Five Notes on the State of Ad Tech in Europe

Janis ZechAfter a week of the industry coming together in Cannes, there’s no better time to reflect on the state of European ad tech. Here Janis Zech, COO and co-founder of Fyber, a mobile advertising technology company and an investor in a number of others, provides an overview of the European industry today.

What’s the current “state” of the ad tech market in Europe?

As an entrepreneur, investor and advisor to a number of European tech startups, this open-ended question piques my interest. As the co-founder and COO of a Berlin-based mobile ad tech company, keeping tabs on the answer is one of the things that challenges me daily.

It’s an ambiguous question because the technology behind ad tech changes constantly, creating a need for new standards, best practices and success metrics as often as every 18-24 months. Take the practice of mobile ad network mediation as an example.

Just two years ago, mediation — or allowing app developers and publishers to work with multiple ad networks through a single monetization provider — was groundbreaking and unheard of. Now mediation is the industry standard, and mobile publishers expect more sophisticated tools to help monetize their growing audiences.

In an industry that’s driven by non-stop technological innovation, it’s perhaps more useful to contextualise the market based on the current social, economic and business norms. So here are five things for an entrepreneur, investor or potential job-seeker to consider when evaluating the “state” of European ad tech:

Programmatic doesn’t dominate the ad value chain like in the US

Real-time bidding (RTB) and programmatic trading have fuelled the growth of the ad tech market in the US — which in turn helped create a global industry. But programmatic doesn’t dominate the digital ad value chain in Europe in the same way.

Last year in the US, for example, the majority of all digital display ads were bought and sold programmatically. In contrast, analysts expect that even two years from now, less than a third of all digital ad deals in Italy, Spain and Greece will be programmatic.

The European digital ad market is massive, with overall spending projected to grow from last year’s $35 billion to $45 billion in 2019. So why isn’t programmatic the leading driver of that spend in the same way that it is in the U.S.?

Because markets are smaller & budgets are more fragmented

First and most obvious is the fact that the European ad market is fragmented across languages and countries. This fragmentation puts pressure on ad tech startups to build platforms that can buy and sell in real-time across currencies — in addition to serving and tracking campaigns across multiple languages and devices. That requires massive injections of capital, and without liquidity (and deal flow) to back that up, it becomes very difficult for programmatic trading startups to scale here.

Market dynamics make it harder for European ad tech companies to truly “dominate”

Across Europe, there are specific advertisers, agencies and publishers in each of the markets and countries that have varying degrees of buying and selling power. This adds an additional layer of complexity for ad tech startups to navigate.

From the media sales side, there are a number of European mega-publishers that are able to sell most of their inventory directly. Their market ownership and direct advertiser relationships mean that they have limited interest in programmatic tools or intermediaries to drive fill.

Other market-dominant publishers and media companies do work with programmatic platforms for monetization, but only with select partners. Think of Stroer, for example, one of the leading display and OOH companies in Germany. An ad tech platform aimed at the German market would have a difficult time achieving critical mass here if they didn’t work with Stroer.

On the buy-side, there are media agencies with large market share and while making steps towards programmatic, the ecosystem still falls behind the US market.

The combination of these factors is what has prevented true ad tech “leaders” from emerging in any specific European market. The companies that have become successful (think of Criteo as the most recognisable) became dominant because they aggregated buyers, sellers or some combination of the two, across both Europe and the US.

But there’s a unique opportunity for regional players to thrive

All of the above poses both as a challenge and an opportunity. To become a truly successful ad tech company based in Europe, one must be at least international, if not global. One market doesn’t allow for such depth of technology solution to invest in, and keep up with global standards.

Still, the language and country fragmentation make it so that there will always be room for a few regional players — such as a data exchange which leverages deterministic data for specific markets, or fully integrated players trying to control the whole value chain and counteracting the trends of specialisation.

And there are always disruptive startups and growth companies to look out for

Despite the challenges inherent in the European ad tech market, the non-stop evolution creates a steady stream of entrepreneurs working to bring innovative new solutions to market. Right now, there are many interesting companies to watch across countries and verticals (and this is by no means an exhaustive list, nor does it factor in the companies who have already been acquired):

  • adjust: Based in Germany, mobile ad attribution and fraud prevention
  • AppsFlyer: Based in Israel, mobile ad attribution
  • Adform: originated in Denmark, rich-media DSP
  • AdBrain: originated in the UK, cross-device DSP
  • AdSquare: originated in Germany, mobile audience data platform (disclosure: I’m an investor)
  • Captify, originated in the UK, search retargeting company
  • Criteo, a performance marketing company, originated in France
  • Exactag: Based in Germany, multi-channel attribution (disclosure: I’m an investor)
  • Iponweb, originated in the UK, provides a variety of custom ad tech solutions and Bidswitch.
  • Remerge: Based in Germany (disclosure: I’m an investor)
  • Teads, originated in France, specialises in outstream video 

Ultimately, the “state of ad tech” in Europe is about as fluid and volatile as the financial agreements and political processes that dominate each country. There is still much room for continued innovation, especially with startups that can address the international market from the get-go.

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