I used to think one of the best things about working in New Zealand was being able to watch trends in the UK and US arrive on our sandy shores two or three years later. As a consequence a considerable amount of my time is spent trend watching to ensure our clients are riding that wave of online search and ‘performance display’ innovation, when it does reach NZ.
But this ‘crystal ball’ advantage has almost disappeared: the lag is getting shorter. In particular a statistic from the UK’s IAB/PWC latest report really stood out:
“the targeting and rich social data offered by Facebook has meant the social network has taken the lion’s share: 14% of the online display advertising market, a 200% rise year on year.”
This is a trend that we are also seeing here at OMD NZ – the meteoric rise of Facebook advertising. Not quite 14% of all online display, but it’s getting there. This time last year agency spend with facebook was practically nil; now it’s a significant player and really only just out of the blocks.
This combined with Google AdWords, the Google Display Network and the much anticipated ‘Ad Exchanges’ will put huge pressure on big publishers like Yahoo!, MSN and APN . How will they stem the flow of advertising money to self managed accounts like Facebook and Google who provide incredible efficacy?
These publishers have three choices: innovate, conform or die.
By innovation I mean monetising content through ‘pay walls’ (New York Times and The Times UK) or tailoring content to the user and selling it to other sites (e.g. Elle.com). To conform publishers will have to hand over inventory to Ad Exchanges. Publishers should be able to keep control of key sections like home pages for rich media executions, but everything else is likely to be commoditised and bought in an auction the same way search is, letting the market decide on the price. The third option is ad revenue will fall below operating costs and doors will close.
At the moment most publishers appear to be taking the ‘Ostrich’ approach. The smart ones are actively planning trials with some inventory.
These are exciting times for display advertising, and even better for our clients as they benefit from improved performance. My crystal ball prediction: by 2013 all display inventory in NZ, with the exception of ultra-premium positions, will be bought through ‘Ad Exchanges’.
Alex (happy to be proven wrong) Radford
Hi Alex,
Great article and great topic. What makes it even better is that my crystal ball shows something almost completely different for 2013.
The key is that the online medium’s flexibility means that your campaigns can have different goals, and different goals require different ad strategies and executions. In my 2-3 year ago rear-view mirror from the USA I see everyone predicting that ad networks will soon control almost all the inventory online, even much of what was traditionally considered premium.
But a funny thing happened on the way to the future. Publishers started pulling out as they figured out ad networks were not the best way to monetize their content, and advertisers followed when they remembered that context matters. In the end it settled into a nice dynamic advertising environment that allowed flexibility for both publishers to sell, and advertisers to buy in environments that matched their client goals.
Yes, behemoth’s like The Facebook are now entering the display advertising scene, and that’s a great thing. Advertisers will hopefully reap the benefits of their targeting solutions and high level of user engagement. But at the end of the day they are a specific type of environment, and thus only match campaigns with goals that can utilize that (probably quite a few though).
But as more and more digital dollars comes online there are many solutions available, from retargeting, audience and behavioural targeting, contextual targeting, efficiency or premium pricing, and run of network campaigns. These each have their strengths and weaknesses for any specific goal. Some give reach without context, others optimize for the wrong goals or may be effective but pricey.
As publishers and clients continue to innovate some of these strengths and weaknesses will shift, but in the end we’ll again end up with a flexible environment for both publishers and clients. As you said, the smart ones are out their already innovating, and that’s why I don’t see a future dominated by ad-exchanges. Those may have a place, especially in place of network buys and reach campaigns, but innovation in publisher products and value will probably keep them away from premium content sites.
Cheers,
Eric Rowe
@kiwieric
Audience is key.
Great to see such contrasting views….!
Amongst New Zealand’s top digital publishers there is a mixture of fear and trepidation toward the much maligned ad exchanges and I must agree with Alex – there does indeed seem to be an ostrich approach by most.
To provide some background to the whole affair let’s consider how digital publishers currently manage their inventory – they sell primary inventory direct via a traditional sales force which comes with guaranteed delivery and they sell secondary inventory which is not guaranteed. Invariably, secondary inventory is remnant inventory and does not come with any degree of targeting or transparency. Publishers all over the world do this and it has resulted in an oversupply of opaque ads.
The means by which local publishers sell their secondary inventory has various permutations but the one constant is that there is a very large difference in yield between the two tiers. Ad exchanges offer an opportunity to close that gap by virtue of raising the sell price for second tier inventory, but there’s a catch; – In order to get the maximum return publishers must provide transparency. This of course creates anxiety of cannibalising and under cutting their existing direct sales.
This is understandable but short sighted. In order for local publishers to stem the flow and remove the temptation of buyers to opt for lower yielding second tier inventory Publishers need to work toward narrowing the price differential (from both sides) or else direct sales will suffer.
If local publishers treat ad exchanges as a clearance house for non-transparently packaged inventory and without a sound strategy then there will be a race to the bottom and our local providers could end up totally despondent and pull out of ad exchanges altogether, citing low CPM’s yields.
Eric, on your point that context matters; It does to a degree but what matters more is audience. It’s smarter audience targeting that’s really driving a shift in ad-spend around the globe, advertisers are more focused on data driven demographic targeting and BT than they are contextual targeting.
Context still has relevance but digital media advertisers aren’t limited to using content as a proxy to reach an audience and are doing so less often. There are a few new local offerings whom have come into the market that specialise in audience focused solutions and they’re prospering.
Ad exchanges aren’t a silver bullet and as is the case with any new technology they will improve with maturity. They have real potential to benefit both sides if managed well.
Jack Flewett OMD.
With many of my clients, I steer them away from facebook marketing as a product and more as an added bonus to a normal social hub like a blog. When ever I create a new website or blog for someone , I create it with automatic facebook and twitter updating.
I show people that using these tools is beneficial, but it is not where your main effort should be focused. No one can doubt the power and reach of facebook, so as a marketing porfessional, it would be irresponsible to not use it.
I stress continuously updating clients blog/site, a strong focus on link building and creating marketing campaigns that focus on ROI and targeted traffic.
Content is KING and relevance is the Queen. Establishing yourself as a professional/expert and positioning yourself as the king of content as your site as the queen of relevance you will do well.
Great subject Alex – I’ve blogged about it here:
http://www.adhub.co.nz/blog
Apologies – by way of a bit of a lead in…
I think exchanges will have their place just as performance networks have before them. I seriously doubt they will have the ability to increase CPMs for publishers, so the old conundrum of cost / benefit still raises it’s head for any publishers wanting to fund their sites via advertising. As for additional (pay-wall, T-Shirts, Mugs, Ipads & Android apps?) funding options – they haven’t yet proven themselves a viable proposition for many publishers or users for that matter.
In the interests of full disclosure, we don’t sell cost per click advertising and don’t farm impressions out to third party networks. We specialise in delivering targeted audiences and placements for our advertisers on behalf of our publishers. We do also sell Behavioural Targeting in conjunction with contextual targeting. I don’t see us or our publishers tipping inventory into exchanges unless they can seriously improve our effective CPM across individual sites. Does it cost us more to send real people out to agencies and advertisers as apposed to Google or Microsoft’s (assuming they own or buy the biggest exchange platforms in market) cut? I actually doubt it. Especially coupled with the other selling opportunities those people have beyond standard broad-reach banner campaigns.
Read more here: http://bit.ly/rnvCTV