Legal Spat in Programmatic Ad Land: Time for Business Ethics in Programmatic Advertising

AdUnity is a company that has developed a set of business ethics for programmatic advertising, so it is perhaps unsurprising that we take a keen interest court cases involving other companies and stakeholders in our complex ecosystem. The recently announced suit and counter-suit between Criteo and Steelhouse are no exceptions, especially as each side alleges the other is undertaking systematic fraud on an industrial scale. This blog post is intended as a short commentary on the two cases from the perspective of a company that wants to bring business ethics to programmatic advertising. We believe the adoption of business ethics would not only obviate the need for such corporate antagonisms and commercial rivalry boiling up into litigation but would also make the digital media market as a whole work more effectively and efficiently.

The main thrust of Criteo’s initial July 13th lawsuit (filed in the United States District Court Central District Of California, Case No. 2:16-cv-4207) is their claim that Steelhouse ran a large-scale “counterfeit click fraud scheme” in order to improperly profit from the good work of Criteo and others. The crux of the claim is that Steelhouse “counterfeited clicks to trick e-tailers into attributing sales to SteelHouse that should have been attributed to Criteo, other competitors, and partners, or direct traffic.” Without going into a deep technical description of the alleged fraud, Criteo claims Steelhouse injected an intermediate web page from traffic redirected to the advertiser’s site. This alleged hoax intermediate webpage falsely recognises clicks for SteelHouse as opposed to the real originator of the click (whoever that may be). A more detailed technical mechanism of the alleged fraud is available from this Business Insider UK article. If any of this is true, it will provide yet another example of skulduggery and treachery in the digital marketing ecosystem.

However, what appears to have piqued Criteo more than anything (as far as one can ascertain from the filing), is that Steelhouse went on to claim that it “consistently outperformed” Criteo in head-to-head comparisons. At this point, it is worth remembering that there is no universally accepted theory of how advertising actually works. Last click attribution may be a relevant measure of advertising effectiveness with low-interest products, but advertising is much more complex than simply retargeting ads for browsed products or searched items. In fact, as shown by Thota et al 2012, matching ads, sites and people is a double-edged sword, since Advertiser and Publisher brands can suffer from inappropriate matching of brands and sites. Therefore, Advertisers, in particular, should take a very large pinch of salt when hearing claims made by ad tech vendors and recognise that their brands can be damaged by ad tech companies inundating Internet users with retargeted ads on their behalf.

In its counter-suit (filed in the United States District Court Central District Of California, Case No. 2:16-CV-04207 SVW (MRWx)) Steelhouse levels all kinds of accusations at Criteo. Firstly, they allege that 52% of Criteo’s clicks are NHT. Secondly, they assert Criteo overstates its performance through fraudulent click practices; for example, Steelhouse claims that 16% of Criteo clicks are from users clicking the same advertisement within a 30-minute period (eight times the industry standard). Thirdly, they attack Criteo’s black box business model and state that “Criteo has built its company on a black box model, which gives its advertisers no visibility into how their advertising dollars are being spent.” Steelhouse accuses Criteo of deceiving advertisers into increasing CPC bids to yield better performance, whereas, in reality, the increased bid results in no additional traffic. Fourthly, and in a move most likely designed to leverage the rising political irritation at the pervasive fraud in the industry at large, Steelhouse references the allegations and questions raised by U.S. Senators Charles Schumer (D-N.Y.) and Mark Warner (D-Va.) to the Federal Trade Commission regarding systematic and industrial scale fraud in the digital advertising industry. The letter to the FTC can be accessed via Scribd here.

It is easy to hurl allegations at black box business models because it is a human instinct to be suspicious of hidden behaviour. However, as I have mentioned in a previous post, it is impossible to behave without bias if you run an End-to-End Ad Platform using a hidden arbitrage business model. Nevertheless, if any of the claims made in the suit or the countersuit are upheld, it will be yet another damning indictment on the current state of the industry. Regardless of the specifics of this particular spat, the industry as a whole is riddled with unscrupulous systems, methods, and practices designed to fleece the naïve and the unwary on both the buy and sell side. The result is a digital media market that is inefficient and ineffective. Regrettably, even the biggest companies in our industry are also culpable (this was also implied in the letter from the two US Senators to the FTC).

However, with a more ethical approach to digital advertising and with some honesty in how advertising actually works and influences people, we can make the industry work better for everyone: Advertisers, Publishers, and Internet Users. Firstly, in terms of ethics, the team at AdUnity has developed a simple four point programmatic business ethics framework below:

1. Transactions for digital media should be transparent and consider, where possible, all costs and benefits, so as not to economically undermine the value of the all the people involved in creating original sites and apps.
2. Where auctions for ad media are not on an equal-access basis they should be clearly described as such.
3. Data regarding money value of traded digital media should be available to all stakeholders in the transaction process: Internet User, Publisher, and Advertiser.
4. If profiles are to be used to target individual Internet Users for advertising then these should be under the control of the Internet User.

I hope industry professionals will recognise the adoption of such ethical principals will make the industry work better for everyone.

Secondly, it is worthwhile reading up on what advertising actually is and how the latest academic research believes it works. I still find it strange that I work in a huge industry whose main output is a product that hardly anyone understands. A wider appreciation of the strengths and weaknesses of advertising as a means of influence will do much to dispel much of the myth and hearsay that seems to dominate so much industry discourse. More honesty and less myth would diminish the power of the snake oil salesmen that trade in false promises of the next big thing while public trust erodes and Publishers continue to struggle financially. A good place to start gaining a deeper understanding of how advertising works is with Professor Robert Heath’s Seducing the Subconscious: The Psychology of Emotional Influence in Advertising, available here.

References:
Thota SC., Song JH. & Biswas A. (2012) Is a website known by the banner ads it hosts? Assessing forward and reciprocal spillover effects of banner ads and host websites. International Journal of Advertising. Warc Ltd.