Last month Adconion Asia-Pac President Alex Littlejohn was one of the first people to acknowledge what many of us were thinking – how many of these ‘digital video advertising’ companies that have sprung up in the past 18 months are much more than middlemen, buying cheaply off exchanges and selling at a premium to a local market with more dollars than sense around the buzzy area of online video.
Littlejohn: “In the last 12 months more than 15 online video advertising businesses have sprung up and all are clamoring for a share of the market, yet the reality is that many of these organizations are simply video brokers looking to make a margin on the way through the booking process. We feel that brokers don’t offer value to agencies and advertisers who are seeking global insights, cross-channel data and tech infrastructure from their partners, and so these players risk eventually being replaced by agencies and DSPs.”
I approached Alex to talk more about the boom of online video in Australia and to discuss some of the more pressing questions. It is clear there’s a strong appetite for video from Australian media agencies, it’s not so clear how strong the inventory is and what the checks and balances are to ensure clients are getting high quality inventory worthy of migrating budgets from elsewhere.
Talking Digital: A lot of the ‘video’ companies in Australia appear to be not much more than re-sellers from exchanges. Is this view correct and why has this re-selling approach boomed so much in the past 18 months?
Alex Littlejohn: The reason is simple – there are virtually no barriers to entry so anyone can set up and sell non exclusive inventory – this creates a confusing landscape with many players not delivering any value to either the publisher or the advertiser. It reminds me a lot of the display market in 2006 and prior where there were upwards of 15 display brokers operating in Australia. According to IAB Australia’s recently released PWC report, in Q1 2012 online video recorded $11.6million in advertising revenues (excluding Google and YouTube) and once the traditional broadcasters and portals have taken their likely 50 percent it doesn’t leave a lot to go around for the 15 video tech businesses.
It means that those video ad tech businesses will be more interested in fighting for their survival to secure short term revenue goals and profitability rather than considering their clients’ best interests. There’s a danger of the market entering a “race to the bottom” when it is pitching itself as an alternative to TV – and I can’t see how that’s good for the industry.
TD: What is the risk to clients dealing with brokers/handlers? is there erosion of value and transparency with so many ‘mouths to feed’ along the way
AL: We define the “brokers / handlers” as middlemen who simply facilitate a transaction and add a margin to fund their operations by taking a clip of the ticket on the way through. They can manifest themselves as both video networks and video exchanges and many of them are marketing themselves as “for sale” before they’ve even started. In this sort of market with so many businesses playing a short term game there will inevitably be risks and challenges for advertisers, particularly around transparency.
TD: What are your thoughts on the quality of video inventory going through these re-sellers?
AL: The definition of quality is like beauty – it is of course “in the eye of the beholder”. There are plenty of direct response advertisers who are using video and they will each have a different interpretation of what “quality” is. I firmly believe that every impression in the internet has a value –it’s just dependent on price and how it’s marketed. But when we think about marketing video as an alternative medium to broadcast TV, the platform to bring big brand advertisers online things get complicated. If the collective goal is to use video as an alternative to TV then put simply, brand advertisers should not be running video in environments where there is risk. And we find that the issue with the brokers in this process is more about when they market specific inventory as something it is not.
There is also another very important issue that should cause concern for advertisers and that’s around the area of inferred “non-exclusivity”. Due to the prohibitive cost of producing quality digital video content and Australia’s lagging broadband speed, 70 percent of the available inventory to reach Australian audiences is generated by overseas websites and these sites know their inventory is at a premium so they want a global monetisation solution. Only the multinational ad networks can deliver what they seek so these networks typically receive the best inventory in Australia and provide a global solution to their publisher partners. Yet in market, you can see duplication of inventory appearing in the site lists of video ad exchanges and video ad networks, so advertisers and agencies assume that most inventory is non-exclusive. This is not necessarily the case as while publishers may make their inventory available to multiple ad tech vendors, they only actually deliver it to those who provide the best yield to monetise their traffic across multiple regions.
