AdTech - Display Advertising Space Overview
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The document discusses disruption in the display advertising industry. It notes that advances in technology have led to greater targeting capabilities, more available data, and more efficient execution. This has resulted in a complex "lumascape" of companies involved in display advertising, including publishers, agencies, ad exchanges, and other players. The document outlines opportunities and challenges for publishers and agencies in this evolving landscape.
AdTech - Display Advertising Space Overview
- 1. C o p y r i g h t -‐ H i m a n s h u B a r i . A n y d u p l i c a t i o n o r d i s t r i b u t i o n w i t h o u t t h e a u t h o r ’ s p e r m i s s i o n i s s t r i c t l y p r o h i b i t e d Display Advertising -‐ An Intersection of Science & Art Author: Himanshu Bari An outsider’s view of the disruption in the display advertising space April 14
- 2. Disruption in the Display AdTech Business Per a major publication -‐ “The space between advertisers and publishers, where there used to be a handshake and a media plan, is now densely populated by various, and sometimes mysterious, products and services. There are sell side platforms and buy side platforms. There are ad networks and ad exchanges. There are aggregators and optimizers. There are services so cutting-‐edge advertisers aren’t even sure what they do, let alone whether they need them” What was the problem -‐ Limited targeting & personalization o Due to limitations in technology & data availability, targeting was done at very broad group level resulting in poor engagement -‐ Opacity in measurement o Little to no ability to measure Ad campaign impact to key business metrics. Also, use of CPM based pricing compounded the problem and resulted in misalignment of incentives between the publisher & advertiser -‐ Inefficient execution o As seen from Appendix-‐1, the traditional display media ordering processes is extremely manual and stitched together with point solutions resulting into a bloated cost structures on both advertiser and publisher ends o Execution has traditionally been focused and customized around campaigns and there was little room to exploit economies of scale What has changed now? -‐ Commoditization of technology o Open source software – Not having to spend on software acquisition really gave a jump start to innovation in the AdTech space o Scale out computing – To solve the problems in Display advertising, small startups needed ‘Google’ like computing paradigms sophistication. The rise of open source Hadoop & NoSQL technologies gave them level footing o Cloud – 95% of the startups in the AdTech space would not have existed without the availability of a cheap on demand infrastructure -‐ Availability of ‘Complete’ data Driven largely by the commoditization of the technology used in storing and processing data, publishers and advertisers have access to data that is o Granular o Multi-‐dimensional o Fresh -‐ SaaS – Lowers the barrier for customers to try new products.
- 3. Display Lumascape… Woow! Opportunities & challenges for some sections of the Lumascape PUBLISHERS Key Players Too many to list. Opportunities -‐ More data = opportunities for price discrimination -‐ Better liquidity for their inventory -‐ Monetize first party data -‐ Rich media – engage the users with the Ads.. eg. Youtube implemented Ad skip functionality -‐ Taking the one throat to choke approach to AdTech
- 4. -‐ Native Ad formats (publisher specific ad format that enables creative engagement with user) -‐ Vertical expansion (starting with sell side platforms) Challenges -‐ Excess inventory & programmatic buying are putting downward pressure on CPMs -‐ Fragmentation of the Adtech space means -‐ managing multiple ad tech vendor relationships becomes a big overhead.. -‐ Too many dependencies on the site = slow down and brittleness of the site = lost revenue -‐ Need more transparency from AdTech vendors -‐ most Adtech vendors only report line items by audience segment -‐ Lack of differentiation amongst Adtech vendors = vendors selling dreams. Publishers want to see case studies not tech promises. Few vendors focused on content, creatives, verification, analytics and audience measurement have really worked hard to understand publishers needs AGENCIES Key Players WPP, Omnicom, Havas, Publicis etc (see Lumascape for better list) Opportunities -‐ Capitalize on existing brand relationships. Shoot for the broader campaign & brand goals… -‐ Making up that lost margin with more modern data services that require fewer but more expensive full-‐time employees and global data services through partnerships with companies like Adobe. The pitch goes something like this: While it might be cheaper for clients to deal directly with ad-‐tech vendors, their savings will be eaten up by the time and resources needed to cobble together a global ad-‐tech ecosystem on their own. -‐ Wave the white flag with DSPs -‐ Agencies often lay out rules of engagement for ad-‐tech partners and map out how the two sides can team up to win new clients. One former agency trading-‐desk executive said his firm and others would offer quid pro quos to DSPs. If a DSP wanted to be the trading desk's primary automated ad-‐buying tool or wanted the agency to guarantee to funnel $1 million a month in ad spending through its system, the trading desks would ask the DSP for introductions to new clients or to give the agency first-‐look at any inbound client inquiries
