1/2014. Integral Ad Science Semiannual Review. Key findings from Integral s analysis of the display advertising industry

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1 1/2014 Integral Ad Science Semiannual Review Key findings from Integral s analysis of the display advertising industry Q3 and Q Industry Analysis and Key Findings Integral Ad Science s Semiannual Report is designed to highlight the state of media quality in the online advertising industry. Integral processes billions of impressions daily, thus surveying the industry on a broad and representative level and measuring media quality as defined by multiple crucial metrics including the TRAQ Score (True Advertising Quality), suspicious activity, viewability, brand safety, ad clutter, and ad collisions. The scope of digital advertising has continued to grow and mature over the years. While advertisers were presented with unprecedented reach, media placement and quality were neglected in the quest for pure audience. As a result, tools were developed to help advertisers regain control. While a few years ago, there were no consequences for ads appearing on unsafe brand content, unviewable media, and general behavior outside of IO specifications, now, cutting edge technology has enabled buyers and sellers of digital media to optimize their ad budgets and keep each other accountable and honest. As more advertisers and publishers take advantage of the technology available to them, the overall dynamic in the marketplace shifts and reaches a new equilibrium. The data analyzed in this report shows that the quality of media surveyed has increased steadily. Over the second half of 2013, media quality continued the upward trend seen earlier in the year from Viewability and brand safety increased while suspicious activity, ad clutter, and ad collisions decreased. As a comprehensive assessment of media quality, the report begins with the TRAQ Score. The TRAQ Score provides an instant overview of the industry based on a single metric. In itself, TRAQ is made up of viewability, suspicious activity detection, brand safety, ad clutter, and professionalism. In the 2H 2013, TRAQ Score analysis showed that ads placed through direct publishers were more likely to land on above average quality media while ads placed through networks and exchanges landed on average quality media. Direct publishers have more control and insight into their inventory and thus can vouch more for the quality of their placements. IntegralAds 1

2 True Advertising Quality Score (TRAQ) The TRAQ Score is a quantifiable and granular measure of media quality that encompasses metrics such as viewability, suspicious activity, clutter, brand safety, and professionalism. Integral rates each impression according to the TRAQ Score in order to gain the most comprehensive media quality measurement and analysis in the market. TRAQ Score is recorded on a scale, with 1000 indicating the highest quality media. Analysis over the 2H 2013 revealed that direct publishers had an average TRAQ Score of 684, signifying that impressions served through direct publishers tended to land on above average quality media. Exchanges and networks had a TRAQ Score of 597, which indicates satisfactory media quality. Overall, across the digital advertising ecosystem, TRAQ was rated at 625. The bottom graph below highlights the TRAQ score by ad size. Among the three major ad sizes, skyscrapers (160x600) had the best overall quality, with a TRAQ Score of 659. As viewability is a component of TRAQ, this supports the assessment on page 4, which also showed that 160x600 ads had the highest average viewability. TRAQ Score by Channel Network Direct Exchange Overall TRAQ Score by Ad Size 728 x x x 600 Overall IntegralAds 2

3 Suspicious Activity Detection 2013 was the year of ad fraud awareness, with continued documented interest in the subject. The sustained concern for eliminating bot traffic has led to increased adoption of various types of detection and prevention technology, ranging from white and blacklists to more sophisticated solutions such as realtime bot detection. As such, there has been a noticeable decrease in fraudulent traffic. In analyzing billions of impressions, general fraud trends, and historical data, Integral found that compared to the 1H 2013, bot traffic levels stayed the same on direct publishers at 2%. Across other channels, fraudulent activity decreased. On the exchanges, fraudulent activity decreased from 20% to 13%. On the networks, fraudulent activity decreased from 20% to 15%. Suspicious activity by vertical fell into three buckets of moderate risk (fraud scores ), moderate to low risk ( ), and low risk ( ). Ad-supported retail sites were the only vertical scoring within the low risk range, proving to have the least fraudulent traffic in the 2H Buying traffic is less useful to retail sites, which seek to maximize sales, contrary to other sites, which seek to increase traffic. This lowers retail sites exposure to bot traffic. While trends for bot traffic look promising, there is still much work to be done on keeping up with and proactively blocking fraudulent activity in the industry. Bot patterns are constantly changing, and future studies aim to continue to track and understand the sources behind these nefarious actors. As more industry players become aware of and take action against bots, the cash flow to the botnet operators will dry up and make it less profitable to operate. The problem of non-human traffic will not go away, but the expectation is that it will reach manageable levels over time. Suspicious Activity by Channel Direct Exchange Network 1H/2013 2% 20% 20% 2H/2013 2% 13% 15% Suspicious Activity by Vertical Auto Energy Entertainment Pharma CPG Education Fashion Finance Telecom Travel Retail IntegralAds 3

