Key Takeaways: Future of AdTech in the Post-COVID World
Sigma Software continues its series of free quarantine-time webinars aiming to explore the new normal, inspire businesses to move forward, and present expert views on how to surf the digital wave.
Speakers from Sweden, the UK, and Germany joined the Accelerated Change: AdTech webinar and shared their thoughts about how the crisis has accelerated much-needed changes in advertising. Johan Liljelund, a CTO and Vice Executive President at DanAds International AB; Sam Jones, a Founder & CEO at Gener8 Ads; Andreas Schemm, a Co-Founder & CEO at Vreo; and William Mercer, a Venture Director at Zag (moderator), covered the following topics:
- The new digital world – post-COVID customer behavior
- What is the future of marketing and AdTech?
- How can Internet users benefit from ads?
- How global brand managers can secure their customers’ loyalty in a time of uncertainty?
Webinar partners: Zag, Sigma Software Labs
Will: Hello and welcome to you all.
Johan: I'm the CTO and the executive vice president of DanAds, a software development company in the business of self-service and automation. DanAds was founded in 2013 by two guys from Sweden. We develop and deliver self-service advertising platforms to some of the world's largest media owners from TripAdvisor and Bloomberg Media to Hearst and eBay. Our platform enables publishers to capitalize on first-party data and to set up a direct relationship with their advertisers or agencies. We optimize it all the way through.
When COVID-19 hit, we saw that for the first three or four weeks nothing happened. After that we saw a huge effect on our business. Publishers from all over the world started contacting us because they had laid off all of their salespeople. And now, when the industry is starting to regain, they will not take back all of these people again. So COVID-19 forces publishers to make a transition to self-service and automation.
Sam: I'm the CEO and founder of Gener8 Ads. We enable people to control and monetize their own data. We're very small, we have had about 80,000 installs in the UK, of which about 40,000 people are daily active. But we're growing relatively fast. Before founding Gener8, I worked at Red Bull as part of their global marketing team. Most recently in the position of a global brand manager where I was responsible for one-third of their worldwide advertising across all media channels.
Andreas: I'm the CEO and founder of Vreo, we make in-game advertising easy. Vreo acts as the glue between the advertisers and the game developers. We help both sides find each other. We place ads of various kinds of formats into video games, which is the biggest entertainment industry. Myself, I have been involved in startups since I was 18. I also founded LaserTag as entertainment with some of my friends. We expanded it to 14 venues, founded a tournament scene and a community, and received multiple millions of dollars in revenue.
Will: Johan, whenever you mention digital marketing, you can't help but think about the duopoly of Facebook and Google. Where do you think the future of that dominance is going?
Johan: We are more likely looking at some sort of triopoly with Amazon also being part of this group. They have been taking care of 60 percent of all the advertising spend from the SMEs. As an SME, this has been the only place where they can buy ads because all the traditional publishers have closed their doors. The publisher doesn't want to touch anything below twenty or thirty thousand dollars. This is because it will cost them 20K just to push that campaign through with all the manual work that needs to be done. It's a very inefficient business. I do believe that there are governments that will not allow Google, Facebook, and Amazon to become any bigger.
On the other hand, if we look at the total advertising body, the spending will grow. It will open up for other players to get bigger and will also start to form a relationship with the SMEs. So there will be new players entering the market.
Will: Do you envisage there being a greater amount of dialogue between media platforms and their customers? Do you think it'll still be programmatic but a bilateral relationship? Or one in which you'll see more strategic relevant advertisement placement on media platforms?
Johan: Programmatic can be defined more as a business model of how you buy something. You place a bid and then you get something. I do believe that there will come a technology change. This industry cannot continue with all of these tech providers taking a cut of each advertising spend. It will not work if you throw in a hundred dollars as an advertiser and the publisher gets twenty and tries to deliver something with that. I don't think that will happen. We will see more tech providers that move away from the old-style commission-based models and more into fixed license fees. There will be a lot more so-called walled-gardens and unique connections. This will have a huge impact on the industry in the upcoming years.
Will: Sam, marketing platforms traditionally rely on advanced customer insight and you're taking customers in the other direction. Is your job to kill digital marketing?
Sam: Not at all. I'm not against the use of data at all. We all know that accurate and high-quality data is essential for marketers to deliver on their campaigns. For me, that emphasis is on control rather than privacy. People should be able to have more control over their data. They should be able to share in the wealth that's created from their data. This is the way that I see the world moving, albeit in a slow and incremental fashion.
When I reflect on Google and Facebook, both of them, especially in combination, offer incredible scale and incredible targeting. Right now others simply can't offer that. Even entire media channels can't keep up.
