Some 98 per cent of large US media owners are pursuing programmatic marketing strategies at home, but only 72 per cent are deploying them overseas. This looks set to change, according to a recent survey and whitepaper from the Interactive Advertising Bureau (IAB) and Winterberry Group. Jonathan Margulies spoke to Karen Taylor.
International media owners active in the burgeoning programmatic market trend intend to close the deployment gap between home and abroad over the next two years, according to Going Global: Programmatic Audience Development Around the World. The study’s key findings showcase an international growth opportunity for companies with expertise in building programmatic advertising programmes, and detail the priorities of US and global companies seeking new markets.
In considering new regions for expansion, the study respondents ranked “availability of third party data” as the most important prerequisite (52 per cent). Conversely, the biggest hurdle was “a lack of understanding of audience development”, with 34 per cent of the study’s marketer, ad tech executive and publisher respondents seeing this as a problem. Government regulation was found to be a much smaller concern, with only 24 per cent ranking it among their top three barriers to programmatic expansion.
Jonathan Margulies, managing director of marketing consultancy Winterberry Group, said the research sprung from feedback from earlier studies in the US, which looked at how people were practicing omnichannel promotional programmes. “A lot of feedback from contributors suggested a tremendous amount of interest in the programmatic practice right now and new activity was being driven with an eye to expanding the infrastructure to new markets, particularly international ones. That was what we heard overwhelmingly from respondents in the technology world; people who were building platforms to power programmatic marketing and audience management practices. But we also heard it from publishers and advertisers. Our key question was is this something which is universal or just something happening within a small portion of the industry, likely to participate in our research anyway? What’s driving it? Is it in response to market demand or just a bunch of technology companies looking to establish a beach head somewhere else?”
The research took place this summer to assess the drivers and level of investment. From there the researchers compiled a road map to give potential pioneers an understanding of the opportunities, which vary all around the world (see pyramid for front-runners).
Says Margulies: “The seven point road map was created from the point of view of the publisher who wants to set up shop somewhere else. What did they need to know before entering new markets to help facilitate or prioritise investments? There is a series of characteristics which we refer to internally as ingredients for success. They define markets that are ideal for programmatic investment.”
Publishers essentially need to do some high level research, to see if potential markets support these characteristics today or are lining up to support them in the next few years.
The ingredients mark out “the ideal set of circumstances for someone who wants to introduce programmatic on a global basis”. There is a marked sliding scale.
“Clearly the largest and most sophisticated economies, particularly those with the closest ties with the US, are the most advanced with programmatic marketing,” says Margulies. “Overwhelmingly right after the US where a lot of the technology that powered this approach was developed, is the UK. And we are seeing the incubation of new technologies and processes as well.”
Other markets beginning to shift more investment into programmatic are Canada (although they are similar to the US and trying to capture the same audiences) and Australia. By virtue of the common language, it has been much easier for technologists there to apply tools developed elsewhere. “We also see a lot of adoption in France. However, owing to cultural and business circumstances, there has been more of a preference to use French tools and talent. In France it’s about finding out how business can benefit from programmatic and then building the tools at home,” he says.
Regulatory barriers aren’t quite the headache anticipated, says Margulies: “We assumed restrictions on the collection and use of data and using cookies to engage unknown visitors to your sites, would be major barriers. The feedback from the panel was, yes, regulatory barriers are a meaningful source of anxiety and may well serve to inhibit investment in markets where they are more substantial than elsewhere. (The EU is a great example, which takes cookies off the table for many purposes.) That said, what we also heard for the most part is publishers and practitioners otherwise have a good understanding of the kind of limitations regulations set for them. And so, it’s really a question of being able to manage regulations where they exist.”
A far more substantial challenge is the availability of data itself. “The existence of a market for third party data – the ability to license information, to supplement your own data set, the ability of a market where you can transact all sorts of programmatic resources and the availability of technology that’s geared to the use cases that you are looking to deploy, are actually much more substantial barriers,” says Margulies. “Not to downplay the bigger picture impact regulation may have, but on a day-to-day basis, wherever you are doing business, regulation, at the very least, is clearly laid out. For the most part, people know what it allows and what it restricts. If there is no data to use, or the toolset available can’t support multiple languages or use cases, these are much more meaningful concerns.”