4 Viewability Viewability has become a baseline and vital metric on many ad campaigns, as advertisers have increasingly recognized that for an ad to have an effect, at the very least it needs to have an opportunity to be seen. With the MRC set to lift its advisory on viewability by the end of the first quarter of 2014, and as more media buyers are required to account for viewable ad placements, Integral has seen ad viewability steadily increase across the board. The current 3MS proposed standard for an ad to be considered in view is if at least 50% of the pixels on the ad are in view for a minimum of one second. The bottom right chart displays ad viewability measured by the time frame. Overall, viewability has continued to improve year over year. While in the 2H of 2012, impressions placed through direct publishers saw 56.0% of ads in view for at least one second, this year the number increased to 66.0% over the same time period. Ads placed through the exchanges and networks also saw improvement. On the exchanges, there was an increase from 37.6% in the 2H 2012 of ads in view for one second to 47.4% in the 2H Directly placed ads also had the highest viewability for impressions in view for 5 or Viewability by Ad Size Viewability by Time Frame In view > 1 sec 43.9% average 66.0% Exchange 41.6% Network 44.7% Direct 56.8% Exchange 44.4% Network 50.5% Direct 62.8% Exchange 52.0% 48.8% average 55.7% average 50.6% 47.4% 46.3% 30.6% 29.9% 27.4% 18.1% 18.1% Network 59.5% In View > 1s In View > 5s In View > 15s Direct 68.6% IntegralAds 4

5 Viewability more seconds and 15 or more seconds at 46.3% and 27.4%, respectively. Directly placed ads are carefully chosen by the advertiser and on average placed around engaging content where users spend more time, thus increasing viewability. The bottom left chart on page 4 shows viewability rates according to ad size. Generally, longer and vertically oriented ads (160 pixels by 600 pixels) showed greater average viewability, with 55.7% of impressions in view. This makes sense as web browsers scroll vertically and longer ads have the potential to stay in the browser viewport for more time. Creating ads based on a more viewable ad size is only one factor in optimizing ad impact. Even if you have a large format ad, you still need to account for where the ad is located on the page. Viewability by vertical was largely consistent, with most industries falling between 44.1% and 56.1% of impressions in view for at least one second. Viewability by Vertical 60% 50% 40% 30% 20% 10% 0% IntegralAds 5

6 Brand Safety Advertising technology has evolved to allow brands to scale their efforts and reach consumers through millions of publishers. As with many technological advancements, new opportunities create new challenges. In this case, brands lose control and visibility or transparency into ad placement. To regain control, brands need to protect themselves from appearing on potentially objectionable content. Brands now have the ability to protect their ads from landing on risky content and it has become the standard to employ ad verification services. As adoption has increased, the amount of ads being served alongside objectionable content has subsided. Advanced technology today allows brands to fully protect themselves by blocking ads before they are served on objectionable sites. The following charts break down the high to very high risk content surveyed above into content categories. In Q3 and Q4, risky content consisted mostly of adult, followed by illegal downloads, alcohol and drugs. In Q4, Brand Safety by Channel 8% 6% 67.4% of impressions served alongside risky content were on adult sites, 12.7% on illegal download sites, 8.4% on alcohol sites, and 7.3% on drug sites. In Q3 and Q4 of 2013, direct publishers were the least risky, with 4.1% of impressions served alongside objectionable content in Q3. This number decreased to 2.8% in Q4. Networks and exchanges proved to be more risky. On the exchanges, 7.2% of impressions were served on risky content in Q4. Through networks, 7.1% of impressions were served on risky content in Q4. 4% 2% 0% Q3 Q4 Q3 Q4 Q3 Q4 Risk Levels Very High High Moderate Direct Exchange Network High-Risk Composition by Category 8.0% 1.5% 3.0% 10.5% 7.3% 1.9% 2.4% 8.4% Q3 15.4% Q4 12.7% 61.6% 67.4% IntegralAds 6

