If Ari Paparo had one piece of advice for everyone looking to buy ads today it would be to stop putting so much faith in measurements and look for other (read: cheaper) opportunities. Paparo carries some weight when it comes to dispelling ad tech advice. His career spans DoubleClick to Google before he founded the ad tech platform Beeswax, selling it to Comcast in 2021. Paparo, known colloquially as the Ad Tech Influencer, now runs Marketecture Media and pens its widely-followed newsletter.
Paparo admits the ad tech arena is complicated, but he says that marketers have more weight — and options — than they may think.
“Even the best trading systems, like Trade Desk, Beeswax, et cetera, all have these inborn biases towards measurability that are very hard to work around, even if you want to,” he says. “I think it’s just causing a huge loss of opportunity for marketers.”
Hear more from this timely conversation between Signal 360’s John Battelle and Paparo, including his take on the current Google Antitrust Ad Tech trial — and Google’s changes — in the video below or read our lightly edited conversation.
TRANSCRIPT
John Battelle
Welcome to another Signal Conversation, this one with Ari Paparo. Ari is the founder and CEO of Marketecture media, but if you’ve been in any way involved in the advertising technology or marketing technology business. You probably know he also goes by the tagline of an Ad Tech Influencer, or even Ad Tech God. Ari has been involved in advertising technology for very long time, since before DoubleClick was acquired by Google. He was at DoubleClick, then went to Google, started several companies, and was involved in many others, including FreeWheel, and is an expert in the space. I thought it’d be fun to talk with him about where things stand. Ari actually is coming to us right now from near the current proceedings of Google’s second major antitrust trial, and we’ll get into some of that as well. Welcome to Signal, Ari.
Ari Paparo
Thanks for having me. I’m very excited to be here. I do have to correct I am not Adtech God. I’ve acquired AdtechGod, which is an anonymous persona, and the person behind it is the CMO of my current company, and is a real person that is not me.
Forgive me for that, but I’m glad you cleared it up. But you do go by the tag Ad Tech Influencer.
Which started as a joke.
Tell me what that means for you.
I was just trying to mind my own business, having a career working in ad tech at various companies, and suddenly I got 10,000, 15,000 20,000 followers on Twitter, and I started spending maybe more time on Twitter than I should now X, and the the title Ad Tech Influencer came my way, and people embraced it. So it’s a little jokey, because you don’t think of influencers as looking like me or talking about the things I talk about, but I’m enjoying it.
Why don’t we start for those? Because our audience is pretty International and not necessarily technical. How do you define ad tech, and what are the sort of broad issues in the space?
Advertising is a marketplace, a two-sided marketplace, buyers and sellers. And in the traditional world, up until the 1980s, probably virtually 100% of that advertising was executed with minimal technology, involved human beings having steak dinners, sending paper around, signing things, and nowadays it’s become a global liquid multimedia spot market, where the ads themselves are being bought and sold using multiple layers of technology, and that technology is on the buy side and the sell side.
It’s used in different ways by different people, including agencies and publishers, etc, and it all goes towards making those transactions, hopefully, more efficient for both sides. Publishers get higher yields, make more money, advertisers get better return on ad spend, and the choice of which technologies to use, the stack to adopt, is what is up to each of us to figure out for our own businesses.
You’ve been involved in that figuring out over several decades now, and I’ll acknowledge I have too, but I would say more orthogonally than you, but mostly on the publisher side. What do you consider to be some of the largest issues with the space currently?
I think big picture, people are unhappy by the percentage of every dollar that goes towards non-working media, and that is sometimes disparagingly called an ad tech tax. I really don’t like that phrase, because tax is involuntary, and this money is very voluntary. People are choosing what to use. But regardless of what they call it, I think as an industry, we have been trying to push down the level of cents on the dollar that goes to intermediaries and making some progress, but it’s still probably too high. Worse than it being too high, when you start digging into that problem, you find that some aspects, some cents on the dollar, are very wasteful, duplicate, duplicative, inefficient, or in the worst case scenario, fraudulent, where you’re not buying what you think you’re buying, or you’re not buying it from the person you think you’re buying. This being a big, complicated, open marketplace, it requires some level of cooperation and policing to get rid of the issues, and that’s where we have industry associations and trade associations and journalists and other folks who are slowly but surely taking little bits of the inefficiency out of the system. I’d say that’s the overarching umbrella issue that most concerns people.
