The Problem With Ad Tech (And What Companies Should Do About It) With Richard Jones From Cheetah Digital [AMP 201]
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The ad tech industry—specifically, Facebook—continues to create privacy consent concerns and public discontent. How much do people trust social networks and the brands that advertise on them? Today’s guest is Richard Jones, chief marketing officer (CMO) for Cheetah Digital. If you rely on social advertising to promote your business, Richard talks about what you need to know to prevent or handle damage to your brand’s reputation.
Some of the highlights of the show include:
- Ethics: What problems does ad tech introduce into social marketing?
- Digital Footprint: Personal information gets presented without permission
- Under the Knife: Invasion of privacy when bombarded with ads on Facebook
- Stop Hate for Profit: Campaign to curb hate speech and put people before profit
- Money or Morality? Ad pressure makes it okay to break up with social media
- For Sale: Personal data creates polarization of society, dangerous environment
- Algorithms: People’s inability to curate truth, not simply sort shared information
- Social Media Alternatives: How to shut off highly effective or targeted ad spend?
- End of Era: Fast and loose data powering third-party advertising economy is over
- Trust Economy: Why trust is most impactful economic power over data privacy
- COVID Impact: Expect increase in promotions and people looking for value
Ben: Hey, Richard. Welcome to the show.
Richard: Thank you. Good to be here, Ben.
Ben: Yeah, absolutely. Would you mind taking a moment just to introduce yourself to our listeners and explain what you do at Cheetah Digital?
Richard: Yeah. My name’s Richard Jones. I’m the Chief Marketing Officer of Cheetah Digital, which I believe is the world’s largest independent marketing software firm today. Came to Cheetah Digital by way of acquisition of a company that I founded, which now makes up the division which is the Cheetah Experiences at Cheetah.
Ben: Cool. Very cool. What we’re going to be discussing in this episode is a lot of things to do with ad tech and the ethics of ad tech. Broadly speaking, in your view, what’s wrong with ad tech right now? On an ethical level, what are some of the problems that are facing that space at this moment?
Richard: To answer that, I’ll dive into a little personal story, if you wouldn’t mind. About 18 months ago now, I had to go and have a hernia operation. Got into the age, everything is starting to fail. Need to go under the knife. I didn’t really think too much about it. I didn’t tell anyone about it. I knew I had to go and get it done. It was a spot in my schedule where I was going to be at home for a bit. I was like, okay, let’s go do it.
Went to the hospital, had the operation, and came back heavily medicated. The next day or the day after, when I started to come around from all the meds and stuff, I decided to go on to Facebook. I went on to Facebook. I was just getting this stream of ads saying, your hernia operation went wrong? Here’s a lawyer. And all these other ads about personal health procedures that I’d gone through that I certainly haven’t given anyone permission to either know about or to talk to me about. I didn’t want to be talking to anyone about it. I just want it to be left to heal. For me, that really crystallized the abuse that ad tech was fostering on the world around us.
People aren’t stupid, right? Consumers know that if you’re getting ads these days, it’s because you’ve left some sort of digital footprint that people are picking up and advertising too.
Whereas mine was a hernia operation, it could’ve been something a lot more private. Perhaps something I didn’t want my family to know about. It’s an invasion of privacy whichever way you’re looking at it.
Ben: Yeah. I think we’ve all had some discomforting experiences much like the one you’re describing. That leads to my next question. I understand that you led the charge at Cheetah Digital, and getting your company to take part in the Stop Hate for Profit campaign that a lot of companies have been participating in recently.
For our listeners who aren’t familiar, would you mind explaining what that campaign is all about? And then explain maybe more specifically what inspired you to really lead the charge for Cheetah Digital to join in.
Richard: Yeah. It’s a good question. The movement itself has a relatively simple premise. That is, let’s try and use advertising for pressure on social media—primarily Facebook, we’re not exclusively Facebook—to sort out some endemic problems that many of us see with social media as a whole. The lack of substantive effort to curb hate speech on social media platforms being the primary issue that we’re trying to address and trying to change.
For me, it’s not just about Stop Hate for Profit, curbing hate speech, et cetera. Reality as marketers, we have a responsibility, I believe, for the behavior of the platforms that we keep funding with our dollars. You can’t really escape like that. In today’s society, there’s a huge amount of research out there, particularly the younger generations, who are very much voting with their wallet based on their minds. Perceived morality of the brands that want their business.
