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An outsider's view of the display advertising market space

An outsider's view of the display advertising market space

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AdTech - Display Advertising Space Overview Document Transcript

  • 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:    
  • 12.                 Future:       10. Making   Native   ad   formats   work   http://www.forbes.com/sites/groupthink/2014/03/10/making-­‐native-­‐ advertising-­‐work-­‐for-­‐you/                
  • 13.             11.  Types  of  re-­‐targeting  and  the  efficacy