So for example, TV offers the scale but not the targeting. Powerful publishers offer the targeting but not the scale. Out-of-home claims to offer a mixture of the two but struggle to validate either one of them. Outside of regulation, it's very hard to imagine a circumstance where advertisers are going to opt for a choice of needing to do more work to try and reach the same people.
Will: If Red Bull started today do you think their approach to building that brand would be considerably different?
Sam: The approach has always been to identify people who we believe will share in the ethos of the business and in the company and to send them relevant messaging, which will start that relationship. So whether that is music, a dance, or an extreme sports audience, it's always been about the relevant messaging. It’s always been about relevant targeting and harnessing the right assets, whether that's an athlete, or a sports team, or an event.
If you have a big sizable budget, you can build a brand nowadays much easier than 20 years ago. We have access to these platforms where we can target our audiences with the correct messages very simply.
Will: Could you say that what you're doing at Gener8 is almost the same as the approach at DanAds but for the consumer?
Sam: Absolutely. I agree with Johan that first-party data has always been valuable and is becoming more valuable. I think the eradication of third-party cookies is fantastic. I think there's a lot more that can be done. Especially when we're looking at fingerprinting and other techniques that companies, media owners, publishers used to track people as they go online.
But my fundamental belief is that the data that's accrued on an individual should belong to that individual. For example, if I go to the website of my local council, then just by clicking on this page and going to this site, 26 different companies have dropped trackers on me. And that's because the council as the publisher has allowed this to happen. Seven of those 26 businesses sell on my data and make money from it. That’s their business model as a data broker. When people at scale become aware of this inherent tracking and following that's happening everywhere we go online, they will start to ask questions. They will say, “Hang on a minute, if people are selling my data, a) What data are they selling and b) Who's making money from it.” More people come to the same conclusion, they want to have more control over their data and be able to make money from it themselves.
Will: You mentioned that you've been looking into how your customers have changed their habits during this crisis. Do you have any insights you can share?
Sam: Recently during the UK lockdown, we ran an analysis of just over 31 million page views across 3,600 people to identify the changes in online behavior that took place. The results were fascinating.
We saw there were short-term changes. For example, the week that the lockdown was announced in the UK, time spent on adult websites increased 292%. Gaming was up 179%. Time spent on personalized gift websites went up 61%. The news initially spiked 64% higher than it was. But then within three weeks, people started to deliberately avoid the news, it was 19% lower than the baseline.
We also saw some interesting things about Google searches. We saw the highest ever rise in “How to” searches, which illustrated resilience and practicality and empathy from the British people. “How to work from home”, “How to home-school”, “How to make a face mask” very quickly transitioned into searches for “How to help”, “How to volunteer”, “How to support others”. So there were some touching findings from the data too.
The companies that will come out of this stronger are going to be the ones that can understand the changes in their consumer’s behavior and react accordingly to pivot revenue streams or evolve marketing channels or offerings.
Will: Andreas, why did you get into in-game advertising, and what are your views on the future of in-game advertising?
Andreas: I'm a big gamer myself so that was an easy decision in the end. The current formative in-game advertising is very interstitial focused and that is not something most gamers enjoy. There are over 2.5 billion gamers worldwide and the average time spent playing per gamer is seven hours per week. This means people spend roughly 15 billion hours of gaming worldwide every single week. This is more than double what gets watched on YouTube. And revenues support that claim. Today revenues from gaming are bigger than music and movies combined.
As a gamer myself, I didn't see that many ads inside games. This is very astounding because a lot of studies suggest that ads in games are very efficient. The brand recall rates and perceptions rise too. Especially if there is a good fit and it is done right. You don't go into a fantasy game if you advertise cars and Coca-Cola. This would be a big immersion breaker. If it is a football game or a game taking place in a city, then it can even enhance realism. Because this is what you experience in real life. This means the game is more realistic and enjoyable.
In terms of acceptance rates, studies have also shown that gamers like this form of advertising better than most other forms. It has up to around 80 to 90 percent acceptance rates if it's not too much and the content fits well.
This industry will only get bigger and bigger. The future is in immersive advertising, where it's part of the surroundings but not interrupting the user experience and not ripping the user out of the immersion.
Will: Johan, what kind of conversations are you having with large scale platforms? What's concerning them at the moment and how can the marketer take advantage of that?
Johan: If you talk about the big tech providers, something needs to happen between the technologies of DSPs (Demand-Side Platforms) and SSPs (Supply Side Platforms). I see a lot of the SSPs looking more towards DSP functionality. And there will come players which take on both hats.
