“The Sell Sider” is a column written by the sell side of the digital media community.
Today’s column is written by Romain Job, US general manager at Smart AdServer.
Many digital publishers in Europe are thriving in an advertising market very different from that in the US. Those distinctions offer important insights for US publishers, in terms of scale, relationship building and content.
The market structures are, of course, completely different. Despite the cohesion promised by the European Union, the ad tech marketplace across the pond continues to be very diverse compared to that of the US. Europe contains several different ad tech markets, each with its own requirements and organization, and with its own advertising providers.
At four to five times the size of the European market, the US ad tech market in comparison is huge and very dynamic. In many ways, the market here requires less finesse than is needed to succeed in the European market because a solution that works in Los Angeles will work just as well in New York.
Because of the US market’s size and relative cohesiveness, success here is primarily a matter of scale, as companies build ever-larger operations in an effort to dominate. So mergers and acquisitions are commonplace as businesses seek to grow to be successful. European companies can learn a lot from the American ability to scale quickly and build global leadership at a market’s earliest stages.
In the US, middlemen control much of the advertising business and have built powerful nationwide networks, which make life difficult for medium-size publishers. That concentration of control elsewhere can prompt publishers to imagine that their own initiative may not count for much.
To succeed in Europe, on the other hand, advertising firms need to focus on proximity, flexibility and adaptability to varying local needs. Residents are accustomed to different ad units in the UK, Poland, France, where home page takeovers are unusually popular, and Germany, where a popular ad unit, “wallpaper,” merges a leaderboard and skyscraper to form a unit commonly known as a “hockey stick” in the US.
Proactive Relationship Building
In Europe, since each individual ad market is small, publishers that want to succeed must build more direct relationships with ad buyers. As a result, European publishers are more proactive in order to attract better advertising. Despite the small markets, there are opportunities for shrewd players to build solid, sustainable businesses with a good deal of customization. Ad tech providers here must provide a flexible environment for publishers that have limited resources to innovate and differentiate.
Raising money is tougher in Europe, so companies have to manage their cash flow carefully right from the start in order to avoid running out of money. So they build a leaner cost structure and never lose sight of efficiency. European publishers tend to have smaller ad ops teams. That’s due, in part, to the simpler ad tech landscape they face. It’s also because they’re reluctant to overhire, which can be costly in both the short and long term. Here, too, ad tech providers must adapt and provide a high level of support to reduce the workload of ad ops teams, enabling them to focus on higher-value tasks.
The balance of power appears to tilt more toward publishers in Europe compared to the US. A medium-size publisher in Europe can develop very innovative custom content, which may attract an advertising budget that might not be available to a player of that size here.
Perhaps because the market here is more standardized, American publishers seem less inclined to take this approach. If more tried it, though, they might realize greater profits.
The mobile advertising market provides a good example. Mobile innovation in Europe has long been publisher driven, as EU publishers built a strategy and offered branding opportunities long before there was much demand for mobile ads. EU publishers saw where their audience was going and took a proactive approach to attract advertising revenue.
So in Europe, publishers built new mobile ad products and use cases, working closely with brands to ensure the success of their campaigns. Publishers made investments, took risks, leveraged their brand relationships and enjoyed flexible technology providers, all of which led to greater profits.
In the US, technology and service providers are not always so flexible, which may force publishers to wait for similar results. They often have to rely on third parties, such as ad networks, to address their mobile challenges. But US publishers may need to focus on building their mobile businesses so that they don’t lose this critical part of their revenue. Mobile already accounts for more than half of the audience for sports and news, and that percentage will only grow.