Adtech, eSports and OTT: where are marketers investing their money for the next decade?

Emerging technologies like including artificial intelligence and VR are the number one priority for private equity investors.

As a new decade begins, marketers are increasing their investment into important areas in the personalisation of media and content and removing friction from their commerce ecosystem, according to experts.

When one thinks about personalisation in 2020 and beyond, this requires a concerted investment from marketers to acquire a genuine understanding of who their customers are, says David Haddad, the chief executive officer at IPG Mediabrands Singapore, and this means ethically sourced first-party audience data.

“We know consumers are comfortable with some kind of value exchange where sharing their data will get them something they want from a brand. Having great audience-led data is one thing, having the technology to apply this data to marketing plans is where brands and marketers will need to ramp up their investments; this drives a better audience experience and is a benefit to both marketers and audiences,” Haddad tells The Drum.

“Consumer online shopping experiences will remain a core focus of marketing investment for any brand that wants to thrive in an increasingly shoppable world. Investments in reducing friction in order fulfillment are well underway in many markets, and we are seeing examples of anywhere and anytime delivery, click-less shopping and product ordering portals across multiple platforms such as smart-TVs and voice-text, not just online and in-app.”

He continues: “We are quite bullish on the advancement of voice and visual search playing a much larger role this year within the e-commerce ecosystem of many brands. I would encourage marketers to start or continue developing and testing capabilities within these areas, as once the numbers start to stack up it’s better to be live and ready, versus having voice and visual assistant recommendations going towards competitors.”

Paul Shepherd, the chief investment officer for Asia Pacific at Omnicom Media Group, says this means the traditional media mix is now evolving.

He points out that across many APAC markets, mobile is the first and sometimes the only screen. At home, he believes on-demand viewership will continue to be underpinned by over-the-top services delivered by more, not fewer providers.

“The incredible reach that can be found today via eSports is redefining our perception of sports viewership. The platform delivered services from the likes of YouTube, Facebook, TikTok and Amazon are also delivering greater algorithmic viewing opportunities,” he explains to The Drum.

“On the horizon, 5G powered content and user experience and the exciting capabilities that virtual reality could deliver with the right hardware. The future of media is exciting, but super complex at the same time.”

Agreeing, Hattie Marsden, director at SI Partners, adds that the number of South East Asian Internet users continues to grow and this includes young users who have grown up consuming media in bitesize formats on their mobile devices who are starting to hit the workforce.

As a result, she says the purchasing power of this ‘mobile-first’ generation is an increasingly important segment.

“The rise in Tik Tok as a channel, plus the development of products that have been designed from the outset with a view of how they will look on Instagram, are examples of this,” she tells The Drum.

“Where the consumers go, the brands follow, and as such, we are seeing a lot of investment interest in short-form content.”

Breaking down the investments

According to SI Partners’ Global Acquirer Survey, emerging technologies including artificial intelligence and VR are the number one priority for private equity investors.

70% of the private equity acquirers surveyed identified AI and VR as capabilities that they are looking to acquire, while only 59% of the global marketing groups did.

This difference is driven by private equity’s appetite to invest in technology that will provide returns over the following five years, versus the tension that listed companies face in needing to deliver shareholder returns with shorter horizons, according to Marsden.

“Adtech merger and acquisition deals are back up in terms of volume and interest, partly driven by the ongoing in-housing trends that we have seen in other areas of the market,” she explains.

“A number of the national media corporations are looking to acquire adtech, as the need to monetise their media more efficiently means they are increasingly considering bringing the capability in-house. In addition, the brands themselves are investing directly; McDonald’s acquisition of Dynamic Yield is a recent example of a global brand investing in customer personalisation.”

She adds: “Some of this in-housing is a result of the adtech platforms becoming simpler and easier to use allowing brands to manage them directly. It will be interesting to see if these brands have the capability to fully capitalise on the talent and skills they have acquired to bring their brands closer to their consumers. The risk inherent with bringing specialist capabilities in-house and away from the agency environment is that over time, it can become increasingly difficult to innovate and develop services based on that technology.”

For Haddard, he also feels adtech investments will be one to watch this year and the industry is already seeing some very interesting bundling together of services. Previously, he notes the industry had many smaller adtech players who provided one or a couple of products.

In recent times, larger adtech companies acquiring a few platforms and offering agencies and marketers a one-stop solution from setting-up through brand safety and execution through reporting.

“I think we’ll continue to see that trend in the future and I’m positive that is a good step for creating a simpler and more efficient ecosystem. Of course, we have to mitigate risks of consolidation that mainly lie in the accountability and transparency space, though I think we are getting louder and tougher as an industry to ensure we set and enforce standards.”

Shepherd meanwhile, feels eSports will rival the biggest traditional sports leagues in terms of future opportunities. He points to how eSports became a medal event in the 2019 South East Asian (SEA) Games as evidence that the world population is becoming more comfortable with gaming as a whole.

This means the numbers of players and viewers will only increase in the coming years.

He says Omnicom is already doing some “fantastic work” in this space with clients like Nissan, PepsiCo, and McDonald’s, but the opportunities are there to expand on what it is already doing.

“VR has also been talked about for years now, with the core barrier-to-entry being around unwieldy hardware. Looking at the opportunity differently – virtual reality is about creating a digital experience in immersive content. Is a headset really needed?” he asks.