7 Ad Collisions With the myriad of publishers available and advertisers need for scale, multiple vendors and aggregators are used to maximize audience on the same campaign. Ad collisions occur when users are unintentionally shown multiple ads from the same campaign on the same page. This occurs either due to the technical inability of buyers to control where their ads appear or because of different networks buying ads on the same page. Ad collisions waste ad spend and diminish ad effectiveness, while potentially driving up the price of inventory. Though ad collisions are not a widespread problem, over the 2H 2013 an average of 12.2% of ad impressions collided with at least one other impression from the same campaign. Broken down, 8.4% of impressions collided with one other impression (2 ad collision), 2.2% of impressions collided with two other impressions (3 ad collision), and 1.7% of ads collided with three or more impressions (4+ ad collision). By channel, as expected, direct publishers tended to see the least ad collisions, with only 6.4% of ad impressions colliding with at least one other from the same campaign in the 2H Directly placed ads tend to carry a higher CPM and direct publishers have closer control of their inventory. In addition, advertisers placing ads directly have greater technical control over preventing collisions. Exchanges and networks had higher rates of collisions. Through exchanges, 16.1% of impressions collided while networks saw 14.3% of impressions colliding in the 2H Ad Collisions Overall 1.9% 2.3% 8.6% 87.3% Q3 88.5% 1.4% 2.1% 8.1% Q4 No collisions 2 ads 3 ads 4 ads Ad Collisions by Channel 93.6% 4.8% 1.3% 0.3% 83.9% 10.7% 2.9% 2.5% 85.7% Direct Exchange Network 9.5% 2.6% 2.1% IntegralAds 7

8 Ad Clutter Ad clutter refers to the number and density of ads on any given page. When advertisers consider ad placements, ad clutter is an essential metric to evaluate as it influences professionalism, ad effectiveness, and share of view on the page. In assessing the value of an ad placement, clutter should always factor into the equation. How useful is an ad if it is surrounded by too many other ads? Analysis over the second half of the year showed that most ad traffic had low clutter, with 84.7% of impressions landing on pages with 1-3 ads. The rest of the ad impressions surveyed showed that 11.5% of impressions were on pages with 4-5 ads (moderate clutter), 2.3% of impressions were on pages with 6-9 ads (high clutter), and 1.6% of impressions were on pages with 10 or more ads (very high clutter). Aside from low clutter, impressions tended to fall more on moderately cluttered sites over sites with high and very high clutter. This could be due to the trends in page construction over the Internet with most sites having less ad slots. Over Q3 and Q4, by channel, direct publishers had the least clutter, with 92.5% of impressions on sites with low clutter, 4.2% of impressions on sites with moderate clutter, 0.7% of impressions on sites with high clutter, and 2.7% of impressions on sites with very high clutter. Networks and exchanges saw more impressions landing on sites with higher Ad Clutter Overall 83.9% 11.8% 85.4% 11.2% Q3 2.4% 1.8% Q4 2.2% 1.3 % ads on the page ads on the page ads on the page ads on the page Ad Clutter by Channel 92.5% 78.9% 81.3% 14.2% 4.2% 3.3% 0.7% 3.5% Direct 2.7% Exchange Network 14.3% 2.8% 1.6% IntegralAds 8