It’s a good thing for marketers to care about some of these wider social issues. The Stop Hate for Profit is really to try to get social media to sort things out. The term is used quite often by various people. The social media core, among that. Very recently, Forrester came out with the report, It’s OK to Break Up with Social Media. It was all addressed to marketers to basically, look, things are going too far.
For me, privacy is also a part of that. It was Facebook that was serving me up that ads for the hernia operation. They have encouraged an ecosystem where one of the apps on my phone sold my data. It could see that I went in an Uber to a hernia specialist hospital and sold my data of where I was going. It’s snooping on me and snooping on society in general. That is bad. We have a very unhealthy environment in social media right now, with online bullying, with hate speech.
The fact that we have so many people getting their news from social media, yet there is no responsibility taken on by the platforms to do any kind of curation. Actually, the algorithms that power these social media platforms are contributing in a very real way to the polarization society, which we are seeing in extreme politics, on protest accounts, or protest you take on the street. We’re in a very dangerous environment. I’m not buying social media squarely for this.
I’ll give you an example. My wife is a very educated lady, very smart. She got caught up, I believe, in being tricked by a social media algorithm. If she gets caught in tricks, how is everybody else expected to […] her? What I mean by that is when the algorithm serves up content to you based on your prior behavior, it makes it super quick for people to actually get brought into this single lane thinking. Where they’re not exposed to the opposing view. They’re not exposed to any kind of curation.
They go on to their news feed on Facebook or into their YouTube homepage, and they’ve served up a reflection of what they’ve been looking at previously. And it’s very easy for people to go, I just call to understand what’s going on in the world. Look at his homepage on YouTube. It’s terrible. What’s going on? It’s all the same people shouting the same things, feeding the same polarization of viewpoints that you’re getting served up.
Social media, in many ways, has created an environment where it is taken truth out of people’s ability to get the truth. It’s become much harder because there is no curation, this […] to be platforms where, oh, it has nothing to do with us, governor. We just let people share information. I’m sorry, the world has moved on. People thinking stop making profit is pressure on their social media platforms to sort out the social media problem because I don’t think it’s a particularly healthy place for a lot of brands to put their money right now.
Ben: Social media advertising became popular because it’s highly effective, or at the very least it’s highly targeted. I spent X amount of money and if I know what a product cost or if I know the value of a lead, I can calculate—with a high level of granularity—exactly how much return I’m getting on those ads.
I imagine that if you’re a company or a brand that has been doing well with this, the thought of turning off that spigot might be terrifying a little bit. I’m curious, in your own situation, if you don’t mind sharing, how has turning off Facebook ads and social media ads and just shutting down that spend affected your agency?
Richard: For us, we’re a business to business software and services supplier. Turning off Facebook and Twitter—and we didn’t turn off Twitter, by the way, because we think they have taken substantive steps, unlike Facebook. For us, it is pretty much the target is Facebook—was immaterial, to be honest. We knew it wasn’t going to be much of an impact. It’s not really a big surprise. We just felt we have to do it to support what we thought was an honorable movement. In […] and we sell to marketers. We provide software and services for marketers to build direct relationships with consumers. That’s why we joined.
We still are currently doing things on LinkedIn. We don’t think LinkedIn has a lot of the same weaknesses in this regard that particularly Facebook has. For us, it’s very much targeted at Facebook. Not just speaking from us, but from speaking as the industry as a whole, this Stop Hate for Profit was really jumped on by our customers in many ways. People who like the North Face, Starbucks, et cetera, that all jumped in and got involved with boycotting. North Face, Vans Corporation were one of the first people to spark this off. It’s been these larger advertisers.
But the problem is the major advertisers make up about 6% of Facebook’s revenue. Either Facebook doesn’t really give two hoots, to be honest. It’s so immaterial to their revenues until you get millions in mom-and-pop shops joining in as well, they couldn’t give two hoots. And it’s just lip service at the end of the day to the advertisers. Yeah, sure, they’re going to make some changes, they’ve been at some stuff already. How far they go, what actual impact […] is in the long run probably limited because of just the fact they make their money elsewhere from large advertisers.
Ben: Yeah, absolutely. Thank you for the necessary clarification there that you’re running a software company. I used the word agency. I just want to make note of that correction there briefly before we move on.
