tag:econsultancy.com,2008:/topics/legal-and-regulations Latest Legal content from Econsultancy 2018-02-13T15:28:00+00:00 tag:econsultancy.com,2008:BlogPost/69796 2018-02-13T15:28:00+00:00 2018-02-13T15:28:00+00:00 Traffic buying allegations against Newsweek Media Group highlight complexity of the digital ad problem Patricio Robles <p>But <a href="http://socialpuncher.com/media/files/CFPB-IBTimes-Case-by-Socialpuncher.pdf">an investigative report</a> (PDF) recently published by Social Puncher, “an independent company that serves as a sheriff in the digital ad market”, suggests that publishers seen as legitimate can be the source of fraud. </p> <p>The report claims Newsweek Media Group (NMG), whose digital properties include Newsweek.com and IBTimes.com, paid for fraudulent traffic that led to it earning millions in ad revenue from an ad campaign run by the Consumer Financial Protection Bureau (CFPB). Specifically, the report alleges that  “Ibtimes.com in spring 2017 (March-May) received 13,300,000 of laundered via tech domain pop-under visits and 5,500,000 non-laundered pop-under visits.”</p> <p>Many of the sites originating this traffic were said to be file sharing and pirated video streaming sites. Layers of redirects were used to hide the origin of the traffic, Social Puncher's report states.</p> <p><img src="https://assets.econsultancy.com/images/0009/2238/ibt.png" alt="" width="477" height="170"></p> <p>BuzzFeed, which conducted its own investigation into IBTimes India, <a href="https://www.buzzfeed.com/craigsilverman/the-publisher-of-newsweek-and-the-international-business">says</a> that two independent ad fraud detection and measurement firms identified similar patterns. What's more, BuzzFeed reported that one of those firms, DoubleVerify, has this month “classified IBT’s US, UK, India, and Singapore sites as 'as having fraud or sophisticated invalid traffic'”.</p> <p>As a result, DoubleVerify “is now blocking all ad impressions on these sites on behalf of customers.”</p> <p>Not surprisingly, NMG disputes the claims that it has been engaging in fraudulent behavior. While it admitted that it purchases from ad networks that generate pop-up and pop-under traffic, it told BuzzFeed that this represents a “small percentage of traffic on our sites” and “we use third-party platforms to verify and filter this traffic to ensure it is of the highest quality.” </p> <p>According to BuzzFeed, NMG refused to identify those third-party platforms by name.</p> <h3>Who can advertisers trust?</h3> <p>Certainly, the fact that multiple independent sources have raised the same suspicions calls into question NMG's claim that it was acting on the up and up.</p> <p>But more importantly, it calls into question just how much advertisers can trust the digital advertising ecosystem. </p> <p>According to Social Puncher, the CFPB's purchase of ads from NMG was conducted on its behalf by GMMB, a Washington, D.C.-based agency. Its report indicates that one of the largest campaigns GMMB ran for the CFPB was a video campaign that consisted of $6.4m in direct ad buys through the DoubleClick Campaign Manager DSP and that over half of the budget went to NMG.</p> <p>Many advertisers of course outsource media buying to agencies and this wouldn't be the first time that an advertiser has come away let down.</p> <p>Late last year, <a href="https://econsultancy.com/blog/69438-is-uber-s-lawsuit-against-an-agency-a-harbinger-of-greater-brand-agency-discord">Uber sued ad agency Fetch</a>, which is owned by Japanese holding giant Dentsu, alleging that it had squandered "tens of millions of dollars" to purchase non-viewable, non-existent or fraudulent traffic on Uber's behalf.</p> <p>While that's a different scenario – neither Social Puncher or BuzzFeed has alleged that the CFPB's agency knew about NMG's questionable traffic buying – it is clear that even the firms advertisers are hiring for their media buying expertise are often falling short when it comes to policing fraud on behalf of their clients.</p> <p>In the case of the CFPB and NMG, what's particularly disturbing is that the alleged fraud wasn't the product of, say, opacity in the programmatic market. It was conducted by a publisher seen as reputable enough to be awarded a significant irect buy from a legitimate agency.</p> <p>The lesson: the ad fraud problem runs deep and while <a href="https://econsultancy.com/blog/69231-ads-txt-a-new-standard-for-fighting-inventory-spoofing-unauthorized-sellers-what-you-need-to-know">progress is being made</a> to reduce the ease with which ad fraud can take place in programmatic markets, there's still the very real ability for large-scale fraud to take place in plain sight. To address this, advertisers are going to have to get more aggressive in vetting the capabilities of their agencies to address fraud. Ultimately, they may conclude that they either need to move some of their media buying in-house or exercise much greater oversight over agency buys.</p> <p><em><strong>Further reading:</strong></em></p> <ul> <li><a href="https://www.econsultancy.com/blog/69671-programmatic-advertising-trends-in-2018-what-do-the-experts-predict">Programmatic trends in 2018</a></li> </ul> tag:econsultancy.com,2008:BlogPost/69774 2018-02-06T14:00:00+00:00 2018-02-06T14:00:00+00:00 The fake follower economy is beginning to crumble Patricio Robles <p>But it looks like fake follower economy is set for a potentially big fall. </p> <p>This past Saturday, New York attorney general Eric T. Schneiderman <a href="https://www.nytimes.com/2018/01/27/technology/schneiderman-social-media-bots.html">opened an investigation</a> into Devumi, a prominent purveyor of fake followers.</p> <p>A <a href="https://www.nytimes.com/interactive/2018/01/27/technology/social-media-bots.html">New York Times exposé</a> published the same day Schneiderman announced his investigation concluded that Devumi was in control of more than 3.5m fake Twitter accounts and has used them to sell more than 200m fake followers on the popular social media platform.</p> <p>Perhaps the most disturbing thing about Devumi's business is that many of the fake accounts are alleged to use photos and other personal information taken from the social media profiles of real users. In other words, Devumi is accused of engaging in a form of social media identity theft.</p> <p>Impersonation and deception are illegal in New York, and that's the angle attorney general Schneiderman is taking in pursuing Devumi.