China is a case in point. It’s an economic powerhouse everyone would love to buy into. “When you go out and talk to the publishers and technologists about where they see long-term potential, China comes up all the time, because of the size of the market,” says Margulies. “And if all of programmatic is rolled back to the concept of audience building – China is out there as a jewel waiting to be captured. But when you look at it through the critical lens and evaluate all the criteria – is it a free open market place where data is exchanged very freely? Not exactly. Is it a market that is open and transparent to contributions from technologists and business leaders from abroad? Not always. There is optimism over the next few years that the broader global trend and march of technology will open new doors there. Right now the conditions aren’t exactly right for practitioners to see an immediate return on their investment.”
Margulies sees considerable opportunities elsewhere. “The truth for a publisher is their business needs will ultimately be the driver of whether they enter a given market. Despite the relatively advanced stage of the UK, Canada, US and France – cohorts if you will – we heard more optimism and enthusiasm about the tremendous growth potential in Brazil and Mexico. There are so many practitioners within those regions, but others are looking to the markets because, frankly, the lack of established business practices around traditional media. Effectively there is no barrier that needs to be overcome in these emerging markets.”
Entrenched business practices and silos were early obstacles for traditional publishers. “In emerging markets these corporate structures simply don’t exist,” says Margulies. “There are large populations, quickly adopting digital media and mobile devises and small and medium sized publishers (who have traditionally had a hard time competing with the big established market leaders) look at programmatic as an opportunity to carve out differentiation and leverage data as a means to build audiences. To sort of chip their way into a position of better competitive strength.”
Winterberry uses marketing as an omnibus term that includes advertising. Already programmatic has evolved from pure real time bidding (RTB) on online exchanges. The speed of development has caught many napping. Magulies admits: “The vast majority of the industry still thinks of it in those [RTB] terms. But we are increasingly hearing at corporate and strategic level, that the technology and processing to power RTB, can be used to power a whole variety of different marketing approaches that satisfy other corporative objectives.”
“It’s not just ‘let’s buy advertising at the most efficient price’,” he says. “It’s also about ‘let’s capture and apply data so we can build new audience segments and learn more about them and create better targeted offers for them. These things aren’t strictly advertising, but they rely on much the same fundamental infrastructure.”
This has heralded a new buzz term – “use cases” which programmatic can serve. “There is a whole array of different use cases, progressively more strategic and business focused than advertising, which have sprung up. So we use programmatic marketing with an asterisk.”
According to Margulies, advertising and marketing people are starting to occupy a position of greater influence in their companies because they understand these programmatic tools. This has to be a bonus, because there was initial and understandable negativity about the process.
“The sales teams are beginning to embrace programmatic,” he says. “They are seeing it as an opportunity to expand their market – to sell more at higher prices. The notion that the machines were going to take over and render the sales people redundant has been cast aside for the most part.”
Programmatic is a two-way street. Technology can be engineered to allow people to buy advertising at the cheapest rates. But for publishers the technology can be geared to increase yield. In practice, he says, very few practitioners on both sides are looking to do only that.
“There is a real interest in the technology as a means of building and enhancing audiences. We have been brought in by publishers who say, ‘help us build a structure which will allow us to sell more advertising at higher prices, but also deliver more relevant content and effective consumer marketing. This has a nice synergetic effect on the advertising side. If your audience is more engaged and premium, you can raise rates even in a programmatic world. The realisation of employing a unified set of technologies to support advertising, marketing, analytics, etc, marks a new way of thinking in the publishing world and even among progressive marketers. I think this is where a lot of this programmatic investment is heading – breaking down those old silos that existed and supporting a wider range of uses.”
Often the larger publishers have the resources to go in and consider a range of different technologies and pilot them in parallel to see what works for them. They can absorb any cost associated with going down the wrong paths. At the same time, it’s these publishers that have the deeper more entrenched cultural barriers, suggests Margulies.
In contrast, he says, smaller publishers don’t see quite as much resistence. And increasingly there are tools and platforms being geared towards supporting the needs of smaller concerns.
Margulies believes the technology will filter down to the mid and smaller tiers of the publishing world. In fact, he thinks the smaller publishers may have more to gain – getting their often specialised content out to wider audiences.
Says Margulies: “In my mind, it’s just a question of when, not if, folks begin migrating. It’s going to take both technology that’s geared to their needs and expertise and an understanding of the broader opportunities.
“In the next few years this will be the way people do business in the vast majority of the larger markets.”