10 September 2010 in ExchangeWire EMEA 34 Comments

How The “£130 Million” Automated UK Ad Market Is Affecting The Traditional Ad Network Model

Looking at these figures released by Comscore during the week about the UK display market confirms to me that nobody in our industry knows how big the ad net market actually is. Apart for the finger-in-the-wind estimation carried out by ExchangeWire earlier this year there is little out there to benchmark against. Despite all the missing hard data on the ad net market, I did think Comscore’s assertion that 20% of the display UK market would be automated was interesting. I estimated the automated market to be worth around £40 – £50 million based on industry feedback several months ago. But there’s been a lot of movement in the siaply space over the last few months.

Since its $70 million Invite acquisition, Google has been very active in the DSP market here. In case you haven’t noticed Invite is hiring like crazy, and is now offering a managed service to some of the biggest spending agencies in London. Added to this there’s consistent agency talk of budget shifting through DEMs, DSPs and automated platforms. This has to be hurting the ad networks. The traditional arbitrage model is getting hit hard by price and inventory transparency – as well as self-service audience buying.

If the Comscore figures are correct, then the automated market in the UK will be worth around £130 million by year end. While these figures are bullish there’s some evidence to suggest that 20% is not a fanciful stat. This is significant for ad nets as the automated market is eating into their allocation of ad spend. Although it must be said that it is likely that ad nets are the biggest buyers through these channels. What could really propel growth in the automated market growth over the coming twelve months is RTB. Early evidence suggests RTB inventory is returning significant lifts in CPMs. And if these numbers continue to hold don’t be surprised to see an increased number of publishers offer greater volumes through RTB. This will ultimately attract more bidders into the market, increasing demand for inventory.

Budgets are going to be sucked away from traditional ad net routes, and pushed through DSPs and automated channels. Agencies will increasingly use Invite, AppNexus or simply work with a DEM to trade across the European exchange eco-system. The portal ad nets – the big three, namely AOL, Microsoft and Yahoo – will continue to thrive given their size and scale, but increasingly they will be bought around. Vertical ad nets will also prosper given their particular market knowledge. But sales houses and arbitrage ad net models here are going to get crushed by automation. The options available are simple: either buy from exchanges and optimise better than the next guy; or build your own trading desk and compete with agencies for marketers’ ad budget. The display market is changing rapidly, and if RTB grows at its continued rate, I wouldn’t be surprised if automated ad trading accounted for £200 million plus by the end of 2011. Hiow about that for a finger-in-the-air number?

Ad Network, Ad Trading, Agency, Online Advertising, RTB
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  • thepaulsilver

    Just to add my two cents:

    DEM’s have a role to play. Now and for the forseeable future. There are SO many agencies / advertisers who do not have the resource (or even dare I say inclination) to invest in building their own trading desk, licensing a DSP, getting talent in to run it etc. DEM’s will continue to service the longtail of the ad industry. Longterm they could also build out their own their DSP to compliment the larger agencies trading desks. I think there is probably only two DEM’s who could do this (because they genuinely have tech that is proprietary).

    In terms of is the managed service dead: everything is a managed service one way or another in this industry. The only exception to the rule being the big clients who do it all in house; these account for a tiny % of the bigger prize.

  • http://rahulsbb.myopenid.com/ Dheeraj

    On the point about Data, one must realize that for an Exchange Buy to really make sense from a media buying/planning perspective, clients will need to have access to user data-predominantly behavioral. And we all know how far behind Europe is when it comes to harnessing online visitor data-privacy regulations and all. In the absence of cookie based data, for which companies like Bluekai, eXelate et al.will have to make far more inspired forays into the EU market-clients are left with creating patchwork targeting mechanisms using web analytics/crm data. And MOST agencies in the UK do not have a clue as to how to go about doing that.

    The point I am trying to make here is that for the Exchange Integration to work, clients would need not just the traditional agencies that run mom and pop Ad Operations groups but a dedicated, highly experienced team with skills around Exchange APIs, Segmentation Modelling Techniques, Calculating Online reach via various online tools, and loads more.

    This space is crying out for a Media Technology Services Layer that provides platform services to agencies and direct marketers- pretty much like Appnexus is doing from a product platform perspective

  • Anonymous

    It’s not dead… just morphing into something new

  • thepaulsilver

    Just to add my two cents:

    DEM's have a role to play. Now and for the forseeable future. There are SO many agencies / advertisers who do not have the resource (or even dare I say inclination) to invest in building their own trading desk, licensing a DSP, getting talent in to run it etc. DEM's will continue to service the longtail of the ad industry. Longterm they could also build out their own their DSP to compliment the larger agencies trading desks. I think there is probably only two DEM's who could do this (because they genuinely have tech that is proprietary).

    In terms of is the managed service dead: everything is a managed service one way or another in this industry. The only exception to the rule being the big clients who do it all in house; these account for a tiny % of the bigger prize.

  • http://rahulsbb.myopenid.com/ Dheeraj

    On the point about Data, one must realize that for an Exchange Buy to really make sense from a media buying/planning perspective, clients will need to have access to user data-predominantly behavioral. And we all know how far behind Europe is when it comes to harnessing online visitor data-privacy regulations and all. In the absence of cookie based data, for which companies like Bluekai, eXelate et al.will have to make far more inspired forays into the EU market-clients are left with creating patchwork targeting mechanisms using web analytics/crm data. And MOST agencies in the UK do not have a clue as to how to go about doing that.