This means that while a broker or ad exchange may be promoting a site list at the time of signing the advertiser’s order, by the time the campaign runs the inventory is not available, so they will be forced to deliver it elsewhere. Unfortunately this is an all too common occurrence in display DSPs, ad networks and ad exchanges.
TD: As a media network, how do you feel about media agencies entering the ‘media sales’ space through DSPs and the like? Do you feel it could be seen as a conflict of interest when the same group advising on media is also selling their own media product?
AL: Programmatic buying is the way of the future and agencies should participate. We have no problem with the emergence of the DSPs that are transparent and are being set up to leverage the new technologies available to advertisers around data segmentation and audience buying. If there is full transparency to the advertiser and there is a free market where those with the best skill, expertise and technology all operate on an even playing field, then I don’t think there is a conflict. However that’s a BIG “if”. The issue is where the transparency is not there. Just as there are brokers offering no-value on the traditional “sell side”, there are also many different business models within the DSP landscape and this is where it can get “grey” – especially in online video and in online video exchanges. Quality brand safe inventory is not available “cheap” in self-service display exchanges so why would it exist in video exchanges where the entire market has already acknowledged we are in an undersupply?
So if we borrow from the experience in online display, the reason why programmatic buying and DSPs have become more mainstream is due to the buying tools such as real time bidding (RTB) and audience segmentation to leverage exchanges, so surely these should also apply to video…..right? Wrong. Despite the claims of many vendors, aside from the major global players who have invested tens of millions of dollars in their own platform, tools such as RTB and audience segmentation are not prevalent in video, indeed in our opinion they are actually still quite nascent in display in Australia. To put it in perspective, one very well known video exchange operating in Australia is marketing its real time bidding capabilities – yet in its fine print it notes that this real time bidding is in fact an ‘average of three days’! This is not a good thing for the agencies, the advertisers or for the industry.
TD: Video now feels a lot like search did 7-8 years ago. Lot’s of resellers, lots of excitement, but not a heap of transparency and a lot of opportunists.
AL: I believe a better parallel is display. We’ve seen the consolidation of the market over the last five years and I think we are at a similar start point for online video now. So it would be fair to expect that in five years or so we’ll have a very different landscape. The counter balance to the display parallel is the richness and engagement that video offers – so niche premium video content creators will prosper more than their display counterparts did by differentiating themselves from the “audience” solutions.
TD: How important do you feel true investment in not only video ad technology, but also video content is for companies selling video based digital inventory?
AL: You can certainly operate today without owning or investing in technology but I think it’s a pre-requisite to thrive in the future. Businesses who own their own technology are able to enrich inventory by applying data segments which will make them far more appealing to publishers chasing higher yields – which in turn means advertisers and agencies will benefit though better targeting. This is where having a multi channel offering running on a central platform is a huge advantage. Over the last three years at Adconion we’ve invested over $50million USD in our video platform alone. On the content side of the question – the notion that “content is king” is certainly even more evident in video than any platform. There are challenges in Australia around the costs of both creating and distributing video content, but the NBN will play a big part empowering more local content creators and enabling new technologies to develop better user experiences for consumers.
TD: In 5 years what will the online video market look like in Australia?
AL: In 2017 I think we can expect to have seen some pretty major changes – I’ll have a go at naming five:
1. The NBN roll-out will have a dramatic affect (assuming it proceeds as currently planned). This should go some way to self correcting the imbalance of low quality inventory as more quality content will be created at better economies than today.
2. We will see the emergence of the TV manufacturers in this sector as their connected TV offerings are built out and they offer more quality content directly through their own user interface, bypassing the broadcasters of today. What remains to be seen though is what their monetisation strategy will be and whether they will have their own sales teams?
3. Mobile video will be as big as traditional “pre-roll” with the global app developers becoming video content creators in their own right and playing a serious role in the market development.
4. The ad tech vendors from 2012 will have consolidated – many will cease to exist well before 2017.
5. The businesses who are investing in their own technology, who operate across multiple channels and platforms and who are innovators in their own right will be thriving. Of course – the biggest of those businesses, Google, will still be the dominant player in the space!