I think to people who are at least familiar with ad tech, but maybe don’t work in the trenches every day, it seems very confusing, complicated and almost in some cases, like a black box and larger platforms have been driving this, the metas and the Googles of the world. In this product that they’ve built on top of advertising technology, they often say to their clients, including Procter and Gamble, ‘Just trust us, put the money in, spin the dials to the desired outcome, whatever you want to happen because of your advertising, and we’ll do the rest.; Are we there yet, or is the industry too opaque?
Opaqueness and confusing are not necessarily opposite. It is complicated and so confusing is sort of a natural outcome of that. No one should expect a marketer, say a Director of Marketing at a company to understand at the code level, or at the at the technical level, how privacy-enabling technologies obscure IDs and things like that. Right? That’s not the right use of that person’s time to try to understand these complex issues.
I think the right way to use your time is to make sure that you’re getting the transparency and ROAs that you expect by pushing both your agency partners and your vendors to do the work to understand those things, or to bring in specialists who do understand those things. So that’s what I would say about the complexity. It’s not going away, and it’s important and someone needs to understand it, but maybe not you.
The other thing I would say about the transparency is a little trickier, because I do think there are incentives in this business for vendors to not be as forthcoming as they might otherwise be. I used to run a DSP [demand-side platform] called Beeswax. I founded it and you want to sell your technology, and if certain questions don’t come up, why would you bring them up, I guess is the way I would think about it. So there is a little bit of a perverse incentive there, especially among new entrants and cutting edge technologies. I think it’s up to marketers and their partners to be a little skeptical about those sort of things, and try to dig into what they actually mean.
You’re on the board of the company, and one of the statements I read that the company says is that they think that buying connected television ads should be as easy as search or social. I would guess anyone involved in buying connected television ads who’s watching this is like, ‘Yes, please. Can we make that the case? But it’s not the case. Why is that? And is it there are these technical problems, data problems, business problems. What’s the issue there?
It’s a very good point. First of all, I’d say that we’re seeing consumers obviously move to connected TV and streaming. Probably the majority of consumers are already there. One of the side effects that maybe wasn’t expected was that the distribution channel of advertising is being disrupted at the same time, the idea of all national or local TV spots being sold by the cable provider just is going away, or it’s under pressure, and it’s going to change, and that gives opportunities for startups and innovation, which is really exciting.
I think that’s what we all want. As to why it’s difficult, I often pose this theoretical question to people who don’t know anything about our business, which is ‘How do you think you would buy ads on Netflix if you just were able to buy ads?’ And they say things inevitably like, ‘Oh, well, I would just choose the program I’d want to get, like, “The Queen’s Gambit,” and I’d want to be during prime time, and I’d want my ads to run.’ And I think we all now should be scratching our head, ‘Why isn’t that possible?’ Because that is absolutely not possible to do, especially on more legacy broadcasters.
I think that there are a lot of issues with channel conflict. It may be easy to to blame this on tech, but it’s really not as much of a tech problem as is a sales channel conflict problem, where the major broadcasters do not want to let people cherry pick programs and buy on content they want to. They want to obscure that and buy on audience and say, ‘Oh, well, you’re watching a drama and you’re a male-headed household in a certain region, because that makes it easier for them to slot in their legacy upfront deals and other things they want to commit to and not have all these, cherry picking, where literally every single person will want to be on “Monday Night Football” or whatever it is. I don’t think we’re going to solve that problem in an immediate way, because it’s a power problem.
I think for really big companies like P&G you have the leverage to make some of that happen for your own book of business. But for kind of mid-sized advertisers or smaller advertisers, they’re going to be stuck with this sort of blind, scattershot approach for a while. But it’s great to be able to buy television of some kind for $50 on your credit card and put up your homemade video as an ad. That’s a huge breakthrough, versus the legacy way of doing things now.
In the Marketecture newsletter, which I and many thousands of others follow religiously, you’ve been covering the Google antitrust trial, which is where you are right now. Thank you for taking a break to talk to us during it. Can you tell us what that trial is about, briefly and how it’s going?
