#2018Trends: Rise of machine learning & increased transparency

Last year was a tumultuous year for digital advertising in Southeast Asia and APAC, and we can expect this turbulence to continue into 2018 as platform companies jostle for the upper hand. As the new year gets in full swing, I see four major trends affecting digital advertising in APAC.

Advertising agency models
First off, we saw the advertising agency model come under scrutiny in 2017. With revenue and profits down, increased competition from the established consultancies, and ongoing transparency concerns, the door was open for the arrival of the specialist consultants. These well-funded players are now gunning for a slice of the global advertising pie, and hiring senior talent from the digital media sector. As they do, they are winning high-level strategy and planning contracts that could leave agencies with creative, lower-level planning and campaign activation.

Supply-side margins
Secondly, on the supply-side, we are also seeing significant margin pressure, which could likely result in consolidation or business model shifts. The rapid reduction or elimination of buy-side fees is affecting overall profit margins on the supply-side, while the improved detection and eradication of fraudulent impressions also comes at a cost. I think we could see the emergence of more platform-as-a-service (PaaS) models where a flat CPM is charged to the publisher. PaaS offers full transparency and a predictable revenue stream for supply-side players. Lean businesses that maintain a sustainable take rate and build trust with their customers should go far in 2018.

At the same time, header bidding adoption has resulted in increased infrastructure costs for both sell-side and buy-side technology platforms due to a rise in impression volumes. This is very relevant in APAC, as I expect the growth of header bidding to continue at its rapid pace and match the over 70 per cent adoption rate currently seen in the US by the end of 2018.

Infrastructure as advantage
As we enter 2018, technology providers with efficient integrations, low latency, localised data centres and the ability to increase inventory volumes cost-effectively will create competitive advantages. Supply path optimisation (SPO) – where a DSP or agency selects a single or limited supply source through which to buy select inventory – should further reduce infrastructure costs. SSPs are now doing deals to decrease queries per second (QPS) for DSPs so they are able to respond to better bids and inventory. I expect a multitude of deals to be announced this year.

Machine learning should gain prominence in 2018 as a means to gain competitive leverage. Machine learning (ML), a subset of artificial intelligence (AI) where algorithms are used to find patterns and invariants in big data is more pertinent. For example, here at PubMatic, we analyse billions of pieces of data from inventory on our platform, plus process bid stream data from hundreds of DSPs; our ability to interpret and select the most relevant and highest paying ad requires an immense amount of processing power and advanced algorithms. Companies that are best able to choreograph parameters and variables to effectively reach a desirable outcome for the publisher and advertiser will find themselves pulling ahead of the pack.

Fraud
Discussions around fraud which dominated the airwaves in 2017 will not decrease this year. The industry has done a tremendous job of responding to this threat but we still have a long way to go. This year should see a cleaner and more transparent digital advertising economy with those players truly committed to a fraud-free environment benefitting from incremental ad dollars. PubMatic’s “Let’s Be Clear” campaign and our fraud-free program both received a tremendous response. As trust is regained, brand spend should increasingly flow into programmatic.

This industry is not for the faint-of-heart, with persistent radical change and opportunity arising each year. We are largely headed in the right direction with the challenges forcing participants to be transparent, continue to invest in innovation and form strong client relationships. APAC is well positioned for digital advertising success, as programmatic and ecommerce growth rates should continue to outstrip Europe and North America. The maturing economies in APAC present fantastic investment opportunities, and I can’t wait to see what the new year will bring.

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Via Digital Market Asia

Copenhagen INK

Lars is the owner of Copenhagen INK and is an experienced and passionate marketer with a proven track record of driving business impact through innovative commercial marketing initiatives.