DIGITAL ADVERTISING MARKETPLACE AND HOW IT WORKS in France
By Luc Laurentin – Limelight Consulting CEO
Since their arrival in France in 2011, ad-exchanges (digital advertising market places) with their new economic model have changed the game in the purchase of adverting real estate upsetting the traditional model of online media buying and soon that of media buying in general.
The ad exchange is both a media and a technology.
Each platform is driven by an operator (Orange, Microsoft, Google, Yahoo, Hi-Media, Facebook, etc.) or, unique to France, by a coalition of media sellers such as La Place Media (Amaury media, FigaroMedias, Lagardère Publicité, TF1 Publicité, 20minutes, aufeminin.com, Boursorama, La Dépêche du midi, Doctissimo, France Télévisions, Marie-Claire and Southwest) or Audience square (IP, Libération, Next Regie, Prisma, M6, Le Monde, Régie Ops, Les Echos, Red Surf Connect, Le Point)
Furthermore, most of the media agencies have launched their own ’trading desk’ (a service that purchases of advertising space on the ad-exchanges, or other DSP, «Demand Side Platforms»).
Affiperf (Havas Media), Amnet (Aegis Media), AQN (OMD), Audience on Demand (Vivaki), etc.
For its part, Group M France launched in September 2012, Group M Trading Desk, which allows agencies to connect to different sources of inventory – marketplaces – depending on the demands of advertisers.
The role of the digital advertising market places (ad-exchanges): centralization of a stock of Web pages compiled by publishers and media sellers, called inventory, and selling them to the highest bidder.
Ad exchange is paid by taking a percentage of the transactions that pass through its platform.
The technological dimension has taken us to a virtual market place equipped with software for buying and selling display advertising (banners, videos).
Buyers of advertising space – media agencies, specialists of retargeting and independent trading desks – connect to ad exchanges to make their acquisitions.
Acquisition of page views or impressions, takes place at the cost per thousand (CPM). Transactions are done according to an auction model (the « bidding ») and is quasi-instantaneous: less than 120 milliseconds between the time when the user consults a Web page and when advertising that won the auction appears on the page. It is in ‘real time’.
This ecosystem wouldn’t be complete without the socio-demographic and behavioral data supplied by data providers who analyze cookies, such as Exelate, Weborama, Specific Media, who help to better target the user who will receive advertising on his screen.
The major advantages of this new model is that it simplifies and accelerates the process of commercialization of display ads, which, before the emergence of ad exchanges and Real Time Bidding, was heavy and complex.
A revolution in progress
According to NextMark, American specialist in Media planning, the traditional process is comprised of 42 steps performed by a dozen of stakeholders. And according to Google, this complexity has a cost of 28% of the overall advertising budget, against only 2% for television. NextMark is a little less severe, and estimates about 10-12% of the budget. Either way, these percentages explain this rush towards ad exchanges.
With purchase and sale orders being automated, the commercialization process is simpler, faster, cheaper and more precise thanks to data targeting: RTB, via the ad exchanges, gets all of its qualities through users.
Initially, the ad exchanges were primarily used to market unsold real estate, these thousands of Web pages where no advertiser wanted to place its banner, but according to the Interactive Advertising Bureau, ad exchanges are a new economic model that allows the move from a logic of purchasing space (impressions) to a logic of purchasing viewers (targeted consumers who look at ads).
RTB has now crossed into other formats, video for example.
Despite the general enthusiasm, the percentage the ad exchanges represent in the display market (EUR 649 million in 2012) remains modest, at about 8%. Not yeta threat to traditional media planning which is still very important, particularly in the context of special operations.
Key figures to remember for the French market:
RTB expenditures doubled in 2013, from $113.5 million, compared to $57 million in 2012.
Growth will continue with a 32.6+% increase estimated in 2014.
By 2017, the RTB will be 27% of the French Display market, compared with 12% in 2013.
The RTB is spreading to all inventories:
-the purchase of RTB video ads will be multiplied by 4 in 2014.
-mobile advertising spending in RTB will be multiplied by 6 in 2014.
Other figures from the SRI and the UDECAM in cooperation with Price Waterhouse Coopers authors of the 10ème Observatoire de l’e-Pub (10th report on e-Pub) a semi-annual survey on the French digital advertising market:
Overall, the French digital advertising market recorded a 4% increase in the first half of 2013.
The Display segment showed a 3% growth derived mainly from the growth in:
- video (+ 34% to €68 million, representing 18% of the Display market in the first half of 2013).
– RTB buying (+ 121% to €57 million, representing15% per cent of the Display market)
Quid the Loi Sapin of 29 January 1993: it is outdated and thus not suited to the appearance of ad exchanges, which by their nature imply that media agencies, de facto fulfill their role as media sales companies. Actually, the Sapin law states that a media agency cannot collect revenue from media sales companies, so theoretically cannot have its own ad-exchange, reason for which Bercy is currently considering the subject and should be making a decision soon..