9 Ad Clutter clutter, though still were mostly uncluttered. For example, 78.9% of impressions served through exchanges were on pages with low clutter, 14.2% of impressions were on pages with moderate clutter, 3.3% of impressions were on pages with high clutter, and 3.5% of impressions were on pages with very high clutter. As with the clutter trends of general impression traffic, clutter measured according to industry association showed that verticals mostly served impressions on sites with low clutter, ranging from 78.2% to 85.5%, in the 2H However, the automotive vertical had a slightly higher percentage of impressions served on sites with moderate to very high clutter at 21.8%. This could be due the variation in audiences auto advertisers tended to target, and the profile of the sites their audiences visited. Ad Clutter by Vertical 20% 15% 10% 5% Very High Clutter High Clutter Moderate Clutter 0% IntegralAds 9

10 International Destinations of Non-geo-targeted Impressions Ads that inadvertently run in countries not specifically designated as part of the campaign plan serve non-geo-targeted impressions. Though this practice is not extensive, advertisers still need to verify that their ads are served as intended to the right audience. By ensuring proper geo-targeting, advertisers can optimize campaign budgets and ensure their ads are appearing in front of the regionally relevant consumers. Geographic location can be measured and monitored against campaign IOs in order to analyze the trends in non-geo-targeted impressions. In Q3 and Q4, the top destinations for noncompliant impressions fell mostly on English speaking countries such as Canada, India, the United Kingdom, and Australia. In Q4, Canada saw 16.1% of non-geo-targeted impressions, with India following close behind with 13.8%. It is not surprising that English-speaking sites receive traffic from other English speaking countries, and on rare occasion ads are served to legitimate users from the wrong country in order to fulfill an order CA IN GB AU ID FR TR DE MX PH RS BR NL CN JP Canada India United Kingdom Australia Indonesia France Turkey Germany Mexico Philippines Serbia Brazil Netherlands China Japan Q3 15.1% 12.8% 6.9% 3.3% 2.8% 2.1% 0.6% 2.0% 2.2% 2.5% 1.9% 1.9% 1.2% 2.7% 1.2% Q4 16.1% 13.8% 6.2% 3.8% 3.0% 2.8% 2.7% 2.4% 2.1% 2.0% 2.0% 1.9% 1.6% 1.5% 1.5% IntegralAds 10

11 About Integral Ad Science Integral Ad Science is the leading global provider of actionable advertising intelligence data for buyers and sellers of digital media. Since launching the industry s first preventative brand safety solution in 2009, powered by constant growth and innovation, Integral has evolved into a global media valuation platform that is essential to the buying and selling of quality media. Integral s comprehensive solution set enables advertising to appear in quality environments where they receive quality exposure. Integral s technology drives improved visibility, efficiency, and ROI for players across the digital media landscape. Its media valuation platform is the only technology that scores and evaluates overall media quality on a page level for the following metrics: Brand Safety, Ad Viewability, Page Context, Ad Clutter, Ad Collisions, Suspicious Activity, Professionalism Integral provides actionable solutions, empowering advertisers to easily buy and bid on media leveraging these quality metrics and enabling publishers to be rewarded for providing quality ad opportunities. As the industry s leading independent third party standard for media valuation, Integral is integrated with and now counts as clients, the top five Demand Side Platforms (DSPs), nearly all of the major exchanges, including Rubicon, OpenX, and Pubmatic, all agency holding companies, and more than 70 of the Advertising Age 100 Leading National Advertisers. Integral is headquartered in New York City with operations in San Francisco, Chicago, London, Tokyo and Sydney, and is expanding quickly. Visit integralads.com for more information as well as the latest news and product launches. For More Information Avi Goldwerger VP Marketing avi@integralads.com Karlie Santucci VP Client Services karlie@integralads.com Michael Iantosca Chief Revenue Officer mike@integralads.com Niall Hogan UK Managing Director niall@integralads.com IntegralAds 11