</p> <h3>An inconvenient truth</h3> <p>How did Devumi and shady businesses like it get so big? The answer is simple: there's big demand for fake followers and engagement on social platforms like Facebook and Twitter. And this demand often comes from the very individuals and businesses who would like the world to believe that they need Devumi's “services” the least:</p> <blockquote> <p>The Times reviewed business and court records showing that Devumi has more than 200,000 customers, including reality television stars, professional athletes, comedians, TED speakers, pastors and models. In most cases, the records show, they purchased their own followers. In others, their employees, agents, public relations companies, family members or friends did the buying. </p> </blockquote> <p>Why would high-profile individuals and companies risk their reputations buying fake followers? It's simple economics. As the New York Times revealed, the cost of fake followers and engagement actions is often measured in pennies, a small price to pay for inflated metrics that can lead to big bucks.</p> <p>Virtually all of those big bucks come from brands, of course, which have embraced influencer marketing in all its forms in an effort to better connect with consumers online.</p> <h3>Just how badly are brands being duped?</h3> <p>Thanks to the rise of influencer marketing, there are influencers routinely earning five, six and even seven figures for sponsored social media posts. How much they earn is largely a function of the size of the audience they appear capable of reaching. The bigger the audience, the bigger the paychecks.</p> <p>While there are tools and methods brands can use to assess the quality of an influencer's audience, none are perfect and it would seem few brands are doing significant due diligence on their influencer marketing transactions. In many cases, sponsored social media posts are bought through automated or semi-automated platforms, or by ad agencies.</p> <p>All indications are that some if not much of the spend is for naught. Case in point: the Times identified two teenagers, Arabella and Jaadin Daho, who reportedly earn $100,000 annually through influencer marketing. They <a href="https://www.thesun.co.uk/fabulous/5030582/aspiring-child-youtubers-callum-ryan-erin-bradley-arabella-daho/">have worked with</a> brands including Amazon, Disney, Louis Vuitton and Nintendo.</p> <p>But, according to the Times, their Twitter accounts “are boosted by thousands of retweets purchased by their mother and manager, Shadia Daho, according to Devumi records. Ms. Daho did not respond to repeated attempts to reach her by email and through a public relations firm.”</p> <h3>An urgent wake-up call</h3> <p>This sort of dubious social media arbitrage, in which supposed influencers turn pennies into dollars at the expense of brands using fake followers and engagement, is obviously not healthy and is also unsustainable.</p> <p>While <a href="https://econsultancy.com/blog/69343-are-marketers-underestimating-the-fraud-threat-to-influencer-marketing">the existence of what can only be described as fraud</a> has been known for some time, companies like Facebook and Twitter face numerous technical challenges in cracking down on fake accounts. They have also been disincentivized from engaging in major purges of accounts, even if they're fake. That's because, just as it is for influencers, more is better for these companies. </p> <p>But the recent news, which included the revelation that a Twitter board member purchased at least 65,000 fake followers, along with law enforcement action, suggests that the fake follower economy is now too big to ignore.</p> <p>Already, Twitter is apparently cleaning house. As The Daily Mail <a href="http://www.dailymail.co.uk/sciencetech/article-5341637/Celebrities-lose-followers-Twitter-rids-fake-accounts.html">detailed</a>, a number of high-profile users are seeing their follower numbers drop significantly in the wake of the Times piece. And one celebrity – Great British Bake Off judge Paul Hollywood – <a href="https://www.eater.com/2018/1/29/16944770/paul-hollywood-deletes-twitter-account">has deleted his Twitter account</a> after being outed as a Devumi customer.</p> <p>For everyone involved, the writing is on the wall. Savvy brands whose dollars have largely fueled this craziness will get in front of the collapse and adapt their influencer marketing and broader social strategies accordingly.</p> <p><em><strong>Further reading:</strong></em></p> <ul> <li><a href="https://www.econsultancy.com/blog/69620-only-29-of-influencer-campaigns-use-trackable-urls-for-attribution">Only 29% of influencer campaigns use trackable URLs for attribution</a></li> </ul> tag:econsultancy.com,2008:BlogPost/69764 2018-02-02T10:00:00+00:00 2018-02-02T10:00:00+00:00 Kodak demonstrates why brands should tread carefully with blockchain initiatives Patricio Robles <p>Many of these applications are in the world of finance but the blockchain's potential extends beyond financial services. For instance, there <a href="https://econsultancy.com/blog/69712-four-ways-the-blockchain-could-be-applied-to-digital-advertising">are ways it could be used in the digital advertising market</a> to address pressing issues like fraud.</p> <p>But established brands would be wise to tread carefully when it comes to blockchain initiatives.</p> <p>That's because the blockchain hype has led to a flood of <a href="https://www.wired.com/story/cryptocurrency-scams-ico-trolling/">obvious scams</a> as well as questionable behavior that some suggest is not exactly on the up-and-up.</p> <p>For example, a number of publicly-traded companies, most of them small and previously unheard of, <a href="https://www.theregister.co.uk/2018/01/22/blockchain_rebrand_sends_stapleton_capitals_shares_soaring/">have pivoted to the blockchain</a>, sending the prices of their shares soaring. Perhaps one of the most amusing examples of this phenomenon: a company called the Long Island Iced Tea Corp., which, as the name suggests, was in the business of making iced tea, changed its name to Long Blockchain Corp. and saw its stock more than triple on the news.</p> <p>Regulators, including officials at the Securities and Exchange Commission (SEC), have been warning investors about the risks of investing in these companies. And they have signaled that they are going to scrutinize companies that engage in this behavior. Even so, enforcement action has been limited.