In February, Kieran Hannon, chief marketing officer of Belkin International Inc., noticed an odd tweet asking the electronics maker why it was advertising on an extremist news network known for its scorched-earth approach. A banner ad promoting the company’s new Linksys mesh router had appeared on the site, even though this particular site wasn’t among the roughly 200 sites Belkin had preapproved for its ads. Mr. Hannon called his ad agency, which couldn’t explain the mix-up.

Such headaches are becoming all too familiar for marketing executives, as they come to grips with the trade-offs inherent in automated advertising. Known as “programmatic” ad buying, it is now the way the vast majority of digital display ads are sold.

Programmatic advertising allows the buyer to target consumers across thousands of sites, based on their browsing history or shopping habits or demographics. Doing so is more cost-effective than buying more expensive ads on a handful of well-known sites.

But marketers don’t fully control whether their ads will show up in places they would rather avoid: sites featuring pornography, pirated content, fake news, videos supporting terrorists, or outlets whose traffic is artificially generated by computer programs.

The Ad Maze

The confusion stems from the convoluted infrastructure of the ad-technology world: a maze of agencies, ad networks, exchanges, publisher platforms, and vendors. Instead of buying space on websites, brands can buy audiences—categories of people—and their ads are placed on sites those people visit.

The problems arise when those people are on sites where brands don’t wish to appear.

Online advertisers and their partners can generally target specific groups of users based on certain characteristics. But their ads can still wind up in undesirable places.

On open exchanges, it “just becomes harder and harder to figure out if your ad is showing up in a legitimate ad experience,” said Kristi Argyilan, senior vice president of marketing at retailer Target Corp.

Marketers have been dealing with these issues for years. But the “brand safety” risks in digital advertising have hit home with multiple high-profile episodes in recent months. In March, a number of big brands including PepsiCo Inc., Wal-Mart Stores Inc. L’Oréal SA, and AT&T Inc. pulled their ads from YouTube and the Google Display Network, a network of third-party websites, after revelations that ads ran alongside objectionable content, including videos promoting anti-Semitism and terrorism.

Google, a unit of Alphabet Inc., promised to better police its content and give marketers more information about where their ads appear on YouTube. Though the number of ordinary web users who saw an ad in an offensive YouTube video was likely small, the combination of the public-relations damage from the revelations and the potential for more widespread exposure down the road led marketers to act.

The recurring issues have caused brands to adjust their overall approach to automated ad buying.

Colgate-Palmolive Co. is adding language to the contract it has with its ad-buying firm, which requires it to maintain blacklists of sites the company doesn’t want to have its ads appear on, according to people familiar with the matter.

Advertisers are doubling down on using online ad verification services, or other services which help advertisers vet YouTube channels.

More marketers are purchasing ads through “programmatic direct” deals, in which a publisher uses technology to sell directly to advertisers, and “private programmatic marketplaces,” in which a publisher or a select group of publishers can sell to a select group of advertisers, in real time. Automation is involved in both, but the risks are far lower than with open exchanges.

Display-ad spending on programmatic direct deals in the U.S. is expected to grow by 35 percent this year to $18.2 billion, while spending on private marketplaces will increase 39 percent to about $6 billion, according to eMarketer. By contrast, spending on open exchanges is forecast to grow by 8.4 percent this year to $8.3 billion.

Target pulled back from buying via open exchanges at the end of 2015 and now uses private marketplaces to buy ads from about 160 different publishers.

Source: The Wall Street Journal