Nexage Analytics Report December 2013

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1 Nexage Analytics Report December 2013

2 Programmatic: Becoming the strategic technology foundation of mobile advertising Programmatic is gaining steam. It has rapidly shifted from a disruptive force to the technology foundation of ad tech in general and mobile advertising specifically. That shift was entirely predictable. Technology has always been critical for high-volume transaction markets, whether that is stock markets, credit cards, or even search advertising. It is now critical for mobile advertising. The common value is the ability to achieve efficiency at scale while enabling transparency and decisioning at the impression level. This combined value is a core reason why programmatic technology has quickly taken shape. But it is valuable to get underneath the term programmatic and talk about the capabilities in the market: RTB, which automates transactions via real-time auctions Programmatic guaranteed, where buyers and sellers agree to a specific deal (Deal ID) or a broader relationship (programmatic guaranteed) off network but transact on the exchange. The combination of RTB and programmatic guaranteed is important, as it creates a range of technology that can support a publisher s direct and indirect channels and enable different buying options by programmatic buyers. Forecasts affirm the critical role of programmatic and its fit for mobile advertising, and more broadly for digital advertising. Programmatic will grow to support 50% of total mobile ad spend by EXHIBIT 1: PROGRAMMATIC TO REPRESENT 50% OF SPEND Non-Programmatic RTB Programmatic Guaranteed 100% 80% 60% 50% 40% 20% 0% Programmatic In fact, one way to think of programmatic is as less of an option and more of a common underpinning for mobile advertising altogether. This point was highlighted at the Nexage Forum, where an executive from a media company stated that we will have matured as an industry when we do not use the word programmatic market anymore; we simply say market where programmatic is part and parcel of every transaction. Page 1

3 RTB: Dominating share of spend RTB has led the charge for programmatic. The strength of RTB growth is in great part due to the mutual value delivered to both buyers and publishers: Buyers gain superior targeting capabilities in a mobile data model where the exchange integrates and delivers 1 st and 3 rd party data. Publishers are able to consolidate their indirect channel through a single ad tech stack and take advantage of rapidly growing programmatic spend. We are seeing significant RTB growth on the Nexage Exchange, as bid volumes have grown more than 500% in 2013 (so far) and RTB s share of spend on the Nexage Exchange has grown from 26% in January 2013 to more than 60% in October Bid density, a core measure of liquidity, has also grown more than 200% in EXHIBIT 3: INCREASE IN BID VOLUME & BID DENSITY Bid Volume Bid Density (Bids per Auction) In 2013, bid volume grew 515% while bid density grew 215%. Bid volume exceeds bid density due to sharp growth in ad requests on RTB. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov These results outpace the larger programmatic trend in the market and reveal three interrelated dynamics: 1) tremendous increase in supply available through RTB; 2) a broad base of programmatic buyers including online-native DSPs, mobile-native DSPs, and ad networks that have transitioned to RTB continue to ramp up their business; and 3) those buyers are showing a high preference for premium audience available on the Nexage Exchange. EXHIBIT 2: EXTRAORDINARY & DIVERSE GROWTH OF RTB-ENABLED BUYERS Online DSPs Mobile DSPs Ad Networks that Transitioned to RTB We expect RTB share of spend to continue to Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov grow as buyers expand their businesses and agencies move more money to programmatic budgets. Page 2

4 Private exchanges: Taking flight in the premium segment The name private exchange is a bit of a misnomer, as it implies a single monolithic product. Instead, private exchanges are a configurable set of functionality that is tuned to the specific publisher s preferences and needs. As such, private exchanges come in many forms, and differ by how publishers select buyers, create and apply business rules (e.g., brand safety), and whether they are exclusive or first look-based. Premium publishers are able to design private exchanges that best meet their needs, and adapt them as the market and their priorities change. EXHIBIT 4: HIGH-LEVEL SPECTRUM OF PRIVATE EXCHANGE TYPES WHITE LISTS WITH SPECIALIZED RULES FIRST-LOOK MARKETS Nexage Private Exchanges are realizing significant growth: revenue grew 569% in Q3, driven by the combination of CPM and volume growth (CPMs grew more than 140%). This performance sends a powerful signal to publishers; with the right design, they are able to enjoy high levels of liquidity while setting rules that best meet their needs. EXCLUSIVE MARKETS WHITE LABEL/ BRANDED EXCHANGES EXHIBIT 5: PRIVATE EXCHANGE REVENUE GROWTH Q Q Private exchange revenue grew 569% in Q3 with continued growth into Q4. Q Apr May Jun Jul Aug Sep Oct Nov EXHIBIT 6: PRIVATE EXCHANGE ecpm GROWTH Q Q Q Private exchange ecpms grew 140% in Q3 and are increasing in Q4. Apr May Jun Jul Aug Sep Oct Nov We expect private exchange share of spend to grow substantially because of the combination of publisher-designed controls and superior performance. Page 3

5 Auction Analytics: Revealing the strategic value of transparency Analytics are becoming an increasingly important tool to gain visibility to performance, and to best understand the levers to continuously improve performance. This is especially important for markets in rapid growth, like programmatic, where business leaders need detailed views of how the technology works. One important area is, of course, the targeting algorithms that make billions of decisions a day to drive optimal campaign performance. Nexage provides a range of auction- and bid-level analytics to help both publishers and buyers understand and advance their businesses. Publishers are able to understand actual demand patterns for their sites and, based on that information, better package inventory and set floors. Buyers are able to understand their bid behavior for different sites and various audience attributes to optimize their algorithm (and even see where the algorithm s logic is different than their business intention). One analytic output that enables more transparency are bid histograms where we are able to isolate the bid behavior for a site (many buyers) or buyers (many sites) to give them a view of how bidding is taking shape. The most significant trend is that the broad-based growth in programmatic buying is driving up bid volumes and bid density, which measures the extent of competition per auction. EXHIBIT 7: BIDDING BEHAVIOR CHANGING OVER TIME FOR SITE A AUG 2013 SEP 2013 OCT 2013 NOV 2013 Results provide a granular view to clarify the overarching market dynamic: the premium segment in mobile advertising is accelerating as it grows in value. We expect this trend to not simply continue, but become more pronounced as brands more decidedly come off the sidelines. Page 4

6 Conclusion In the world of digital advertising there are two dominant trends, the dramatic increase in mobile ad spend and the role of programmatic in supporting that ad spend. The two trends together tell a clear and profound story: mobile is rapidly becoming a strategic channel for advertisers and programmatic is rapidly becoming the technical foundation for the majority of transactions. The analytics in this report signal that this trend is well underway, and the trends are creating some important markers in the industry: Agency (via trading desks) and buyer preference to buy programmatically is changing the landscape and increasingly motivating publishers to move more and more premium inventory to programmatic. Publishers are increasingly using private exchange functionality to drive their business forward. Analytics are enabling both publishers and buyers to see clearly and adapt to a rapidly changing and growing market. So beyond the up and to the right growth charts, the larger point may be that mobile advertising is changing or better stated progressing. Value drivers such as premium inventory, mobile data, programmatic spend, and technology are place and promise to have a decided impact on and the shape of the industry going forward. Page 5