From a digital marketers’ perspective, it will be more defragmented. If you want to find good data, there is room for niched publishers that have good content. The old-fashioned publishers missed the idea of what the publisher is about. It's about creating content that affects users. So you can build up a good data set that you should be able to capitalize on. This is something that we hear from a lot of the customers we work with. It will become very important not just from the top layer path publishers, but also for the mid-tier and lower tiers. Even though they might not have a broad reach.
Will: Sam, do you have anything to add to that?
Sam: Well I'll give a slightly tangential answer. It's always worth keeping in mind the holistic bubble that we sit within in terms of the entire marketing ecosystem. It is worth looking at one of the challenges that global advertising faces right now. ISBA released a study that shows the public favorability and trust towards advertising currently sits at just 25 percent. So just one in four people trust advertising that they see. This is staggeringly low.
If we look specifically at influencer marketing for people under the age of 30, Instagram is their primary source of news. But new research shows that only 4% of people state that they believe the information that comes from influencers. If we put that in perspective, 46% of people believe in ghosts and 16% of people believe in Bigfoot. Just 20 years ago trust in advertising globally sat at 50%, so one in two people believed the ads that they were seeing on any medium.
What this shows us is that fundamentally the foundation of advertising is broken. We know that major advertisers need to address this. And we know that there is enormous growth for the likes of Facebook and Google. When you see scandals like the one related to Cambridge Analytica, it impacts how consumers end up engaging with the content and whether they trust it.
I see an interesting opportunity as the big players start to address trust in advertising. We'll start to see more tactical media buys. That will go towards publishers who have done things the right way. We'll see it go towards platforms that consumers trust and that people believe in. And we'll start to see money siphon away from those characters who are perhaps acting in a more underhand and shady manner.
Will: How do you see the industry in 2021? Will the respectable platforms with detectable and trustworthy content be the ones that will collect a premium?
Sam: There will be a pendulum swing, but it always takes longer than you anticipate. It depends on where we're looking at this from. From an advertising standpoint, companies are playing for quarterly targets and for year-end results. If they're public they're playing on their share price, so they're going to be pulling different levers. Ultimately money tends to go towards things that get the quickest and the fastest results with the least effort and the least hassle. Right now it is money that's going through Google and Facebook due to the scale and targeting.
If we look at the longer-term though, that's where we'll start to see a shift in the dial and a movement towards capital heading in the right direction. Let's take music for example. Ten years ago Spotify hadn't even launched in the US, they had zero users. But in January 2019, the Billboard number one album in the US only sold 123 physical copies, but it was streamed 83 million times. Within a decade, how music is consumed and how number-one hits are created has totally changed.
When I look forward, I believe that 10 years from now consumers will have control of their data. They will be able to earn from their data, while brands will have to transact with people to use their data or to show them ads. How exactly the solution will be implemented and made at scale is unknown. But I'm sure that over the coming years there will be a trickle-down effect where people start to become aware of the value of their data.
Will: Johan, what are you seeing in terms of a percentage change? And the same question about the industry.
Johan: Our clients are pretty diversified in terms of industry. TripAdvisor had some sort of drop in their ad revenues due to no one traveling or booking hotels. On the other hand, the OTT industry (Over-the-top media service) in the US saw a tremendous lift. In general, the publisher’s side has taken a huge hit because of COVID-19.
I believe that it is something that would happen anyway. The publishers that aren't set for the future business of managing their advertising business would die anyway. We also see some differences in geographical markets. For example, the advertising spend in Asia hasn't been as effected by COVID-19 as in other parts of the world. If you look at Scandinavia the hit has been very big.
All of this will force publishers to take the next step into the future in terms of streamlining. They will be forced to move away from the old ways of doing business. From the buying side, publishers are extremely focused on their budgets and provisions. The wheel to transform or to think outside of the box is zero. They haven't taken the opportunity to invest in “Publisher 2.0”.
We will see companies that haven't seen themselves as publishers or media owners as a new type of publisher and media owner. It can be mobile carriers, banks, insurance companies, etc. They have the valuable data. This is an area where we will see a shift in the coming years.
Will: Andreas, could you share any thoughts on mobile phone networks and how integration with the gaming space would serve to their benefit?
Andreas: As 5G is on the horizon, mobile phone companies will want to push that service. They will push the message out that 5G is available with them and why people should upgrade to it. For example, if you play a multiplayer mobile game that's good-looking, the data consumption can be pretty heavy and fast. In a multiplayer environment, you don't want to be lagging. This would be a good example of an ad that would immediately reach the right people because that audience is already on mobile phones. This can be valid for other industries as well.
Will: During quarantine people spend even more time online and can therefore be oversaturated with information, including by ads. What could be a lightweight advertisement that would nevertheless be heard?