Diagram of changes
In the beginning:
Phase 2: arrival of the Ad Network either brokers or commercial agents who buy publishers unsold inventory wholesale and adding technology that allows the aggregation of viewers and thus to sell ‘packages’ to reach a well identified target.
Very quickly a plethora of models of commercialization of inventories appears.
Phase 3: the system malfunctions
The multiplication of the Ad Network resulted in some advertisers buying the same viewers several times.
Phase 4: the birth of the Ad Exchange, an additional level!
A level of sophistication for better performance.
Publishers sell their viewers on an Ad Exchange platform where buyers can bid for them. Whoever wins the auction serves his ad to the right viewers at the right time.
This moves the model from one of buying impressions (inventory) to one of buying viewers.
Phase 5: the creation of the Trading Desk at media agencies as well as DSPs and SSPs
Trading Desk at media agencies: purchase impressions in real-time on behalf of advertisers on ad exchanges. And can therefore be assimilated to the media sellers.
They are not within the scope of the Loi Sapin which provides that a media agency cannot collect revenue from media sales companies, so theoretically cannot have its own ad-exchange.
The DSP allow for efficient real time negotiations on the Ad exchanges with a new parameter, consumer targeting data as arbitrage.
Whereas the SSP optimizes the offers from publishers
By distributing the inventory made available by the Publisher with the different ad-exchanges or DSPs selected, the SSP will be the link between the advertising location called up at the time page view and the auction carried out by advertisers or trading desks. Then automatically distribute the corresponding advertisement. The publisher can set his SSP based on certain criteria, by setting price floors by placement, by designating preferred partners or, the opposite, in blacklisting certain advertisers.
An ad-exchange is an automated platform that optimize the purchase and sale of advertising impressions in real-time. Like a financial market, each impression available is put up for auction by the seller (website, network of publishers or direction) and attributed to the entity with the best offer (advertiser, trading desk, media agency or retargeter). The arrival of this type of marketing of space fosters two things: transparency (the bidder knows how much and for what he is paying) and speed, with the automation of the phases of negotiation and implementation of campaigns.
Data management platform:
At a time when the qualification of the viewer is as strategic for an e-trader as for a website publisher, data management platforms (DMP) started to evolve allowing for extraction and analysis of what is also referred to as big data. These online platforms may also specialize in the sale of third-party data.
Data specialist: Datvantage, Exelate and Weborama.
DSP (Demand-side platform) is a technological platform that allows advertisers to centralize the management of their media campaigns through a single interface, eventhough they are displayed on different ad-exchanges. They optimize the bidding strategy based on targeting criteria or site selection. They also provide reporting.
Leading DSPs: Appnexus, DataXu, invite Media, Mediamath, Sociomantic and Turn.
« First-party data » and « third-party data »:
« First-party data » corresponds to the information acquired on users visiting a Web site. This information is collected by the advertiser or the publishers through a variety ways (registration form, cookies or attached analytical tools) and may relate to behavioral data (interests, purchases, intent to purchase, type of surfing…) or declarative (age, CSP…). Conversely, third-party data is collected by specialized players (retargeters, DMP) to help advertisers refine their targeting or increase their pool of viewers.
RTB gives the possibility to adjust in real time the price of an advertising impression according to medium, behavioral data and navigational data. More simply, this mode of purchase is based on the behavior of Internet users to deliver advertisements in aligned with their tastes!
Real time bidding (RTB) has taken an increasing share in digital media purchasing by advertisers in recent years, first in the United States and the United Kingdom, before spreading to the rest of Europe. Facilitating access to an increasingly important and fragmented inventory and reducing the complexity of acquisitions and the implementation of campaigns, this technology is today an important motor of the growth in the digital industry.
Supply-side platform (or Sell-side platform), the SSP is a platform allowing publishers to automate and optimize the sale of their advertising space. By distributing the inventory made available by the Publisher with the different ad-exchanges or DSP he has chosen, the SSP will provide the link between the advertising location summoned at the time of the page view and the auction carried out by advertisers or trading desks. It will be then automatically distribute the relevant advertisement. The publisher can set his SSP based on certain criteria, by setting price floors, placement, by designating preferred partners or, the opposite by blacklisting certain advertisers.
Leading PHCs: Admeld and Appnexus, Improve Digital, Pubmatic, and Rubicon Project.
The trading desk is the agency that manages the purchase of impressions in real-time on behalf of an advertiser on the ad exchanges, driving its buying strategy through a DSP, the trading-desk target and buys viewers that his client wants to reach and optimizes his campaign based on performance on different media sites. A trading desk can be independent or part of a classic media agency.
French trading desks: Affiperf (Havas), Amnet (Carat-Aegis), Audience On Demand (Vivaki), Cadreon (Universal Mc Cann, Initiative, Mediabrands), Gamned, Infectious Media, MainADV, Matiro, One 62, Tradelab, Xaxis (WPP) and Zebestof.