    The point I am trying to make here is that for the Exchange Integration to work, clients would need not just the traditional agencies that run mom and pop Ad Operations groups but a dedicated, highly experienced team with skills around Exchange APIs, Segmentation Modelling Techniques, Calculating Online reach via various online tools, and loads more.

    This space is crying out for a Media Technology Services Layer that provides platform services to agencies and direct marketers- pretty much like Appnexus is doing from a product platform perspective

  • exchangewire

    It's not dead… just morphing into something neew

  • http://rahulsbb.myopenid.com/ Dheeraj

    Agency 3.0

  • http://rahulsbb.myopenid.com/ Dheeraj

    Agency 3.0

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  • DdS

    By adapting again. 2/3 years is not nearly long enough to exploit the full potential of the adexchange market and assuming agencies are then in the position that DEMs are in now, (some) DEMs will already be streets ahead in terms of data layers, cross channel attribution and custom optimisation.

    This is even before we start to introduce IP TV, Digital Outdoor and e-Paper “offline” technologies to the mix. The electronic trading concept isn’t just a new channel, it’s a whole new way of doing business that will draw together everything else, once the technology is ready. Just because you know how to trade Display on an exchange, doesn’t automatically mean you’ll know how to trade Digital Outdoor using one. As long as those that are ahead now continue to innovate in working out how to use these different technologies together, they will always remain out in front.

  • guest

    Ad agencies have a long way to go, they are trying to be media owners as well as middlemen! good luck to them-this will take a long time and a lot of expertise and with the current lack of talent and understating within agencies I see this taking a long time.

    The other major issue I see here is agencies are supposed to be impartial to their clients, can some one explain to me how on earth are they impartial if the agencies are setting up their own Exchanges/DSP’s. classic example is MIG (group M’s buying arm) they clearly don’t care about the client all they care about is how much profit they are going to make for their own business unit and from my experience of working with them they have very little clue to how Exchanges and DSP’s work. Same goes for all the other trading desks, still early days and because the agencies are forced to use their own trading desks they are left with very little choice of who they can work with. I must point out here that the top 3 trading desks serves almost all their clients ads on sites that are not suitable i.e. file sharing, adult content and if I remember correctly agencies used to make such a big fuss about IASH and their ads not being on this type of content yet the agencies who are now trying to be media owners are running their clients brands on unsuitable sites! I see no reason why Exchanges and DSP’s can’t approach the client directly after all they have far more expertise than the current DSP’s that have been set up by the agencies.

  • DdS

    By adapting again. 2/3 years is not nearly long enough to exploit the full potential of the adexchange market and assuming agencies are then in the position that DEMs are in now, (some) DEMs will already be streets ahead in terms of data layers, cross channel attribution and custom optimisation.

    This is even before we start to introduce IP TV, Digital Outdoor and e-Paper “offline” technologies to the mix. The electronic trading concept isn't just a new channel, it's a whole new way of doing business that will draw together everything else, once the technology is ready. Just because you know how to trade Display on an exchange, doesn't automatically mean you'll know how to trade Digital Outdoor using one. As long as those that are ahead now continue to innovate in working out how to use these different technologies together, they will always remain out in front.

  • guest

    Ad agencies have a long way to go, they are trying to be media owners as well as middlemen! good luck to them-this will take a long time and a lot of expertise and with the current lack of talent and understating within agencies I see this taking a long time.

    The other major issue I see here is agencies are supposed to be impartial to their clients, can some one explain to me how on earth are they impartial if the agencies are setting up their own Exchanges/DSP's. classic example is MIG (group M's buying arm) they clearly don't care about the client all they care about is how much profit they are going to make for their own business unit and from my experience of working with them they have very little clue to how Exchanges and DSP's work. Same goes for all the other trading desks, still early days and because the agencies are forced to use their own trading desks they are left with very little choice of who they can work with. I must point out here that the top 3 trading desks serves almost all their clients ads on sites that are not suitable i.e. file sharing, adult content and if I remember correctly agencies used to make such a big fuss about IASH and their ads not being on this type of content yet the agencies who are now trying to be media owners are running their clients brands on unsuitable sites! I see no reason why Exchanges and DSP's can't approach the client directly after all they have far more expertise than the current DSP's that have been set up by the agencies.

  • Dan

    I could not agree more. Using your example (Group M) why would they choose to use another DSP? There is no money in that!

    You could argue that its ‘because others might have better technology’ but from what I have used/seen there is not a great deal of difference, for me the one thing that does and will make a difference is the people and experience behind the campaign/DSP/trading desk. I think it may have been said earlier but if agencies want to do this correctly they have to hire the correct people!

    And in regards to unsuitable content is there really any excuse for this to be happening with companies like AdSafe and Double verify around…oh yes of course they charge and you lose part of your margin Mr Agency!

  • Dan

    I could not agree more. Using your example (Group M) why would they choose to use another DSP? There is no money in that!

    You could argue that its 'because others might have better technology' but from what I have used/seen there is not a great deal of difference, for me the one thing that does and will make a difference is the people and experience behind the campaign/DSP/trading desk. I think it may have been said earlier but if agencies want to do this correctly they have to hire the correct people!

    And in regards to unsuitable content is there really any excuse for this to be happening with companies like AdSafe and Double verify around…oh yes of course they charge and you lose part of your margin Mr Agency!

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