As we noted in mid-2017, Big Tech is in BIG trouble.
There are multiple scandals brewing in this space. And the invasion/ selling of/ handing over of private data is one of the more minor ones.
That larger scandal concerns fraudulent online advertising.
Companies like Facebook and the like generate a significant portion of their sales from online advertising. In this business model, clients pay Facebook for online advertising space, the pricing of which is based on web traffic.
However, it now appears that robots not humans are generating a major percentage of web traffic. Put another way, advertising costs (what Facebook and others charge their clients for advertising space) are based on FRAUD.
Last September, a story broke that Facebook was overestimating viewing time on its video ads by as much as 60%-80%.
Big ad buyers and marketers are upset with Facebook Inc. after learning the tech giant vastly overestimated average viewing time for video ads on its platform for two years, according to people familiar with the situation.
Several weeks ago, Facebook disclosed in a post on its “Advertiser Help Center” that its metric for the average time users spent watching videos was artificially inflated because it was only factoring in video views of more than three seconds. The company said it was introducing a new metric to fix the problem…
Ad buying agency Publicis Media was told by Facebook that the earlier counting method likely overestimated average time spent watching videos by between 60% and 80%, according to a late August letter Publicis Media sent to clients that was reviewed by The Wall Street Journal.
A few months later, the company revealed that it was overstating more than just video viewership.
The social-networking company conducted a broad review after discovering three months ago that it had overstated how long people watched videos on its site. The miscalculation wasn’t broadly disclosed, sparking some criticism of the social network. Now, Facebook says it has found four other instances where it miscalculated reach on its site, including overstating how long people spent reading Instant Articles and how many people interacted with businesses’ Facebook Pages.
This situation has since worsened with those in charge of truly MASSIVE online advertising budgets noting the fraud is even worse than previously expected. Here is what consumer goods behemoth Unilever’s Chief of Marketing said last week:
With $8.4 billion in annual ad spend, the advertising industry pays attention when Unilever is unhappy. During the Cannes Lions Festival of Creativity, Unilever’s chief marketing and communications officer Keith Weed
outlined the three concerns that “keep him up at night.”
“If you don’t have your ad viewed, you are dead,” Weed told a Cannes audience on Wednesday.
He wants advertisers to “join up the dots in the digital industry.” As Weed sees it, this ecosystem is corrupted. Some 60% of traffic online is bots. “We want to buy eyeballs of viewers not bots,” says Weed. “If it is too good to be true, it probably is.”
Source: Media Post.
This is not merely a Facebook issue. Yahoo!, Google, and other Tech giants have been implicated in issues related to advertising. Given that the Tech giants generate a significant percentage of their revenues from online advertising, we have the makings of some SERIOUS stock price dislocations as this scandal gains traction.
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Chief Market Strategist
Phoenix Capital Research