- 5. Challenges -‐ DSP vendors going direct to brands -‐-‐-‐ Creating an interesting dynamic where agencies are trying to build DSP like capabilities and DSP vendors are trying to build service functions with agency like capabilities -‐ The operations teams in the agencies that do repetitive tasks are the most under threat. The creative folk that strategize and do campaign planning are not and are exactly the skills that the DSP companies need. -‐ Brand Clients can cheaply implement and oversee many ad-‐tech functions themselves, endangering the fees they paid to full-‐time agency employees for overseeing those functions. Razorfish has cut fees it charges clients for ad-‐ tech services such as dashboard software and cloud-‐based hosting services 10% to 20% -‐ Brands dictating which DSPs they want to work with and agencies have to go with that. DMP Key Players -‐ Oracle(Bluekai), Adobe(AudienceManager), Knotice, nPario, X+1, Lotame Current focus -‐ Ingest & normalize data from search, display, email, CRM, site…etc. -‐ Insight generation – analyze data and create ‘custom audiences’ for targeting -‐ Deliver the audiences to DSPs and perhaps content management systems Opportunities -‐ Mobile tracking & targeting – Cookies don’t work on mobile means blindness to everything that is not browser based. -‐ Users need customer targeting and measurement across the lifecycle from acquisition to retention. To become true ‘Customer data platforms’ (CDPs), DMPs they need to be o Integrated with marketing automation systems. o Integrated with customer’s internal CRM systems -‐ Every DMP vendor seems to have different strengths along the core feature areas. Given the immaturity of current adoption and the range of future use cases, we will inevitably see more use case &/or vertical specialization amongst DMP vendors Challenges -‐ DSP vendors looking to acquire DMP like capabilities -‐ Organizational resistance in rolling out a DMP – lack of clear ownership & need for rejiggering of marketing ops teams
- 6. DSP & RE-‐TARGETING Key Players: Turn & MediaMath are big rivals. TellApart (CPA based pricing) & Criteo ( CPC based pricing), Adroll, Triggit are retargeting focused., Opportunities -‐ Growing popularity of CPA based pricing – Leads to better cost transparency and alignment of incentives. -‐ Expand into the direct buys – eg. AppNexus just announced it Tixt platform that automates the RFP creation process. -‐ Capturing Broader Advertising Budgets. Eg – from Criteo S1 -‐ To date, a majority of our revenue has been derived from delivering advertisements to users who have expressed an intent in one of our clients’ products or services, with the objective of driving a sale based on that intent. We are beginning to leverage the Criteo Engine, data assets and proprietary knowledge to help businesses achieve longer term business objectives, such as customer retention, brand awareness and preference shift, in order to drive sustained sales growth over time. -‐ Focus on Mobile -‐ Opportunity to significantly expand inventory and reach as well as address the growing user audience and content consumption on mobile devices -‐ Specialization by vertical & re-‐targeting type (Search retargeting, site retargeting, CRM retargeting) – eg. Sojern targets travel -‐ Consolidation between traditional DSPs and the new breed of re-‐targeting vendors -‐ Expansion in BRICS countries by US & EMEA DSPs Challenge -‐ Media reach becoming a commodity as almost all DSPs offer connectivity to all the major exchanges -‐ Lack of unified view -‐ While your DSP does mid funnel prospecting, your personalized retargeting vendor mops up the conversions. Try this: ask your personalized retargeting vendor where these conversions came from. Ask them what the effect of different prospecting campaigns has on retargeting campaigns -‐ Inventory acquisition risk – Overdependence on some exchanges. Eg. Criteo get 30% of its inventory from Google & AppNexus -‐ DMPs starting to offer DSP capabilities
- 7. BRANDS -‐ Need transparency in brand measurements metrics. Google eg. Is stressing a lot on providing more brand metrics around the Ads that are shown through its network -‐ Not just Audience BUT Context & Content is becoming key -‐ Need to aggregate tooling around the following cycle o TARGET (Granular audience across devices in the right context with the right content)==> MEASURE (reach, relevance, conversion etc) ==> ANALYZE (how the targeting improved the measures) ==> OPTIMIZE ( learn from previous campaigns) ==> REPEAT… -‐ Starting to build their own cross device first party datasets DATA AGGREGATORS -‐ First party data is still the treasure trove.. Need third party primarily for prospecting and augmenting -‐ Trying to create the real ‘360 view’ of consumers -‐ Need matching technologies that work cross device -‐ Seeing increasing competition from DMPs ( See Acxiom’s 2013 10K filing) -‐ Matching cross