Europe has always been the poor relation to the US in terms of ad tech. US companies have access to capital. Lots of it. You need only do a Q&A on Adexchanger.com, and you too can have foaming-at-the-mouth VCs bursting down your door to invest. And these companies have access to one of the biggest markets globally. Scale is not an issue for US ad nets, ad tech vendors or digital advertising specialists. As one sage insider said to me recently, “you can easily build a $100 million plus ad net business… in Europe it’s nigh on impossible”. He’s not wrong. Compared to the US, we find it almost impossible to build truly pan-European advertising businesses. But over the last 6-12 months I have seen a lot of European advertising businesses looking at pan-Euro strategies. Why now? What’s changed? How can these smaller players be even contemplating scale? Let’s look at the changing environment and examine how we as an industry can build truly European businesses.
Dynamic Inventory = European Scale
While the greater European advertising community tried to get its collective head around programmatic buying and RTB, a handful of players spotted a huge opportunity to scale their business across Europe. In the past it took serious resource and investment to even consider a move across the Channel or the Rhine. If you were running an ad network, you had to think about sales staff to sell into agencies and publisher acquisition teams to aggregate supply. Very few have succeeded. Off the top-of-my-head, I can only list two-to-three real successes – Hi-Media being the most prominent. Dynamic supply is changing the game.
It is now possible to buy European inventory through the exchanges and SSPs. They have done an excellent job of aggregating supply and making it available in real-time. The significance of the Microsoft and Hi-Media deals can’t be underestimated on a pan-European level. The UK, Netherlands, France, Spain and Germany are all in play now. Companies like Criteo have been quick to seize on the new opportunity. It is the biggest trader on the exchanges, and has scaled a significantly-sized business across Europe (let’s say $140 million run rate in Europe) over the past two years.
Don’t get me wrong it’s still difficult to build a truly European business. You need to have local sales people on the ground in each of the markets. A localised offering is still a must. You can’t have a mad Irish man selling to the French in a garbled accent. Not smart. You need a localised proposition. But the move to automated trading is allowing companies to centralise their optimisation and buying operations.
More Capital And Better Networks Are Emerging In The Space
Capital has always been a huge impediment to growing businesses in Europe. Most companies get to a certain level where they require an injection of capital to scale. Most European advertisers in this space have found it difficult to get cash from investors. VCs here are very generalist, and lack domain knowledge of our industry. Many companies have had to go to the US to get funding. It’s a fact. List some of the rising stars in the ad tech space, and all will recount a similar story. Granted there are exceptions. Thomas Falk is an active investor in our space, and nobody is going to argue with his credentials. But it’s not enough. We need more savvy investors. Actually what we need is a couple of big exits so we can get a new generation of smart ad tech VCs. This also applies to early stage investors too. It’s no secret that that when a new batch of data-driven trading companies was emerging from New York the likes of Brian O’Kelley and Joe Zawadzki were investing heavily. I see no active ad tech angel investors in Europe in our space. But we are laying the ground work for a robust investment network in the space. Already there are rumours of significant capital being raised for specific ad tech investment in the European market. And the networks are starting to develop around pan-European events like ATS and dmexco. These conversations are happening, and it’s an exciting time to be in this space. ExchangeWire is looking to launch an event in May of next year to help foster these relationships.
The Models That Will Succeed
This is a tricky one. In the first instance I think the re-targeters have an opportunity to open up the market. The ability of Criteo to tap into marketer direct budget has been a stroke of genius. I think this will be the sweet spot for growth of the next gen euro ad tech business. Outside of that I see huge opportunity for the prospecting networks on the agency side. I agree with Bruce Daisley, I think most re-targeting at the agency level will be centralised, and those prospecting networks winning new customers have a real future in the European space. There are a number of ad server vendors in France and Germany who could build out a true multi-channel offering by adding a DSP and Facebook buying layer. I would suggest you look at what the Israeli “ad nets” are building. They have been at least 12 months ahead of the curve. If there is model to be followed I would suggest you look at what they are doing.
Those ad networks tapping into new demand could see an even bigger opportunity if they can bring a pan-Euro solution to the table. I would suggest to publishers that haven’t considered a PTD to now be putting it on top of their agenda. You are leaving serious money on the table. If you don’t want it, new business models will likely emerge to grab budget. Incidentally, this all applies to video and mobile too as more and more of this inventory will become dynamically available over the coming twelve months.
We are in an exciting period of evolution in digital advertising in Europe. The space is slowly bubbling. The interoperability of supply is underpinning growth. Once all the pieces – particularly smarter investors – come together we will see huge growth from European companies. Exciting times, indeed.