The Future Of The RTB Digital Industry (1/2)

Triggered by my recent redundancy I thought I put some thoughts together of what’s happening in our industry from my perspective. In my little part of the digital industry, in the world of programmatic decision making and big data. Whilst I keep myself busy uncovering the European publisher market and trying to understand the industry from a different point of view, I also take my blinkers off in order to look outside real time and programmatic buying from a demand perspective. Because when I started in real time, or “ad exchange optimisation” as we called it in 2010, the big players like Google or Appnexus weren’t even in the UK yet. Some SSPs (Supply Side Platforms) were working of ExcelSheets in India….those were the days. They call me a veteran of RTB. I think that is a compliment. Yet still, 3.5 years after launching a service provider that got sold to a technology, I still have my doubts which business models will be moving forward. Having said that, I do believe I am more than capable of identifying good business models, technologies and companies who I like to continue my career with. So watch this space.

In the interim (Attention: self promotion), if you have any needs to be consulted on RTB, the industry, your digital strategy or just like to grab a coffee in order to discuss anything, please don’t hesitate to be in touch.

Things have changed in the last few years. We are living in a world dominated by buzz words like “big data” and “programmatic marketing”. Those buzzwords kind of took over “RTB” and “exchange buying”. Some of you might remember the days when SSPs used to be called Yield Optimisers. Those were the days too. But I don’t want to be getting sentimental by looking backwards. Let’s look forward and see what’s on the horizon of our industry:

So what is happening, and what is exciting?

It seems as if some companies trying to move away from media buying dependency and move into SaaS (Software as a Service). There was a discussion on twitter the other day about it. That companies should stick to what they do. However a strong argument for it is to innovate and evolve as a business. I am not saying either is right or wrong but we are at exciting times to see the wheat separating from the chuff. Or is it diversification from network to SSP to cookie-less contextual targeting that brings a new dimension to the industry? Or is it the publisher that does audience extension via 3rd party data, uses data effectively and gets higher CPMs? Or is the future that just all of the above combined ‘wins’ as an end to end stack? Is it about the specialist or the generalist? Like in most other industries we are moving form one extreme to another. Everyone wants to be everything, get the margin from both demand and supply and be the “end to end” stack.

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My question would be about the value proposition. Where can some companies actually add value? Who doesn’t know the fragmented Luma landscape? And of course the ever growing question: will 2013 be the year of mobile or will we be looking at mobile from a different perspective?
How many networks used to be out there and were destroyed due to real time bidding? How many networks had to re-invent themselves. And how many got replaced by “RTB network” or “network 2.0”? The names have changed, the principles remained the same. Transparent pricing doesn’t alway mean transparent margins. Word plays allow for wrong perception of what’s actually happening just because it seems better doesn’t mean that it is better.

It has only been three years ago since a few technologies, demand side platforms (DSP), entered the UK display market to buy the right ad at the right time and right price. With a decision making in milli-seconds it became real time advertising or programmatic advertising. From display this soon moved to video and mobile. Having said that, the mobile RTB world is still struggling with tracking and for video it is still early days. I personally still think that video is very exciting moving forward but probably a year away from really taking off in Europe. And mobile is and will always be very exciting. Then of course, omni-channel buying, attribution and budget allocation is on the rise. We can now target social via Facebook and soon via Twitter. Coming from a search background, I am now waiting until we get search integrated too. Or is that already there? And of course the data proposition of which I will speak in part 2.

Let’s look outside conventional RTB (and you can define what that means 😉 ). When you think search, social and display, those are the DR (direct response) channels whilst mobile and video are brand channels for me. Of course display is also brand but more so in the “video display” or rich media display or site takeover space. And latter is less available programmatically, and that’s why the brand budget still hasn’t moved as much across to RTB than a lot of people have hoped. Hence there is a demand for premium or networks servicing that need for non standard ad formats. However, DR budgets are squeezed down to the last penny and decisions on who stays on the media plans is due to performance and insight reporting. You might have heard of this company called Google who early on figured out to do exactly that with search. To survive in this competitive market you need to invest more and more, and you need to make it easier and easier for agencies to work with you. Very simple actually. Hence it isn’t a surprise that even in 2012, new networks, supported by big VC money, are still able to push into the market: good performance, great staff which is well paid, good customer service and excellent insight reporting. They just make it simple for media planners to use them.
And last but not least there are some companies that focus on that DR budget driven by search with a combination of search, display and social. Maybe less RTB driven but they all move into that space sooner or later as ‘real time’ will just be another way of buying media. A currency if you like. So the future might look like the “ad network 3.0” delivering display en masse for branding and reach campaigns whilst other companies focus on the actual DR driven and hard performance goals across the board.

Will the market get more fragmented? No. I believe that a lot of models we are seeing now are going to die in the next few years. Some short term revenue spinners that might sell themselves and then disappear again. Quick and loud into market, quiet out of the market. LIFO – last one in, first one out. Only tech driven companies will sustain the challenges thrown at them, and will be able to deliver long term added value. So technology will be key in the long term in allowing agencies or advertisers to utilise whichever channel they are after. And channel will mean DR vs. brand rather than search vs. video. Big agency groups already split between brand and DR. And there is a reason for it I believe.

I am not saying that agencies aren’t interested in channel attribution and or omni channel buying but you will have one team looking after DR and one team looking after brand. As a supplier of course you talk to both of them. Post click attribution versus post view or completed view or GRP. Audience measurement, conversion measurement, attribution. Yes, there is a future in figuring out the once holy grail.

So what am I saying here in part 1? I am saying that for the foreseeable future there will be a market for well organised ad network models and that only in the next few years technology will really play the key role. Companies who now invest in the right strategy and technology will survive. And once publishers and direct advertisers have caught up with the actual market situation, they then realise who adds value and who doesn’t. No more hiding! And adding value doesn’t mean cheap. You can have the highest margin but still deliver the most value. Then those marketeers who understand what’s happening will apply pressure on their agencies or walk away from them, utilising technology themselves. And, looking over to the US, you will see this trend starting already. But, in the long term, the agency becomes a consultant, it will adopt and will take technology in house again eventually as it will get too complex. Is that too visionary?

I hope you enjoyed this read and look forward to part 2 on Tuesday.

Please leave a comment.

Have a great weekend,
Volker