</p> <p>That, however, appears to be changing. This month, the SEC halted trading of shares in a Hong Kong-based blockchain company that had seen its stock price increase by 900% last year. </p> <p>And in what is its biggest enforcement action in the space to date, the SEC this week <a href="https://www.coindesk.com/sec-files-fraud-suit-against-crypto-bank-ico/">filed a lawsuit</a> against AriseBank, a Texas-based company that said it was building a cryptocurrency bank. AriseBank claims it raised over $1bn through an Initial Coin Offering (ICO) that the SEC says was fraudulent and represented an unregistered offering of securities.</p> <h3>The case of Kodak</h3> <p>Of course, the presence of bad actors in the nascent cryptocurrency and blockchain technology market doesn't mean that the entire market is full of bad apples.</p> <p>Case in point: Kodak <a href="https://www.businesswire.com/news/home/20180109006183/en/KODAK-WENN-Digital-Partner-Launch-Major-Blockchain">recently announced</a> a blockchain initiative called KodakCoin, “a photo-centric cryptocurrency to empower photographers and agencies to take greater control in image rights management.”</p> <p>Kodak, of course, is the once-powerful imaging technology company. It filed for bankruptcy in 2012 and is today a shell of what it once was.</p> <p>But its brand, which was at one point synonymous with photography, is perhaps its most valuable remaining asset and by slapping it on a blockchain venture, Kodak's stock price rose more than 200% in the span of two days.</p> <p>Kodak's blockchain venture itself is real. The company wants to use the blockchain as the underpinning of KodakOne, an image rights management platform. That seems like a legitimate application for the technology. And Kodak has registered its ICO for KodakCoin, which could raise up to $20m, with the SEC, although <a href="https://www.usatoday.com/story/money/nation-now/2018/01/31/kodak-delays-kodakcoin-cryptocurrency/1082443001/">it is being delayed by several weeks</a> due to concerns over the vetting of investors.</p> <p>But while KodakCoin appears to be a legitimate blockchain effort, the meteoric rise of Kodak's stock price has caused the company to face considerable scrutiny. The New York Times <a href="https://www.nytimes.com/2018/01/30/technology/kodak-blockchain-bitcoin.html">called Kodak's move</a> a "dubious cryptocurrency gamble" and pointed out that Kodak is really only lending its name to the blockchain venture. Its partner and the real brains behind the operation, a company named WENN Digital, is “a California-based affiliate of a British photo agency that specializes in paparazzi photo licensing.”</p> <p>The New York Times has noted that a lead adviser to KodakCoin “has a troubled track record” that includes being banned from the Alberta Stock Exchange for five years, and Marketwatch <a href="https://www.marketwatch.com/story/key-kodakcoin-exec-barred-from-serving-as-officer-in-german-companies-2018-02-01">yesterday reported</a> that the CTO of WENN Digital is banned from serving as an officer of a publicly-traded company in Germany.</p> <p>Throw in <a href="https://www.marketwatch.com/story/kodak-stock-pulls-back-directors-disclose-acquisitions-prior-to-blockchain-rally-2018-01-11">some interesting stock purchases and sales</a> by Kodak directors in the days leading up to and on the day of Kodak's KodakCoin announcement and you have fuel for a narrative that doesn't help Kodak's brand.</p> <p>But on substance, even if the blockchain skeptics and critics are ultimately wrong about how meaningful the impact the technology will have on the world, it's not at all clear that KodakCoin specifically has what it takes to succeed. While the problems the venture aims to solve are real ones, nothing presented by the company to date suggests that photographers and those wanting to license photos will embrace the KodakCoin model over the many existing approaches and platforms that are already in use.</p> <p>In fact, the New York Times has detailed what appear to be serious flaws in the KodakCoin model, such as the fact that only accredited investors will be able to buy and use KodakCoin.</p> <h3>Experiment before embracing</h3> <p>Kodak's experience highlights the primary reason that brands need to be careful about their blockchain initiatives: while blockchain tech is very promising, it's too early to tell which applications are going to be commercially viable and most brands are unlikely to have all the answers.</p> <p>They should by all means be willing to experiment with blockchain technology, but embracing it totally and using it to launch major offerings positioned as viable solutions to big problems looks incredibly premature.</p> <p>Put simply, the risk that such offerings won't be viable high and when you add on the risk of scrutiny from the public and powerful government agencies like the SEC, even brands that are trying to recapture their glory days, like Kodak, potentially have a lot to lose.</p> <p><em><strong>Want to learn more about the blockchain and marketing? Subscribers can download Econsultancy's <a href="https://econsultancy.com/reports/opportunities-and-challenges-for-marketers-in-2018/">Opportunities and Challenges for Marketers in 2018</a>.</strong></em></p> tag:econsultancy.com,2008:BlogPost/69728 2018-01-16T13:30:00+00:00 2018-01-16T13:30:00+00:00 New E.U. regulations could make it easier for fintechs to operate across the bloc Patricio Robles <p>It's a global trend. Cities and countries around the world, from Stockholm to Singapore, are aiming to become fintech hubs and for good reason: while entrenched financial institutions, namely major banks, aren't going away any time soon, observers like McKinsey &amp; Co. <a href="https://thefinancialbrand.com/54662/mckinsey-banking-fintech-competition/">believe</a> fintech upstarts could eventually divert trillions of dollars in business from them. So the regions that successfully court fintechs could seen their own fortunes grow.</p> <p>That isn't lost on what is already one of the most economically powerful regions in the world, the European Union.</p> <p>But the E.U. faces some unique challenges as it battles to keep other regions from dominating fintech. One of the biggest: many fintechs located in an E.U. member state often can't easily operate in other E.U. member states.</p> <p>That's because some member states have applicable laws that are more stringent than E.U. laws, meaning that fintechs wanting to operate in those member states have to deal with the local rules. As a result, many fintechs choose to operate only in major E.U. markets, or their home market only, because the time, money and effort required to operate across the E.U. would be too great.