Richard: In terms of when you look at it, what is the long term impact? Facebook has a bit of a bloody nose, which probably will make some changes. Some of the other social media platforms have made these changes. What I think is more interesting is the long term pressure of the wider community, the analyst. For us to say, look, social media is […]. It’s time to reappraise your strategy.
Doing that with the background of the decisions that we made 10 years ago to do hyper-personalized content distributed at scale through Facebook and Google, which basically made it easy for anyone to be relatively good at marketing if you had a budget. Is that same environment still the case today? This is where I think the analysts and the longer-term changes could be more interesting because I don’t think it is the same today.
The era of fast and loose data, the power of Facebook and Google’s advertising economy, which you don’t need to know who your customers are, just comes to us. Give us your checkbook, and we will allow you to deliver hyper-personalized content at scale to people you don’t know. That world is collapsing like a house of cards all around because of privacy both from a legislation perspective and consumer attitude.
Facebook and Google have had to cancel this cultural third party data integrations and partnerships, which was making advertising so successful in the first place. That one’s going away. It’s going to become much, much harder to market personalized messaging and advertising to people you don’t know anymore because of privacy.
As a marketer, you need to step back and the world’s ad tech roof is falling in. I need to power direct connections to consumers. I need to get people into my loyalty program. I need to get people into my email database. I need to spend money on social media platforms to get them off the platform onto my channels where I have the consent to actually message them, connect with them directly, and have a program of value exchange that gets them to come back to me. Then I can get myself completely isolated from the social media quagmire and the massive construction the privacy is continuing to wreak on ad-tech long term.
Ben: A key thing to keep in mind here is that Richard isn’t necessarily advocating halting social marketing or social media advertising full stop. Rather, when you boil it down, what he’s advising is being smart, being strategic, and being aware not only of the business benefits of being on social media, but also the potential downsides as well, and making decisions that make sense for your brand accordingly.
That might mean making some choices that would’ve seemed perhaps unthinkable just a year or two ago. But those might actually be some of the smartest things that you could do right now and could even free you up to find new and more productive opportunities elsewhere. Now, back to Richard.
Your marketing a B2B marketing software as a service. This is something that I know as well, being a marketer here at CoSchedule, similarly, we’re a marketing SaaS company. Data is really important. Proper data retention and trading data ethically with respect are very important for the integrity of any software as a service type business.
I’m curious, from your perspective and anything too, just like what you’re saying, people are much more cognizant of the dangers of playing fast and loose with data now. We’re probably going to continue to see more of this. That is going to impact consumer decisions and how comfortable they’re going to be with sharing their data, and it could impact who they choose to do business with. Even if it’s for very self-motivated reasons, in some cases.
That creates an opportunity to build something that—it’s what you call a trust economy. Would you mind taking a moment to explain what you mean by the phrase trust economy in your own terms?
Richard: Yeah, sure. The trust economy (as a concept) really explains why trust is the world’s most impactful economic power. And actually, trust economy is something that people have been talking about for a few years now. Actually, I think the context of what’s happening around privacy, everything from Cambridge Analytica, as that scandal broke moving forward where people realize that their data is being harvested illegally. It is being propagated through a data or ecosystem in ad tech, which has literally had no control for years. Your data is out there getting sold. Data that you never willingly provided to anyone, or certainly didn’t do so explicitly because maybe it was hidden away on page 60 of some terms and conditions.
Governments really were being slow to jump on to the realization that data is the new oil. Entire economies need to be rewired around the fact that data is so fundamentally important to everything. Not just to growing businesses, but to the efficacy of democracy—our elections. This is a topic that strikes at the heart of society. Politicians are now getting to grips with it, we’re starting to see change, and we’re starting to see consumer attitudes change as well.
For me, the trust economy just got a whole bucket load more important because of everything that’s going on. Actually, there’s some research that we did with Econsultancy, and it was a six-country piece of research where we basically went out and said, can you go and look at consumer attitudes to privacy, to online shopping, or rest of it. With COVID-19, you had a massive digital acceleration […] people’s digital transformation because everything is going online. Everybody has now happened to address these fundamental questions around how you treat people online, how do you manage to collect, what we do with it, et cetera.
The research they did showed that 39% of US consumers don’t like personal ads driven from cookie data that’s been tracking them around as they’ve been clicking around the web. In some markets like Australia, that’s even higher. I think it’s 44%. You’re rapidly approaching a world where 1 in 10 people are actually turned off by you as a brand. If you serve personalized ads to them, they know it hasn’t been stopped. They’ve told you explicitly directly, and therefore you’re just advertising them based on your existing relationship with them.