“When we think of it like this, we’re doing quite a lot already – whether it’s 360-degree imagery of a hotel room, or being able to “sit” inside a car before going to the showroom, we are creating a similar (albeit lighter) version to virtual reality. The hardware concern will be solved by delivering great user utility.”

OTT is another fascinating conversation Omnicom is having at the moment, adds Shepherd. This is because the landscape has changed dramatically and quickly, which means the agency needs to be able to respond dynamically.

He explains while OTT’s biggest market has been the US, APAC is expected to grow at a compound annual growth rate of over 20% over the next five years because OTT’s growth in APAC is centred on mobile consumption, whereas the US sees OTT as part of home experience.

“While this represents a huge opportunity in the region, marketers still need to properly understand where OTT fits and how to measure success at scale across a mixture of subscription, ad-funded and part ad-funded solutions,” he says.

Ultimately, the way marketers invest is really the same as its always been, says Matt Farrington, the managing partner for Global Client Solutions for APAC at Wavemaker.

That is, play in spaces where you can find more of the consumers you want to attract, and then measure these efforts in as close to business growth terms as possible.

“Without a doubt, though, the changing context of this task continues to accelerate and this is all happening in an efficiency-driven environment where the risk appetite of brands can be ‘cautious’ at the best of times,” he explains to The Drum.

“Data-led decisioning is the mantra of the modern CMO, as it has the opportunity to de-risk innovation and prove back the value of decisions. Esports, VR, OTT, or whatever the environment has a burden of proof placed upon it to entice brand dollars away from those environments where the most infinitesimal consumer action can be tracked and valued.”

Which countries are the investments going into?

According to Farrington, the growing digitisation of the enormous economies of China, SEA and India, will not only see the native technology entrepreneurs of those markets not only influence the world around them – think Gojek, TikTok, Grab – but in turn, also open up to opportunities brought by established tech players from the rest of the world.

For example, he notes The Trade Desk is making large forays into China through OTT.

“When you also consider the growth to come – a country like Indonesia which has around 270m inhabitants but a smartphone penetration of less than 50% - you can only imagine what we’ll see come from these markets over the next 5 years,” he says.

“Also coming upfront is the developing African economies, which could very well be the new hotbed of innovation and global advertising growth over the next decade.”

In the Philippines, Shepherd says Omnicom’s clients are focused on content and how they increase engagement with a highly mobile audience, while across greater China, advance digital video, commerce and messaging platforms continue to lead their fields globally.

Oceania continues to drive innovation around adtech for a customised approach and super curated inventory packaging.

The Thailand market, meanwhile is leading the world in social commerce and India, which is truly a mobile-first country and out of all the YouTube lead markets, they are leading globally.

Shepherd notes that in India, YouTube predictive modelling capabilities are always being enhanced, today, they can predict a movie success depending on the reaction of the soundtrack release on YouTube inside 7 days.

“From an innovation point of view, APAC is leading the globe and we can contribute this to the advance user behaviour and the creativity of many local & global platform partners,” he explains.

“However, without a true measurement framework and local data connections, the true benefits cannot be realised. As a group, we have a laser focus to solve this for our clients. Taking today’s innovative work and enhanced with 5G capabilities across selected markets, the future of media and content will continue to drive global innovation.”

In light of the geopolitical factors in Hong Kong and the trade war tensions between the US and China, Marsden says she is seeing increasing interest in investment in Singapore and SEA.

She adds that while Singapore in itself is a less scaleable market, due to its population size, it can be an ideal base to access the increasingly internet-connected population of consumers in Indonesia, Vietnam and Myanmar.

Making sure there is a return of investments

The Global Acquirer Survey also found access to new talent or skills is the number one driver of M&A in SEA, with 78% of acquirers prioritising it.

Marsden notes acquisitions can be an efficient way to accelerate access to new talent and skills. However, the new team needs to be integrated successfully and retained in the business.

She adds that finding strategic alignment, as well as acknowledging and addressing cultural differences are critical factors in success. This is particularly the case when trying to partner creative skills with engineering, which are often a key component in emerging technologies.

“Despite a trend for longer due diligence processes, too few acquirers are using the time to develop a detailed integration plan with the target that focuses on human capital,” she explains.

“Where integration plans do exist, they tend to be focused on standardising laptop models and financial reporting processes, rather than on finding commonality across company values and developing a plan to communicate this.”

Acquisitions should also come with a minimum three-year forward valuation and that means having a plan to deploy any new talent and skills in the company for at least three years, advises Haddad.

“We must continue to test, fail-fast, learn and especially continue to do that in an economic climate that may typically force businesses to assess their level of “play it safe”. Marketers must always be thinking about their future customers and what their relationship with them will look like: media and content will continue to play a large role within that relationship,” he explains.

In addition, marketers need to ensure decisions always have to be made relative to solving a real-world consumer problem in their product category as being consumer-driven, not technology-driven, is still key, according to Farrington.

“What are the factors inhibiting growth in your business? Why aren’t you winning more consumers? Why are other competitors or categories gaining your consumers?” he asks.

“Correctly diagnosing the problem at hand, and then searching for the most useful and purposeful technology to address that problem, as well as the talent to enable that technology, is the key to smart acquisitions.”

As consumers are getting smarter and becoming bored more quickly, investments into the future of media and content over the coming years is likely to be based around marketers’ ability to invest in micro-moments at scale, says Farrington.

That means in agile and fluid investment environments where brand dollars can keep up with rapid changes in consumer preferences within a single fragmented channel or platform.

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