</p> <p>As Valdis Dombrovskis, E.U. Commission vice-president responsible for financial services, told the Financial Times, “We still don't have this digital single market...and that's why we see many European fintechs then going to the US or Asia to scale up.”</p> <p>In an effort to ensure that the E.U. doesn't cede its fintech opportunity to other countries and regions, the European Commission is reportedly prepping draft legislation that would let fintechs in the peer-to-peer lending and crowdfunding spaces obtain pan-E.U. licenses that eliminate the need to deal with the headaches caused by local regulation. Pan-E.U. licenses for other fintech markets could be added at a later date.</p> <p><a href="https://www.ft.com/content/a340b96a-e727-11e7-8b99-0191e45377ec">According to</a> the Financial Times, the draft legislation will also provide for “regulatory sandboxes” that allow fintechs to experiment with new services without having to deal with excessive regulation.</p> <h3>Not all bad news for established players </h3> <p>While the kind of regulation the E.U. is reportedly preparing to pursue will obviously give fintechs a new advantage as they continue their march to dethrone established financial institutions, it's not all bad news for large, established financial services firms, including big banks.</p> <p>That's because these players are increasingly investing in, partnering with and even acquiring fintechs that show promise and/or are related to their business. In other words, the behemoths of finance are leveraging their capital and playing a strong “if you can't beat em, join em” card.</p> <p>From this perspective, pan-E.U. licenses for fintechs might actually benefit entrenched players, allowing them to more easily and rapidly take advantage of the innovations these upstarts are bringing to market. For example, a major bank that operates across the E.U. might today have to partner with multiple fintechs that serve the same function, or limit their partnerships to fintechs in certain countries, because those fintechs don't operate in all E.U. member states.</p> <p>If and when that changes, both fintechs and the established financial institutions that they're frenemies with, could benefit significantly, ushering in a new phase of fintech's rise in Europe.</p> tag:econsultancy.com,2008:BlogPost/69679 2017-12-19T15:00:00+00:00 2017-12-19T15:00:00+00:00 Luxury brands must focus on digital experiences to fight the discount trend Patricio Robles <p>According to research firm Edited, more than a quarter of luxury items were discounted by 26% to 50%. For comparison, items sold by premium and mass-market brands saw discount volumes of 24% and 20%, respectively.</p> <p>As Bloomberg's Lisa Wolfson and Stephanie Hoi-Nga Wong <a href="https://www.bloomberg.com/news/articles/2017-11-27/holiday-markdowns-deepen-despite-brands-push-for-higher-prices">noted</a>, “Though heavy promotions and specials are a hallmark of the holiday season, the data from Edited suggests that the labels still have a way to go before getting customers to shell out top dollar.”</p> <h3>Could an EU court ruling help luxury brands?</h3> <p>While luxury brands have turned to hefty discounting this year to drive sales, <a href="https://quartzy.qz.com/1148881/luxury-brands-can-stop-sales-of-their-goods-on-amazon-in-europe-court-rules/">a court ruling</a> could help them better control digital distribution of their products, and thus potentially reduce their reliance on discounting, at least in the EU. </p> <p>Coty, which owns brands including Calvin Klein, Marc Jacobs and Covergirl, had sued its authorized German distributor, Parfumerie Akzente, for selling Coty brand products through Amazon and other online retailers. The company argued that such sales hurt the image of its luxury brands.</p> <p>While Parfumerie Akzente countered that its use of platforms like Amazon adhered to requirements intended to “[preserve] the luxury image” of the brands, the European Court of Justice sided with Coty and wrote in its decision that a prohibition on sales through certain online channels “is appropriate and does not, in principle, go beyond what is necessary to preserve the luxury image of the goods.”</p> <p>The Court elaborated:</p> <blockquote> <p>The Court notes in this context that the quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury. Therefore, any impairment to that aura of luxury is likely to affect the actual quality of those goods.</p> </blockquote> <p>The Computer &amp; Communications Industry Association, which represents companies like Amazon, eBay and Rakuten, obviously alarmed and issued a statement that read in part, “This judgment is bad news for consumers, who will face fewer choices and also less competition when they want to shop online.”</p> <p>Luxury brands, of course, will hope that this court ruling will help them strengthen the pricing power their holiday shopping discounts make clear they are struggling to retain. But they would be wise to consider the possibility that limiting sales on popular platforms will only do so much because other factors are likely contributing to luxury brands' hefty discounts.</p> <h3>Other factors contributing to luxury brand discounts</h3> <p><strong>Lack of product differentiation.</strong> As luxury consultant Milton Pedraza told Bloomberg, “There are too many luxury and premium brands selling very similar products.” To the extent that luxury brands aren't producing products that potential customers view as unique if not trendsetting, they are obviously going to struggle to maintain pricing. Unfortunately, the proliferation of fast fashion, fashion startups offering made-to-order products, and counterfeits makes life much more difficult for luxury brands.</p> <p><strong>Digital experience challenges.</strong> Luxury customer experience is one of the reasons luxury customers are willing to pay top dollar for luxury products. Of course, replicating the in-store luxury customer experience online is tough and an inability to do so could in some cases make it harder for luxury brands to convince online shoppers – especially those who haven't experienced the in-store hand-holding – to pay full price.</p> <p><strong>The mainstreaming of luxury.</strong> Luxury isn't what it used to be. Thanks in large part to social media, luxury brands are more mainstream than ever. On one hand, that's a good thing. On the other, it can contribute to the perception that luxury brands' products are less exclusive. In fact, <a href="https://econsultancy.com/reports/the-new-face-of-luxury-maintaining-exclusivity-in-the-world-of-social-influence">this is one of the biggest challenges luxury brands have faced in adopting influencer marketing</a>.