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Is the gold rush to digital marketing finally backfiring?

Digital advertising technology has the potential to reach consumers based on their online behavior, show them relevant advertising, monitor click-through rates and even attribute those clicks to sales.

And advertisers have shown no sign of reducing their spend on search and social platforms, with Facebook and Google together controlling 54 percent of the global digital advertising market in 2016, up from 44 percent the year before, according to figures from MAGNA released in December 2016.

They are also expected to spend $299 billion annually on digital advertising globally by 2021, a figure equivalent to 50 percent of their marketing budgets.

Double exposure of abstract financial graphs, business person in office using smartphone and laptop computer with stock market dashboard, and buildings
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Double exposure of abstract financial graphs, business person in office using smartphone and laptop computer with stock market dashboard, and buildings

But while Facebook founder Mark Zuckerberg has previously encouraged colleagues to "Move fast and break things" (the internal motto changed to "Move fast with stable infrastructure" in 2014), the past few months have seen digital media platforms and the brands that spend money advertising on them in the spotlight.

Last month, Procter & Gamble chief marketing officer Marc Pritchard seemed to heed Zuckerberg's toned-down motto by suggesting P&G had been distracted by new digital marketing methods leading to poor ad placement or wasted money, and announced a five-point plan to clean up the media supply chain.

"I'll make a confession, which may sound familiar. I confess that P&G believed the myth that we could be a 'first mover' on all of the latest shiny objects, despite the lack of standards and measurements and verification," he told an audience of digital marketers at a conference on 29 January, according to a transcript of his speech seen by CNBC.

Rush to digital

For Jon Wilkins, executive chairman of agency Karmarama, many marketers have fallen into similar traps. "I can't help but think it has been a bit of a gold rush really, it's been a race [to say] 'I'm going to create competitive advantage and accountability in this new environment and I'm going to get there first without really thinking of the consequences.'

"[But] there are problems all the way along the food chain, if you like. Ultimately everything starts with the client because it's their money," he told CNBC.com by phone.

A report in the Times last week suggested that some of the world's largest brands are "unwittingly funding Islamic extremists, white supremacists and pornographers by advertising on their websites," because programmatic technology used by brands and media agencies can automatically buy and place ads next to such content on YouTube and other websites.

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Wilkins, who works with the World Federation of Advertisers (WFA) on Project Reconnect, an initiative to better understand what consumers want from brands, says the Times report exemplifies part of a wider problem with digital marketing.

"Funding of extreme websites is just one of a myriad of complex, opaque issues around digital marketing, it is not the issue, it's just one of them, and that's what's made this so complicated."

Wilkins cites disruptive techniques such as retargeting, where an ad "follows" someone around the internet, pre-roll advertising techniques on videos "to stop you getting to the content you want to watch," and "screen invasions" where content pops up on an article or website. "There is a lot of evidence to suggest that it is creating very negative feelings among consumers towards brands," he said.

Following the Times report, the WFA's chief executive Stephan Loerke has urged advertisers to be cautious with their digital advertising. "It is incumbent upon the ecosystem, including publishers, ad networks, programmatic companies and agencies, to prove that the capability to effectively deal with challenges such as ad fraud and brand misplacement is in place," he said in an emailed statement.

"As it stands this seems not to be the case. Until this time, brand owners need to apply caution in relation to their overall digital media investment." He also urged media platforms to do more to remove "inappropriate" content.

Brand safety online

Car marque Jaguar and U.K. supermarket Waitrose are two of the companies mentioned by the Times article, which claims that their advertising appeared on hate websites or next to extremist video content. Both brands told CNBC.com that they have processes in place to monitor online advertising and are looking into why and how their advertising featured against such content, with Jaguar withdrawing its U.K. digital advertising temporarily, after saying it was "very concerned" by the report.

"We re-started digital advertising on Saturday 11 February, and are having constructive discussions with YouTube about improved third party verification," Jaguar said in an emailed statement, which added that it had already invested in "developing practices to minimize the risk of our brands being associated with inappropriate content."

A Google spokesperson said in an emailed statement: "When it comes to content on YouTube, we remove flagged videos that break our rules and have a zero tolerance policy for content that incites violence or hatred.

"Some content on YouTube may be controversial and offensive, which is why we only allow advertising against videos which fall within our advertising guidelines. Our partners can also choose not to appear against content they consider inappropriate, and we have a responsibility to work with the industry to help them make informed choices."

YouTube has also partnered with Facebook, Microsoft and Twitter in an initiative to help stop the spread of terrorist content online, it was announced in December 2016.

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