AdExchanger: How much total programmatic spend in Latin America spend flows through Xaxis?
LUCAS MENTASTI: If programmatic is platform-based, I’d say 70-80% of budgets in Latin America is programmatic, because of [digital platforms like] Google, Facebook and Twitter. And traditional publishers like the newspapers and the magazines are venturing into programmatic platforms.
Around 15% of that goes through Xaxis. I’d expect that to be 30-35% in three years.
I’m guessing Google and Facebook are eating up most of it?
Yes. We historically have Google, Facebook and maybe Yahoo and the global players. And then there are the local publishing companies with their own websites. Those publishers have a local sales force, which charges high CPMs and rely mostly on their brand.
When programmatic buying started to appear, the publishers didn’t know how to compensate the direct sales people and make the commission structure. That held back the progression of the traditional publishers in LatAm. Until last year, they hadn’t developed technology to keep up with the global publishers.
Xaxis hopes to change these markets by bringing in media products.
How does Xaxis compete with establishments like Google and Facebook?
We are smaller so we can be faster. We are first in market to sell some of the technology we have. We have developed the very first Latin America platform. By the time the big monsters catch up, we’ll be developing the next piece of technology.
Are there other shops you compete with that are also nimbler than the big guys?
There are some. But in Latin America, instead of investing in technology, they just whitelabel something and concentrate all resources on distribution channels. Our competitors focus on opening offices everywhere in LatAm and agency relationships. Headway Digital has been there for a while.
But Latin America is a very specific market with specific rules, and we’ve seen some important global players try to get in and fail.
What mistakes do others make?
The culture is one. We’re Latin so relations are important. The second thing is assuming the market will move at the same speed as more developed countries so they overinvest, but once they see the returns, they pull out.
When Xaxis entered Latin America, it did so through Mexico and not Brazil. Why was that?
International companies usually start in Brazil, which is a very different market from the rest of Latin America. It’s very hard. My decision was to start in Mexico, which is a little smaller than Brazil, but they’re close to the US and are more advanced. Some areas like travel and financial services are really advanced and have the scale. Mexico is big enough for global teams to look.
What makes Brazil hard?
Two things: There are no media agencies in Brazil. When I started out in advertising around the early 2000s, it had one creative agency that was doing both the creative and the planning and buying of media.
They focus more on the creative side than the media side, and they’re all still ruled by the creative side. Media departments tend to be less advanced since they don’t specialize and don’t know how much to sell to the suppliers or how to take advantage of all the things that programmatic buying allows.
On the publisher side, Brazilian media conglomerates want to do big, shiny things and don’t want to do much on measurement.
Let’s talk Argentina.
Argentina has a very strong entrepreneurial spirit, which makes it very advanced, and there are a lot of online travel agencies from Argentina. Clients are more advanced and there’s talent, which is easy to recruit. And it’s the opposite of Mexico. It’s so far away, Argentina isn’t observed by the global teams, so they do what they want.
They’re more willing to try new things. They’re not scared the global team will come to them and tell them something. What does scare me a little is Puerto Rico, which is a special case, as it’s between the US and Latin America. They need to follow the US on lots of things.
How advanced is Puerto Rico?
Not really. It’s related to how much we can capture data. The Spanish version of a website is usually the simplified version of the US site. They’re not allowed to implement their own pixels.
Why not take the Mexico version of the site to Puerto Rico?
It’s hard to explain how much difference there is between Latin American countries. Even though we all speak Spanish, our Spanish is very different. The cultures are very different, and Mexico is too Mexican for the rest of Latin America.
Is it common for a brand’s localized website to have that problem?
For the moment, we’re in the big countries where they have scale to manage their website. Once we get to the smaller countries like Paraguay and Ecuador, we’ll be having that problem.
Why are you going to Chile, Peru and Uruguay?
Basically scale. Our source of business comes from two places: the migration of offline dollars online and the migration from traditional media buying to programmatic buying. We’ve reached the tipping point where the numbers make sense.