</p> <p>For these reasons, luxury brands should recognize the need to double down on customer experience and specifically, how they craft <a href="https://econsultancy.com/blog/69000-what-farfetch-s-store-of-the-future-tech-says-about-the-state-of-luxury-retail">online experiences</a> that convince consumers their products are indeed worth top dollar. </p> tag:econsultancy.com,2008:BlogPost/69650 2017-12-08T15:00:00+00:00 2017-12-08T15:00:00+00:00 What Amazon's entry into the pharmacy market might mean for pharma marketers Patricio Robles <h3>What it might mean for pharma marketers</h3> <p>The news of Amazon's interest in selling prescription drugs has, for obvious reasons, spooked investors in major pharmacy players like CVS, Walgreens and Express Scripts, all of which risk being disrupted by Amazon the way so many other businesses have.</p> <p>But pharmaceutical companies could find that Amazon's disruption is a boon for them.</p> <p><a href="https://www.washingtonpost.com/news/wonk/wp/2017/05/17/what-amazon-could-do-to-the-business-of-selling-prescription-drugs/">According to</a> Adam Fein, president of Pembroke Consulting, one of the easiest ways for Amazon to enter the market would be to focus on patients who pay cash for generic and brand-name drugs.</p> <p>Although prescription drug coverage is typically provided through health insurance plans – all plans offered under the Affordable Care Act (ACA) require it – a growing number of patients opt to pay cash for their prescription. As Doug Hirsch, the co-founder of GoodRx, a prescription drug pricing comparison service, explained to The Washington Post, this is a result of the fact that many patients have high deductibles and want to see if it's possible to get better deals.</p> <p>For pharma marketers, Amazon's entry into this market could increase the importance of their direct-to-consumer marketing efforts.</p> <p>Unfortunately, direct-to-consumer marketing is increasingly difficult for pharma companies and could potentially even become virtually impossible if some groups have their way. The American Medical Association supports a ban on direct-to-consumer ads that pitch prescription drugs and in California, a state legislator earlier this year <a href="https://www.fiercepharma.com/pharma/california-legislator-takes-aim-at-industry-s-copay-coupons-pricing-fight">introduced legislation</a> that would ban the use of copay coupons when an inexpensive generic drug alternative was available.</p> <p>A ban on direct-to-consumer ads would obviously complicate matters for pharma marketers, but until that day comes, one of the best ways they can prepare for the potential entry into the pharmacy market would be to evaluate their direct-to-consumer efforts in light of a changing landscape in which digital channels like <a href="https://econsultancy.com/blog/67993-why-pharma-marketers-are-increasingly-turning-to-social-media">social media</a> increasingly trump established channels <a href="https://econsultancy.com/blog/68120-as-tv-ads-lose-their-sway-pharma-marketers-need-to-adapt">like television</a>.</p> <p>They should also consider that if Amazon does enter the market, it could have the effect of increasing pricing transparency, something they would be wise to embrace rather than fight.</p> <h3>Amazon as frenemy?</h3> <p>While Amazon's entry into the retail pharmacy market could prove to be a net positive for pharma companies well-positioned to take advantage of it, there is also the potential that Amazon could become a frenemy.</p> <p>How? As drug supply chain expert Stephen Buck, co-founder of Courage Health, <a href="https://www.cnbc.com/2017/11/02/amazon-pharmaceutical-move-acquisition-targets.html">pointed out</a>, Amazon could eventually decide to manufacture its own generic medications. If that happened, pharma companies would find themselves competing with a company that also acts as, perhaps, one of their more important distribution channels.</p> <p>This possibility too also demonstrates the importance of direct-to-consumer marketing, as pharma companies will want to do everything they can to establish the superiority of their drugs over generics that could one day be manufactured by Amazon.</p> <p><em><strong>More on pharma:</strong></em></p> <ul> <li><a href="https://econsultancy.com/blog/68851-six-ways-digital-is-changing-the-pharma-healthcare-industry">Six ways digital is changing the pharma &amp; healthcare industry</a></li> </ul> tag:econsultancy.com,2008:BlogPost/69634 2017-12-04T12:25:00+00:00 2017-12-04T12:25:00+00:00 Six ways fintech startups could hurt incumbent banks Patricio Robles <p>In <a href="http://www.bankofengland.co.uk/financialstability/Documents/fpc/results281117.pdf">its report</a>, the BoE identified several areas in which incumbent banks could be hurt by fintech upstarts and by how much in monetary terms. They are:</p> <h3>Reduced overdraft revenue</h3> <p>Major UK banks generate more than £2bn annually from overdraft fees. Fintech threatens this revenue in two key ways.</p> <p>First, new tools that help bank customers better manage their finances could help many of them reduce their usage of overdrafts. Second, fintech upstarts could help consumers find other, cheaper sources of credit so that they don't have to tap overdrafts.</p> <h3>Reduced fees from payment services</h3> <p>According to the BoE, payments income contributes approximately £0.8bn to UK banks' annual pre-tax profits and this could decrease as the <a href="https://www.evry.com/en/news/articles/psd2-the-directive-that-will-change-banking-as-we-know-it/">EU's second payment services directive</a> (PSD2) takes effect and non-bank payment providers offer bank customers alternative means of transferring money and making payments without their banks' direct involvement in the transactions.</p> <h3>Higher customer acquisition and retention costs</h3> <p>The BoE says that fintech innovations, including those driven by PSD2, could make it more difficult for banks to acquire and retain customers. “For instance, in the future it may be possible for a customer to manage their finances with only minimal direct engagement with their banks,” the BoE wrote in its report.</p> <p>To deal with the competition from fintech, the BoE estimates that banks may have to double their marketing spend, which would have the effect of reducing their annual pre-tax profits by £1bn.