The digital advertising market is currently dominated by Facebook and Google, aka ‘the duopoly’, with the pair representing anything up to 90% of growth in the sector. Such is the resilience of their dominance, the pair seemingly emerged from their respective crises, ranging from brand safety, measurement woes to mass data leakage, financially unscathed throughout the last two years.
Leading voices in the media sector – among them Andrew Casale, Index Exchange chief executive officer – have long-advocated the model of publishers banding together to counter this dominance, but early attempts to do so (in the form of publisher consortia whereby members pool their inventory) have met with limited success.
In conversation with The Drum, Casale explains his theory behind the robustness of the duopoly’s dominance of ad spend, as well as his theory of how the cooperative model can meet with success as long as conflicts are avoided.
'Identity is the new oil' when it comes to advertising
Per Casale, ‘data’ is not necessarily the new oil when it comes to advertising – a phrase that was often touted with the emergence of ‘big data’– he believes that 'identity' is where the value lies for advertisers.
The duopoly has thrived in recent years due to the fact they have been able to combine addressability – through their logged-in audience data, sets – as well as scale, which is what makes their walled garden propositions such a revenue-spinner. This is despite the complaints of some of the industry's most high-profile advertisers.
“The reason that the walled gardens continue to see the percentage of media expenditure grow is that they have an addressability advantage over the rest of the market,” he adds.
“And we believe that advantage is largely underpinned by the advances in bringing media expenditure in lockstep with CRM. This creates a level of [perceived] accountability over media that marketers have never seen before.”
He goes on to recount conversations with marketers that are increasingly committing ad dollars to these platforms, adding that the pair have been able to convince brands of the effectiveness of such a decision.
The perception of ROI
It is not 'nobody ever got fired for buying the walled gardens,’ according to Casale, recalling the classic IBM adage. “This is not the reason that is being cited, the reason that is being cited is that it performs,” he says.
“So what we believe is [that] if we are to reverse that trend (or even just slow it down) we need the rest of the media industry to solicit that same response from marketers, which is why we're putting a huge effort into identity right now.”
He explains that given how marketers are under increasing pressure from their procurement departments to prove an ROI on their media spend, the prospect of people-based marketing appears to provide marketers with the perception (at least) of guarantees.
To many, it doesn't matter if a 'walled garden media buy' works in 'a black box way' or a transparent way, so long as they can provide results that satisfy their seniors, according to Casale. If such marketers can provide the results asked for by their procurement departments, then their budgets will be renewed if not increased.
“When you connect back to the why; why is it [the walled garden players' marketshare] going from 80-to-90%? It's because this marketing fundamentally works,” he says.
“The marketer walks away with either a more positive ROI, or at least the perception of a more positive ROI based on attribution, and that fundamentally is the advantage that we believe is driving the paradigm in the market.”
How the open ID consortium plans to differ from publisher consortia
However, he believes that the planned open ID consortium – initially unveiled 12 months ago – will help advertisers reduce their reliance (or as some would say ‘blind trust') on the duopoly when it comes to meeting their KPIs.
“There is an option [to compete with the duopoly] and that option is to cooperate and collaborate and to share,” says Casale. “Everyone [such as adtech companies and publishers] generally has their own graph, and all are addressable. The challenge today is all of these graphs are incredibly fragmented, and not contained and shared in a way that is universally understandable.”
Casale also believes the proposed consortium – a scheme that fellow participant Brian O’Kelley believes is a top priority now that GDPR has arrived – can avoid the mistakes of previous collaboration efforts simply by keeping data, or ID, and media separate.
Why bundling media with identity is folly
A common theory as to the mixed fortunes of publisher alliances is that asking historic competitors to effectively share inventory is one that will result in dysfunctional dynamics, with cooperation often begrudgingly given.
Casale adds: “It is the most common skeptical position that we face when we even present this idea, the publisher co-ops universally have not succeeded, or at least have not been in growing success, I would say the reason for this has been conflict.
“Fundamentally, I would say the error in judgment made was bundling the advantage (the perceived advantage that came with the collective) with media. This effectively created this dynamic where the value-prop sounded really good, but you [publishers] had to bundle media together.”
The compound effect of this was to create channel conflict, whereby the collective offering potentially threatened pre-existing relationships, etc. “So I think the lesson that we've taken from the history books is don't bundle media with any kind of collective, especially with our business, as it fundamentally results in conflict.”