The vast majority of Facebook advertising is advertising to people you don’t know. It’s not you telling Facebook because you know John Smith, you had a five-year interaction, and he told you about it himself. […] has given you the consent to use that information to target ads for him. That’s not the world we live in. It’s hitting people that haven’t gone through that explicit data transaction with you. Most marketers, they’re going to jump into this post-COVID world and go, right, I need to grow again. Let’s shove loads of money in personalized ads on Facebook. Not realizing that one in two people are going to absolutely be turned off by it, and you’re going to cost brand damage.
70% of people don’t trust social media platforms with their data because of privacy issues in the US. 37% of consumers regularly delete cookies. And 30% installed an ad blocker. The writing is here on the wall for marketers. I think we’re doing quickly enough to actually build out our direct to consumer channels, our direct to consumer databases, and putting in our loyalty programs which are going to isolate us from the social media quagmire.
Ben: Sure. You’ve touched on the answer to my next question a little bit. But to bring it maybe down to a strategic level, say I’m a marketer and I’m listening to this episode. Let’s say that I share all the concerns that you have in regard to ad tech and to Facebook advertising and social media advertising. Hypothetically, these individuals, okay, maybe Facebook advertising isn’t for us anymore, but we were getting a lot of revenue from it. Not only do we need to replace that revenue with something else, we’re going to need to grow, to bounce back from the kinds of contraction that a lot of companies are facing right now.
If I were feeling or if this hypothetical marketer were feeling nervous about the prospects of just turning off their ad spend on Facebook, what could they do instead that would either meet or exceed that return without having the potential to harm their brand?
Richard: Good question. I’ll preface this by saying our advice to marketers is not to don’t put any money into advertising on social platforms forever. If you want to join Stop Hate for Profit, as many of our customers have done, and we have done, yes. Good pressure on Facebook in particular to address some of these issues and not just pay it lip service is a positive thing. Most people got involved but in a relatively short time frame. We’re going to do the boycott for a month, or we’re going to do the boycott for the rest of the calendar year. And people have taken different positions. It’s all good pressure.
Our advice is really long term. Any media you spend, you should be thinking about how do I drive people off that platform with that media spend into my own channels? And then what are the experiences I’m going to put in place to actually turn that unknown consumer into a known consumer into my database with consent for me to be able to ask them questions, learn about their motivations, their desires, their interests as an individual, and message and market to them directly on our own channels, not on social media or in a pay to play environment with all the other issue that the social media quagmire has today?
In COVID-19, in a deep recessionary period, if you look at the data from past recessions, the one thing that goes up dramatically in recessions is promotions, offers. People are looking for value. If you’re going to think about what can I do as a business that is going to reduce, perhaps spend on social media to build out my own direct channels? I need to think of what’s that value exchange between me as the brand and you as the consumer in return for your opt-in, your data. It took me zero party data, you telling me about yourself explicitly, and then how am I going to incentivize you to connect with me long term?
That value exchange we’re talking about is typically filled by loyalty programs. Loyalty is going to be one of the big winners from accelerating out to COVID-19 because you already have the search for value. To do that, promotions, offers, and all that type of stuff, this is the core capability for loyalty programs. I would also say, if you look at some of the leading lights in the Stop Hate for Profit, we’re able to turn social media advertising off. A lot of those guys are those with the most sophisticated direct to consumer channels, most sophisticated loyalty programs—Starbucks, Vans Corporation.
We recently put our customer, Vans, through to the loyalty magazine. Also, they won the best loyalty program for the American region. Their loyalty program is not about points for purchases. It’s about engage with us directly, come in and take challenges, and see the latest artwork for the next designer’s shoes. It’s all these ways to improve the connection to a brand or consumer.
What they’ve got is they’ve got tens of millions of people now or over 10 million people into their loyalty program, direct connections with them, and the amount of money that the members spend versus a non-member is ridiculous. It is a huge economic benefit to build out direct to the consumer channels. You have no time to lose as a marketer. The clock is cooking on the cookie, the third-party tracking cookie. Google put the death knell on that. Apple’s idea, […] changes are basically destroyed […]. The advertising ecosystem can actually give a report on engagement. If you’re a marketer and you’re not doing this stuff, you got your head buried in the sand.
September 9, 2020