</p> <h3>More difficulty cross-selling</h3> <p><a href="https://econsultancy.com/blog/68940-banks-are-using-data-access-to-disrupt-their-disruptors">Data is worth its weight in gold for banks</a>, and banks' ability to cross-sell to their customers has been helped by banks' “ownership” of their customers' data. But thanks to PSD2, which lets customers give third parties access to their transaction and activity data, banks in the UK will increasingly find themselves competing with non-bank fintechs, many of which are focused on services that banks have traditionally cross-sold.</p> <p>As a result, banks could find that they are unable to cross-sell as much, not only reducing revenue but weakening their relationships with customers.</p> <h3>Increased liquidity risk</h3> <p>Increased competition from fintechs for customer deposits could expose banks to increased liquidity risk if customers more frequently switch their deposits. This could also reduce banks' net interest margins. </p> <p>One way banks might be able to counteract this is to offer higher interest rates on savings accounts, which could have the effect of persuading some customers to move money from instant access accounts to time deposit accounts.</p> <p>This, of course, will still come at a cost: the BoE estimates that if banks increased their time deposit rates by 25 basis points from the current average, it would reduce their pre-tax profits by £0.8bn. </p> <h3>Increased cyber security risk</h3> <p>With customers having the ability to grant access to their banking data under PSD2, banks will have greater exposure to cyber security threats such as hacking and data breaches.</p> <p>While the Financial Conduct Authority (FCA) is working to mitigate these risks, namely by playing an oversight role in which it will vet third parties that will be accessing bank data, it's impossible to fully eliminate cyber security risk. After all, the good guys have to be right all of the time; the bad guys only need to be right once.</p> <p>Given how high the stakes can be –  the recent hack of Equifax, for instance, could have costs in the billions of dollars – banks will have to invest significant sums – £4.9bn over the next seven years according to the BoE's estimate – into cyber security.</p> <h2>The news isn't all bad</h2> <p>While they may not be able to avoid some of the ill-effects of fintech disruption that the BoE has identified, incumbent banks <a href="https://econsultancy.com/blog/67202-what-s-the-future-for-big-banks-in-a-fintech-world">do have a future</a> – if they make wise decisions and investments today. </p> <p>There's no reason that banks can't participate in the fintech trend by developing their own innovative new technologies, <a href="https://econsultancy.com/blog/68905-bnp-paribas-looks-to-transform-its-customer-experience-not-its-services">rethinking their customer experiences</a>, <a href="https://econsultancy.com/blog/68159-five-ways-fintech-upstarts-are-disrupting-established-financial-institutions">looking at markets they have previously underserved</a>, and partnering with or acquiring young companies that have built better mousetraps.</p> <p><em><strong>Further reading:</strong></em></p> <ul> <li><a href="https://econsultancy.com/reports/digital-transformation-in-the-financial-services-sector-2016/">Digital Transformation in the Financial Services Sector</a></li> </ul> tag:econsultancy.com,2008:BlogPost/69438 2017-09-22T09:39:51+01:00 2017-09-22T09:39:51+01:00 Is Uber's lawsuit against an agency a harbinger of greater brand-agency discord? Patricio Robles <p>Procter &amp; Gamble <a href="https://econsultancy.com/blog/69309-how-much-waste-is-in-the-digital-ad-market">has already slashed $100m from its digital ad budget</a>, while JPMorgan Chase has cut the number of sites it advertises on from more than 400,000 to 5,000.</p> <p>But unhappy with the results of some of its spend, Uber isn't just slashing its budget or cutting campaigns. As <a href="https://www.bloomberg.com/news/articles/2017-09-18/uber-goes-on-rare-legal-offensive-suing-dentsu-unit-for-fraud">detailed by</a> Bloomberg, the ridesharing behemoth has filed a $40m lawsuit against one of its agencies alleging that it paid for "nonexistent, nonviewable, and/or fraudulent advertising."</p> <p>According to <a href="https://www.documentcloud.org/documents/4053888-Gov-Uscourts-Cand-317169-1-0.html">Uber's complaint</a>, it discovered that "mobile first" ad agency Fetch, which is owned by Japanese holding giant Dentsu, charged it "tens of millions of dollars" while knowingly purchasing bad ads. It also alleged that Fetch "allowed networks and publishers to steal credit for organic installs of the Uber App, and Uber App installs that were attributable to other sources."</p> <p>Uber says it discovered this fraud when it received reports of its ads appearing on a conservative political website that it had previously told Fetch to blacklist: </p> <blockquote> <p>Uber's investigation into that particular issue suggested deceptive naming was to blame. Specifically, the public-reported name of the websites and mobile applications where Uber advertisements supposedly appeared did not match the actual URL accessed. For example, one publisher retained by Fetch reported clicks on Uber ads as coming from placements such as "Magic_Puzzles" and "Snooker_Champion." In fact, those clicks actually originated from advertisements on Breitbart.com, despite the fact that Uber had instructed that no ads be placed with that website.</p> </blockquote> <p>Not surprisingly, Fetch is denying Uber's allegations. James Connelly, Fetch's CEO, says he was "shocked" at Uber's claims, which he calls "unsubstantiated" and suggests are designed to "draw attention away from Uber's unprofessional behavior and failure to pay suppliers."</p> <h3>The blame game</h3> <p>As Uber sees it, it hired Fetch for its expertise and part of Fetch's job was to deal with <a href="https://econsultancy.com/blog/67659-three-things-that-show-the-scale-of-the-ad-fraud-challenge">ad fraud</a>. "Regardless of whether Fetch purchased mobile inventory on an agent-principal or principal transaction basis, Fetch was responsible for the day-to-day oversight of [ad] networks and vetting of publishers for quality and fraud preventing, concordant with the...duties of a reasonably prudent mobile advertising agency," Uber's lawsuit states.</p> <p>Fetch, of course, says that it, like just about every legitimate player in the ad industry, is <a href="https://econsultancy.com/blog/67660-what-can-prevent-ad-fraud-we-ask-an-ad-tech-ceo">trying to deal with ad fraud</a> and "minimize its impact." As Fetch's Connelly sees it, Uber is "[using] an industry-wide issue as a means of avoiding its contractual obligations."