What is the new normal for adtech?

Ilda Jamison
By Ilda Jamison | 30 April 2020

Ilda Jamison is managing director Australia and New Zealand at SpotX.

Media consumption data is flooding in from platform players around the world as everyone takes stock of the terrifying COVID-19 pandemic, and the destruction it is wreaking on the global economy.  

The current hope in digital advertising is for a V-shaped advertising spend recovery in the fourth quarter and into next year. Even so, the latest data from the US and UK indicates that this faithful optimism could be short-lived.

It’s a worrying time for everyone, everywhere. In the meantime, at the coalface of digital advertising, the industry must pay close attention to a myriad of issues if we are to emerge into a better world in 2021 and beyond. 

Every business is going through a risk assessment process right now. So, what are some of the key challenges facing all of the players in the digital advertising market? 

Cashflow and payment terms 
With extended payment contracts coming into force, and an overall slowdown in advertising spend, there is a risk that some adtech companies might not make it out of the other side. 

The immediate issue is liquidity in the supply chain. Thirty, sixty and ninety day payment terms are common in the industry and many companies will be negotiating to extend these as far as possible to 90 days or more.  For those without strong balance sheets, they will quickly face cash flow issues which will be very challenging to manage. We’re already seeing several companies look to soften the impact by taking drastic cost cutting measures now.

If one partner in the adtech supply chain goes down, this can have big knock-on effects on other partners. We saw this when Sizmek filed for bankruptcy, owing huge debts to Index Exchange, PubMatic, OpenX and AppNexus. Are companies contingency planning for this and looking to cut ties with the weakest links? My view is the industry clean-out is likely to be further accelerated. 

Many digital advertising industry players have already taken measures to limit risk exposure through contract updates or insurance provisions. Companies will continue to review partner contracts to ensure they have mitigated risk and monitor lines of credit, and will be ready to react with immediate actions to any red flags. Our industry is constantly evolving, and many of the weaker companies have already been weeded out of the ecosystem. I would expect many smaller less transparent players to quietly fall by the wayside. 

Adtech consolidation and fraud 
Having a clear differentiator with market-leading tech and superior service are table stakes during economic recessions. Our strategy is to focus on existing relationships and look after our loyal customers during this time. Those companies with broad appeal, and who operate in a growing market will be most resilient. With global lock-downs, we are seeing consumption surges of premium online publishers (news, entertainment and lifestyle), OTT streaming platforms, gaming and audio.

A number of these areas were experiencing accelerated adoption pre-virus, and there will be benefits, eventually, for platforms in these areas. Niche operators focused on key verticals that are currently under pressure will be under real pressure as they can’t diversify their offering or clients so readily.

There have also been reports of a rise in malware and fraud during COVID-19, as audiences flock to online environments. There is a risk of losing focus on hygiene factors amid the rush to move money to digital. The trick is to stay vigilant and invest in robust technology. New bot and fraud schemes, like the recent IceBucket CTV scheme will be discovered. The industry needs to escalate its defences. 

This is a good time to be working with publishers that provide a breadth of premium content and whilst traffic to news is spiking right now, consumers are also staying to browse non-news content in large numbers.  Feedback from major publisher networks have shown double digit page view and unique user growth for their lifestyle and entertainment content, which offer a more “protected” environment to advertise.  We’ve always maintained the importance of supporting an independent publisher ecosystem to enable them to invest in quality editorial and fact-checked journalistic content. They’ve really stepped up to the plate during this crisis and advertisers need to be supporting them rather than retreating to the walled-gardens. 

For OTT platforms and streaming video publishers, there isn’t the same challenge for brands, as these platforms are carefully curated professional content heavily focused on lifestyle and entertainment, with the surge in OTT viewership they offer ideal environments for more sensitive brands. As should be the case at all times, brands should ensure they are qualifying their inventory sources with fraud guarantees in place, utilise private marketplaces and have the necessary protective measurements in place to be able to monitor and react quickly. 

Our objective is to focus squarely on delivering premium targeted video audiences to brands, and ensure the metric outcomes are solid in areas such as high viewability (80%+), high completed view rate (80%+), a high percentage rate of on-target audiences, and strong brand uplift performance.   

Technology Innovation 
A crisis state can be a catalyst for innovation. Leading companies will be adapting to the present with eyes firmly focused on a post-virus world.  One thing the current crisis has created is the bandwidth to focus on existing strategic initiatives. You’ll see many firms emerge more advanced in their preparedness for the cookie-less world as they have more time to focus on the future. 

The key evolutionary milestones that lay ahead of us in the ad tech industry still apply irrespective of the virus. More effective and efficient programmatic monetisation will remain number one on the agenda.

However, the unfortunate reality of uncertainty is the human tendency to revert back to the status quo.  Wall gardens will naturally benefit in this scenario as brands seek a ‘safe bet’ when marketing budgets are rationalised.  However, it’s important for brands to hold their nerve. In recent years many advertisers and their agencies had spent considerable effort to diversify their video strategies, understanding that a broader media mix allowed them to reach new audiences and benefit from the plethora of brand safe, trusted editorial and professionally produced content environments available. Brands want easy execution, targeted reach and frequency, and the ability to quickly reach audiences on new channels. We have to help them do that. 

The Future Beyond 2020 
The jury is still out on how much will actually change after the pandemic storm eases. Programmatic advertising needs to work harder to sell the benefits of efficacy in targeting audiences with the right message, and demonstrate clearly the benefits of reducing media wastage. The industry needs to show that if brand advertisers want to pivot their spend to high usage content segments, that it can deliver true performance in the form of sales uplift and brand awareness. 

For the ad tech industry, and video in particular, shifts in consumer behaviour will accelerate pre-existing trends like rate of cord cutting and growth of advanced video on demand platforms. At the moment, crystal balling should be shelved, as its too early to see what the seismic changes will be. 

What is certain? The severity of the recession will accelerate the rationalisation of the industry and increase consolidation, benefiting the companies with the best technology, slick service and robust balance sheets.  

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