This is the trial that’s shorthand called the Antitrust Ad Tech trial, as opposed to the Search trial. The allegation is effectively that in 2008 Google bought DoubleClick, which was the leading software provider for ad servers, the product called DFP [DoubleClick for Publishers]. I think we all know about DFP, and the allegation is threefold.
Number one is that DFP is a monopoly, whichI think editorial side probably is they have like 90% market share. Number two is that they built an ad exchange, Google AdX on top of DFP, and those two are exclusively tied together so that you can’t use AdX without DFP. So if you’re a DFP customer, which is a monopoly, you probably use AdX, and you can’t use AdX if you’re using a different ad server. So those are two monopolies that kind of interact with each other.
Then there’s a third monopoly, which is AdWords formula, now it’s called Google Ads, which has probably the world’s largest supply of advertising, and it only will bid into AdX, so you can’t get the demand from Google Ads if you are using a different ad server or a different exchange, and you can’t use the exchange without the ad server.
The three things are reinforcing each other, and this is primarily a publisher case. They’re making the argument that this complex series of monopolies effectively took care and reduced payouts to publishers building a multi-billion dollar business. The counter argument from Google is that we’re talking about banner ads. The world’s moved on. There’s mobile, there’s video, there’s social. We’re barely a blip in social. This is not even if you think it’s a monopoly, it doesn’t matter. It’s tiny, and our exchange is the best anyway, on quality and on malware and all that other stuff. So there’s a reason we’re able to charge more.
How is it going? You’ve been following it every day, and I think you’re close to the end here. How are you handicapping this? Google’s already not done well in the first one in search. Are they going to be a double loser here?
I think it’s possible. I think some of the evidence is really damning. There were numerous witnesses from DFP customers who said things like, ‘We really wanted to switch ad servers, but it was impossible.’ That’s a pretty strong statement there. So the government’s witnesses were very compelling, and they put up a lot of evidence, but the Google counter is also interesting and compelling. They’re making arguments that their ad exchange is better, and that it actually is cheaper. If you think about the total cost of a DFP plus an SSP [supply side platform] and also, like I said, that it’s a bigger market, I think that the very possible outcome is that they’re forced to spin out DFP. I think that’s very possible, and it’s also a clean outcome. It’s not the search trial. It’s hard to figure out what to do with search in this market. It’s quite easy actually to just spin out DFP, the problem is solved. I think it’s very possible that will be the outcome. I would say 75% is my current estimate.
I guess we will see. You know, before we go, I’m wondering, given all the things that we’ve discussed, if you could just wave a magic wand and change something you know instantly in the ad tech ecosystem, that would make things much better. What would it be?
I think the biggest improvement to digital advertising would be some sort of regulated identity that is both privacy protected and universal. An example, and I have spoken to Randall Rothenberg, the former head of the IAB, about this, which is that browsers should be regulated and should have some standards about what data they’re allowed and not allowed to pass to advertisers and publishers. It should not be up to Apple and Google and Microsoft to figure out ad hoc what they do and don’t want to pass to people. I think that would be a very nice regulatory intervention in this complex market, not because, among other things, it would allow for a permanent opt out. It could be both an opt in and an opt out that is not controlled by these self-interested parties. That would be on my wish list.
If you could change one behavior from the point of view of the demand side from the marketers that are listening, as it relates to engaging with the ad tech system, what would you ask for them to do?
The biggest mistake that buyers are doing right now is that they’re biasing towards media that’s more measurable, in particular in the display advertising market. That means Chrome with its cookies. The amount of Safari traffic that is not being bid on or taken seriously, is enormous. The prices are lower. The availability of inventory is much higher, and yet is not being purchased. Because the trading systems, even the best trading systems, like Trade Desk, Beeswax, et cetera, all have these inborn biases towards measurability that are very hard to even work around, even if you want to. I think it’s just causing huge loss of opportunity for marketers.
That’s an interesting bit of advice, and counterintuitive, I appreciate it. Ari Paparo, thank you so much for joining us today, and good luck with covering the rest of the trial, and we’ll be following along with your reports on the Marketecture newsletter. Again, thanks so much for joining.
Thanks for having me.