</p> <p>Ultimately, the two companies will either settle their dispute or let the legal system determine the facts and decide which party is in the right.</p> <p>In the meantime, the lawsuit, which is notable because Uber is targeting its agency and not the actual media sellers from which the allegedly fraudulent ads came, highlights just how significant the costs of ad fraud can be and just how difficult it is for brands and their agencies to deal with it.</p> <p>It also raises a number of interesting questions. As more brands scrutinize their ad buys, sometimes through formal audits, they will inevitably uncover evidence of fraud. Will this lead to more lawsuits against agencies? In an effort to up control and oversight, will more brands opt to build in-house agencies or split the difference with <a href="https://econsultancy.com/blog/69148-in-house-agency-versus-on-site-agency-weighing-the-pros-and-cons">on-site agencies</a>?</p> <p>Time will tell, but it's clear that agencies, <a href="https://econsultancy.com/blog/69357-what-s-next-for-the-agency-model">already under pressure</a>, have yet another thing to worry about.</p> tag:econsultancy.com,2008:BlogPost/69418 2017-09-14T14:26:39+01:00 2017-09-14T14:26:39+01:00 The FTC begins cracking down on influencers who violate its rules Patricio Robles <p>Last week, the FTC <a href="https://www.ftc.gov/news-events/press-releases/2017/09/csgo-lotto-owners-settle-ftcs-first-ever-complaint-against">announced</a> that two influencers active on YouTube, <a href="https://www.econsultancy.com/blog/69392-amazon-turns-twitch-into-an-influencer-sales-platform">Twitch</a>, Twitter and Facebook had settled charges that they "deceptively endorsed the online gambling service CSGO Lotto...while failing to disclose they jointly owned the company."</p> <p>In addition, the FTC says that the influencers, Trevor 'TmarTn' Martin and Thomas 'Syndicate' Cassell, paid other influencers to promote CSGO Lotto without requiring them to disclose that they were paid.</p> <h3>A notable first</h3> <p>This is not the first time that the FTC has taken action over influencer marketing rule violations – it previously won a settlement with Lord &amp; Taylor over the retailer's Instagram influencer marketing efforts – but it is the first time that the FTC has gone after influencers themselves for violations.</p> <p>"Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts," FTC acting-chairman Maureen Ohlhausen stated in a press release. "This action, the FTC's first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions."</p> <p>While this settlement is somewhat unique in that the influencers targeted owned the service they were promoting without disclosure, the FTC appears to be making it clear that it is now going to more aggressively pursue influencers for violations of its rule. Indeed, in its press release announcing this settlement, the FTC revealed that it has sent warning letters to 21 of the 90 influencers it contacted in April.</p> <p>"The warning letters cite specific social media posts of concern to staff and provide details on why they may not be in compliance with the FTC Act as explained in the Commission’s Endorsement Guides," the press release explained. "For example, some of the letters point out that tagging a brand in an Instagram picture is an endorsement of the brand and requires an appropriate disclosure."</p> <p>One would assume that if any of the 21 influencers the FTC contacted do not respond or don't allay the agency's concerns, new charges could be forthcoming.</p> <h3>A reminder for brands too</h3> <p>On one hand, the FTC's latest enforcement action is good news for brands, as it indicates that the FTC is willing to go after individual influencers and not just brands, who are the bigger financial targets. On the other hand, the FTC's move could signal that the agency is stepping up its enforcement efforts, which means that the entire influencer marketing ecosystem will be under more scrutiny and violations of the FTC's rules will carry with them a greater and greater risk of punishment for both influencers and brands.</p> <p>The good news is that as the FTC ups its enforcement, it is providing more guidance about what influencers and brands need to do to stay on the right side of the rules. For example, the FTC has also announced updates to <a href="https://www.ftc.gov/tips-advice/business-center/guidance/ftcs-endorsement-guides-what-people-are-asking">its enforcement guides</a> which were last updated in 2015.</p> <p>The new information in them covers a number of topics, such as the obligations of foreign influencers, disclosure of free travel and whether disclosures must be made at the beginning of paid posts. It also adds platform-specific disclosure guidelines for Instagram and Snapchat.</p> <p>Among the notable additions:</p> <ul> <li>"Tagging a brand you are wearing [in a photo] is an endorsement of the brand and, just like any other endorsement, could require a disclosure if you have a relationship with that brand."</li> <li>"There is a good chance that consumers won’t notice and understand the significance of the word 'ad' at the end of a hashtag, especially one made up of several words combined like '#coolstylead.' Disclosures need to be easily noticed and understood."</li> <li>"The use of '#ambassador' is ambiguous and confusing. Many consumers are unlikely to know what it means. By contrast, '#XYZ-Ambassador' will likely be more understandable (where XYZ is a brand name). However, even if the language is understandable, a disclosure also must be prominent so it will be noticed and read."</li> <li>"Keep in mind that if your post includes video and you include an audio disclosure, many users of [platforms like Instagram and Snapchat] watch videos without sound. So they won't hear an audio-only disclosure. Obviously, other general disclosure guidance would also apply."</li> </ul> <p><em>For more on this topic, read:</em></p> <ul> <li><a href="https://econsultancy.com/reports/measuring-roi-on-influencer-marketing"><em>Measuring ROI on Influencer Marketing (subscription required)</em></a></li> <li><a href="https://www.econsultancy.com/blog/69209-six-inconvenient-truths-about-influencer-marketing"><em>Six inconvenient truths about influencer marketing</em></a></li> <li><a href="https://econsultancy.com/blog/69196-11-impressive-influencer-marketing-campaigns"><em>11 impressive influencer marketing campaigns</em></a></li> </ul> tag:econsultancy.com,2008:BlogPost/69209 2017-06-30T10:43:00+01:00 2017-06-30T10:43:00+01:00 Six inconvenient truths about influencer marketing Patricio Robles <h3>1. Calculating ROI can be difficult</h3> <p>As Rakuten Marketing MD and Econsultancy contributor James Collins <a href="https://econsultancy.com/blog/69164-should-sales-be-used-to-measure-the-roi-of-influencer-marketing/">recently noted</a>, “influencer marketing is often about raising awareness through aspirational content, with a view to generating purchases further down the line, rather than pushing immediate sales.”