Opinion: Why is Australia lagging behind in programmatic investment?

Kerry McCabe
By Kerry McCabe | 18 March 2014

A big part of getting ready to launch into Australia was not only understanding where the programmatic market is at and why, but more importantly where it’s heading. First there was the market sizing stuff which is locally a tad confusing but all pointers suggest growth and lots of it. Then there were some impressive global estimates such as the recent report from Magna Global, suggesting that programmatic will grow from over USD12bn in 2013 to USD32.5bn in 2017.

But how does Australia stack up against this growth trajectory? In answering this question I’m going to define programmatic as automated media buying that is done both via real time bidding (RTB) in open and private ad exchanges and by other automated buying practices (non-RTB). We’ll also take a starting point that programmatic in Australia in 2013 was circa $145m (I get told numbers between $90m and $200m and certainly don’t envy the SMI and PWC analysts in trying to get a handle on this given the fragmented buy and sell points and ever increasing number of players entering the category).

What these numbers suggest is that we are way under the odds in terms of investment into programmatic compared to the US and European markets – as much as 50 per cent behind as a proportion of total investment. Why?

Initially when I dug deeper into why this was, I believed what I was hearing – that we are a small and less sophisticated market, battlers Down Under trying to keep pace with the flash markets. What I’ve learned however is that this couldn’t be further from the truth. Australia is every bit on par with the UK and perhaps even more sophisticated that the US in certain ways given the continued heavy reliance on arbitrage ad networks.

Here’s why I think we’re lagging (and would welcome being challenged on any of these):

1. Prospecting vs retargeting
Australia still has a monster addiction to re-targeting. That’s not all bad but it certainly does limit the marketing budgets that can be accessed and somewhat ignores the advertisers’ needs in finding new prospects and moving them down the purchase funnel. A big part of this over-reliance on cookie bashing is our serious lack of actionable third party data and reluctance from marketers to share their own data.

2. Separation of data & delivery
Meaning, the place that gathers, houses and segments audience data is separated from the platforms that deliver creative to target and convert those audiences. This is a big one. With so many tech providers and online/offline data management systems it’s no surprise that marketers often only reach 20 to 30 per cent of their desired segments when working with separate DMP and DSP vendors and third party data providers.

It also makes it impossible to get a 360-degree view of current and prospective customers across display, mobile, social and video. In short, data and delivery should never be separated – an integrated platform, built to create, store, segment, serve and connect is a must as we evolve and live up to our promise of efficiencies and optimal ROI.

As a marketer, I’d want ALL of my insights and knowledge of current and future customers realised, not just some of them, some of the time.

3. Supply quality
Australian publishers have been cautious with their entry into programmatic. The unique market conditions where the big ten publishers have such large reach and historically high sell through rates has led to a disproportionately large ‘remnant only’ opening salvo into RTB. This is changing as the supply side platforms are making it easier and ‘safer’ for big publishers to keep their hands on the dials and avoid the much feared race to the bottom.

In a previous life, launching an ad exchange, I learned first-hand what happens to the value of inventory when sold programmatically. Good inventory (content/context), once supported by robust audience data, improves its yield considerably. Bad inventory, supported by nothing but smoke and mirrors, gets found out and treated as fodder. Long story short, if a publisher believes in their asset and can prove its value, yield improves as does profitability driven by greater operational efficiencies.

4. Limited demand points
Australia is quite unique in that the majority of programmatic buying is transacted from the global media holding companies’ agency trading desks (ATDs). In other markets I’ve recently visited this is much less common for a few reasons (i) the agencies within the holding companies buy programmatically themselves and often at similar volumes to their ATDs (ii) the number of independent agencies and brands buying programmatically is well advanced in comparison to Australia and (iii) the ATDs in other markets are less effective than ours in on-boarding clients which leads to more demand points into the demand side platforms (DSPs).

The future structure and business model of the ATD’s will be the biggest determining factor in where we go from here, as will the pace and volume of major brands building and operating their own in-house programmatic activities.

5.Trust & confidence
Last but certainly not least, as humans we often don’t believe what we can’t see. I’m convinced (supported by umpteen marketer studies) that the way we overcomplicate what we do is intimidating and invokes scepticism from those we are asking to invest their advertising dollars. Transparency around the business model and budget allocations/fees is one part. I believe the bigger issue though is about giving confidence to clients through old school education, taught in the language of the client rather than our own often overly technical dialect. The other trust-based challenges are obviously data control, ownership and brand safety, which get covered constantly in trade forums.

There are others challenges of course; true cross-screen targeting functionality, agreed value attribution and the programmatic role as a serious loyalty and retention channel will evolve this year. Looking beyond online, how quickly IPTV providers can grow scaled audience will be interesting for the TV and Telco/PTV sectors where a few are already taking the lead.

Bringing the real time actioning of audience data into a broadcast environment will be both exciting and game changing. If they can move relatively quickly you’d have to say Foxtel and Telstra have a mammoth opportunity to lead here. Radio, OOH and other offline media, I'm hoping, will also move from previously viewing programmatic as yield eroding commoditisation and start seeing it as a means to improved profits; where they can drive their own agendas in a strategic and collaborative way. I know that there are a few pioneers making moves here already and as an old billboard salesman I certainly hope to support that push.

As you can no doubt guess, I’m predicting serious growth for programmatic (both RTB and NRTB) between now and the end of next year and expect marketers will be investing in excess of $500m by the end of 2015.

Addressing the above will certainly go a long way towards enabling them to do this. But rather than waiting for technology to solve our issues, there is a huge opportunity for individuals and progressive companies to remove the blockages by creating new business models and making smart decisions about how to action data and deploy the sophisticated programmatic technology at our disposal.

Kerry McCabe
Managing director APAC
RadiumOne

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