Sam: There has always been enormous saturation in advertising. The challenges have always been to create ads that cut through to your target audience with a media buy that is relevant for them. The best way to find out what works is to test at scale. That doesn't necessarily require a large budget, it depends on the media that you're buying. To use the example of Facebook, you can take five different audiences and you can run the same ad at all five audiences to see which appears more. You can then segment and target different ads to different audiences. You very quickly get the metrics back on what's working and what's not. Thus, you can optimize your budget accordingly.
There's no change there really from an advertiser’s perspective. The question which advertisers were asking themselves: “Is my message relevant given the global events that are happening around us right now?” Those of course being COVID-19 and the Black Lives Matter movement. As a direct result of this, we've seen some brands stand up and take a big stance. They're doubling down and putting media buys and creatives into showing how they want their brand to make an impact. For example, Nike ran a campaign saying “Stay at home and play for the world” during COVID-19, and then as soon as BLM came up, they very quickly started running campaigns and ad buys to communicate that they were standing strong with the black community on this.
As an advertiser, I'd be asking if we are taking into account these global events that are happening. Is our message still relevant given that? If the answer is no, then pause. You don't need to push your message until you've got a reason to do so.
Will: What are the main challenges brought by the current crisis?
Andreas: It's about standing out and identifying the right medium. We see it for other advertisers and ad agencies. They have announced that they are missing about 40% of their spending. So ad spend can be down and especially on certain things. That was one of the main challenges, to identify the right audience. Identifying the right medium and not getting stuck in a loop of using content and saying “OK, I will do what has always worked”. Because today it doesn't. You have to adapt, you have to change.
Sam: All businesses ultimately need to do three things right now: respond, rebuild, and recover. Respond by cutting costs, by furloughing staff or losing staff, and by putting out fires. Rebuild by revisiting their fundamentals, by understanding what's changed about their consumer or their customer, and by adapting their business. And then recover by implementing new revenue streams, different marketing approaches, and ultimately by maintaining their growth.
Right now, most businesses are at the rebuild stage. They've got through that initial panic moment of cutting costs, most opted to cut costs very deeply and quickly and they only had to do it once. Now they're rebuilding and having conversations with publishers, understanding what they're doing to try and increase their revenue. Most businesses are looking at diversifying revenue streams. These are the similarities that they all have.
The flip side to this is - some companies benefit from this.
Johan: One of our clients used COVID-19 to give away inventory for free to make some sort of positive impact on this. They did it directly with the advertisers to hopefully create some relationships that they could utilize later when business comes back.
Andreas: I would agree that COVID-19 has been like an accelerator. Stuff that was already going on is now pushed even further. A lot is probably going to change in the long run. Some companies have said everything is going to be work from home, some extended it, some sectors can stay on it forever. It's just getting faster the cycle at which stuff changes, for example travel. AdTech will also change, and trends that have already begun will move even faster.
Will: Do the AdTech clients want to get some discount for advertisements through this pandemic period? How do market vendors relate to such requests?
Johan: We haven't seen any discussions related to this. If we look at the tech that is part of the value chain of managing this, it's based on commissions. If there is no money coming in, there is no revenue for the AdTech providers.
I think there will be fewer AdTech providers, or at least fewer than there have been. Of course there will come new ones, but there will be a lot of the providers going down the drain.
Sam: CMOs will start to look at where they can make efficiencies and one of the easiest would be to kick somebody out of this chain. We'll see some of these middlemen get knocked out. So there will be a kind of coming together and a centralization of fewer players doing more to try and make the media buy go further.
Will: What AdTech social channels are popular now?
Sam: TikTok, Facebook, Instagram, Twitter. This depends on who the advertiser is and what audience they're trying to reach. It's different depending on if I want to reach an 18-year-old male versus a 36-year-old female. I'm going to be looking at different media buys.
In general, the cost of media has decreased enormously. For big companies, it's a fantastic time to buy up media. It’s a fantastic time to run ads and to run campaigns because we've seen the cost of media drop. Now's the time where if you do have the budgets you double down on them. We all know from the research that brands that can continue to spend throughout a recession will come out of the other side faster and stronger than brands that turn off advertising. The reality though is that if you're a small or medium-sized business, you might not be able to continue advertising because your revenues have probably dried up. And if you do it you might not make it to the other side.
We hope that the insights that our experts shared will help you bring more digitalization and introduce the right mentality into your organization in these turbulent times. We will keep bringing you outstanding experts that are transforming businesses in various domains. Follow us on LinkedIn, Facebook, and Twitter and stay tuned about our news and events.