</p> <p>But for brands spending growing amounts of big bucks on influencer marketing campaigns (according to research from Linqia, marketers will spend $50,000 to $100,000 per influencer marketing campaign this year) justifying that spend increasingly requires more than faith that it will produce a return down the line. </p> <p>Unfortunately, a recent Econsultancy report <a href="https://econsultancy.com/reports/measuring-roi-on-influencer-marketing/">revealed that measuring ROI on their influencer initiatives is the biggest challenge for 65% of marketers</a>. While measuring ROI is hardly a challenge exclusive to influencer marketing, given the growing cost of influencer marketing campaigns, it's getting harder and harder for marketers to brush the ROI question aside.</p> <h3>2. Engagement doesn't necessarily translate to efficacy</h3> <p>Part of the ROI calculation challenge is that some of the most easily tracked metrics in influencer marketing campaigns are related to how much followers engage with sponsored content. But likes, retweets and comments aren't always meaningful metrics and don't even necessarily mean that an influencer's followers have truly engaged with the branded content.</p> <p>At a minimum, companies should use benchmarking to assess whether or not the engagement their campaigns is generating is in line with what they expect based on an influencer's non-paid content, but it's not clear that marketers are even doing this.</p> <h3>3. It's hard to assess audience quality </h3> <p>Fake accounts, often created by automated means, have for years been a thorn in the side of social platforms like Facebook and Twitter. While it's impossible to pin down exactly how many fake accounts exist, even if a relatively small percentage of the accounts on these platforms are fake, that represents tens of millions of fake accounts, if not more.</p> <p>By some estimates, even some of the biggest influencers on these platforms have fake followers well into the double digit percentages, which can equate to anywhere from tens of thousand to millions of fake followers. Even though in most cases this almost certainly isn't intentional, it's a problem given that the most popular influencers are setting their prices based on their total audiences and marketers can't really be sure whether the number of useless accounts following a particular influencer is 1%, 10%, 25%, etc.</p> <p>Beyond fake accounts, it's even more difficult to assess the quality of an influencer's legitimate audience. How many followers are active? How many are truly fans of the influencer? And so on and so forth.</p> <h3>4. You can't control how people will react</h3> <p>The concept behind influencer marketing – that brands benefit by positive associations with high-profile individuals on social media platforms – isn't an invalid one, but that doesn't mean that campaigns are guaranteed to produce positive reactions.</p> <p>For example, Marigold, a prominent dairy and beverage company in Singapore, learned that the hard when when it used three influencers to promote its Marigold Peel Fresh juice drink. One of the influencers, Naomi Neo, who did not disclose that she was being paid by Marigold, claimed that she “always [carries] around a carton of my favorite MARIGOLD PEEL FRESH juice.”</p> <p>That claim was, for obvious reasons, <a href="http://mothership.sg/2016/05/internet-person-says-she-carries-1-litre-carton-of-marigold-peel-fresh-everywhere-she-goes/">met with extreme skepticism</a> and lots of negative comments on social media and the web – probably not what Marigold was looking for.</p> <p><img src="https://assets.econsultancy.com/images/0008/7191/neo.jpg" alt="naomi neo" width="615" height="424"></p> <h3>5. Influencer relationships can go south, and quickly</h3> <p>Influencers are human beings and thus not infallible. That means influencer relationships are fraught with many of the same risks as typical celebrity endorsements.</p> <p>In a worst-case scenario, brands associated with an influencer could suffer some level of embarrassment if the influencer becomes the subject of a public firestorm.</p> <p>Case in point: after a Wall Street Journal article highlighted a number of anti-Semetic videos posted by PewDiePie, YouTube's biggest homegrown star, brands that had been involved with him, <a href="https://www.wsj.com/articles/disney-severs-ties-with-youtube-star-pewdiepie-after-anti-semitic-posts-1487034533">including Disney</a>, made the decision to cut ties. </p> <p>While it's unlikely that the PewDiePie association will have a lasting negative impact on a brand like Disney, the fact that it had to end the kind of long-term influencer relationship that is most likely to pay dividends demonstrates just how hard it can be to bank on internet stars as reliable partners.</p> <h3>6. Disclosure is still an issue</h3> <p>In the U.S., the Federal Trade Commission (FTC) is ramping up its efforts to ensure that influencers are adequately disclosing when they are being paid to promote products and services for companies. </p> <p>While in theory it should be easy for marketers to require that the influencers it works with are following the applicable rules, and platforms like Instagram are aiming <a href="https://www.bloomberg.com/news/articles/2017-06-14/instagram-to-make-it-clearer-when-influencer-posts-are-paid-ads">to make it even easier</a>, the FTC <a href="http://fortune.com/2017/04/20/ftc-instagram/">is still finding dozens upon dozens of instances of violations</a> of its rules. Even following the FTC's letters, a number of watchdog groups <a href="https://www.mediapost.com/publications/article/303461/celebrities-still-fail-to-disclose-instagram-ads.html">discovered that</a> many of the influencers the FTC warned are not disclosing when they are posting content for brands.</p> <p>Ultimately, if brands aren't proactive about making sure the influencers they work with are following the rules, it's likely that the FTC will be forced to take enforcement action, action that could carry with it fines for brands.</p>