device is an opportunity -‐ No cookies on mobile means the dynamics of data and matching change a lot REGULATION Opportunities -‐ Overall what is needed is a way for consumers to o Opt-‐out o Correct information o Know who holds what data and demand that data from them o Keep personal data away from job & financial decision makers -‐ Consumers are worried about privacy but they want to ‘share within reason’ See the trends around ‘influencer marketing’ Consumers are happy to share information on brands they like.. -‐ Plenty to learn from analogies from stock trading & credit bureaus. Challenges -‐ Being overly draconian or cost prohibitive to implement -‐ Govt. looking to regulate consumer data like credit information see Rockefeller Data bill. But the bill has the risk of being overly draconian or not being implementable at all. -‐ Aligning interests from various groups amidst intense lobbying
- 8. M&A Trends: The M&A activity exploded in 2011 with with 60 deals valued at a total of $4.5 billion. It shrunk a bit in 2012 but has started to pick up steam again. M&A in the display advertising space will happen across the following three dimensions 1. Mutual consolidation a. The large DMPs & some DSPs will be the acquirers more often than not. b. ‘Data assets’ will be one of the key magnets. Eg. Criteo’s acquisition of Ad-‐X was a lot about Ad-‐X has amongst best databases around mobile app tracking in the industry and in-‐app is where consumers spend majority of their time on mobile. c. Many customers find managing multiple vendor relationships hard. Single throat to choke adds simplicity d. Several agencies are looking to build their own end to end AdTech stacks. DSPs with integrated DMP capabilities and Ad serving capabilities seem like their targets 2. Traditional enterprise tech companies jumping in – a. Their core tech businesses are rotting due to the commoditization of the infrastructure tech and shifting of value at higher level of the stack. As a result these companies are looking for greener pastures b. They already started with marketing automation acquisitions – DMPs, DSPs & data aggregators are next c. As advertising moves from being an ‘Art’ to being a science, the business & operating models look familiar & attractive to the traditional tech companies. d. Their stocks are cheap BUT they are awash in cash. As a result they can pretty much buy into any space that is being disrupted by startups. As you can see from Appendix-‐2, IBM, ORCL, MSFT ( new CEO might like marketing?), SAP & Salesforce put together have more than $200B in cash/current assets e. 3. Large internet companies expanding portfolios a. Primarily looking to vertically integrate and provide a unified customer experience. Adobe is the closest to building a complete stack. Adobe has set the standard in terms of having the most integrated platform. But the key risk to manage in doing so is not creating a platform that becomes so generic that it doesn’t solve any use case really well..
- 9. b. Companies like Google, Apple, Facebook already possess a lot of leverage as they can easily tweak the browser , social and mobile platforms that provide the underpinnings of the data that is driving the display ad revolution c. Expected to boost acquisitions in the mobile ad targeting area. Appendix 1. Complicated media ordering process 2. Traditional tech awash in cash
- 10. 3. Expanding DSP use cases 4. Overview of the ecosystem buckets and the blurring of lines http://www.adexchanger.com/data-‐driven-‐thinking/the-‐new-‐digital-‐ad-‐ ecosystem/ 5. List of key players in every bucket of the display advertising space http://www.lumapartners.com/lumascapes/display-‐ad-‐tech-‐lumascape/ 6. The rise of programmatic – Programmatic RTB is on the rise but it is still a small sliver of the budget. Bulk of the money is still in DIRECT buys.. so now folks are creating programmatic DIRECT
- 11. http://www.the-‐makegood.com/2014/03/18/ad-‐tech-‐investors-‐are-‐ wasting-‐millions-‐on-‐buyer-‐interfaces/ 7. The introduction of DEALID – allows to capture the nuances of a person to person negotiation in a deal the agencies then take their dealID that they struck with the publisher and use that to bid for the publishers inventory in the open exchange.. this allows the exchange to better match the inventory from the publisher to the agencies needs. Who uses them -‐ Demand-‐side platforms like Turn, Invite and Mediamath. And private exchanges like those offered by Google, Pubmatic and The Rubicon Project and, soon, AppNexus. 8. Device graph on mobile (vendors like Tapad & AdMobius) These platforms use a method of audience targeting often called "probabilistic" identification, designed to overcome the cookie limitations of the mobile channel by building detailed profiles linked to individual device characteristics. Per AdMobius -‐ "We are ingesting multiple different types of IDs, never the original UDID, never the original device ID," Grigorovici told AdExchanger in 2012. "We index everything in our database in terms of our own AdMobius ID…. We essentially stitch together, if you will, multiple different non‑personal identifiable IDs." 9. Current & future DMP use cases (Source: Winterberry consulting) Current: