iab europe transnational advertising report
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Transnationalonlineadvertisingtrading
An IAB Europe White Paper
Introduction
20 years ago trans-national advertising was a minor part of total advertising activity, but the strength of onlinetrading is changing all that. This timely report examines how global brands are spearheading a gradual rise intrans-national digital advertising and the benefits this can bring. It looks at how traditional working structurescontinue to keep most media buying within national boundaries and looks ahead to the market forces that arelikely to break down these boundaries.
IAB Europe is pleased to work with Vincent Letang and his team at Screen Digest to bring you this report.
Alain Heureux
President & CEO
IAB Europe
Vincent Letang
Head of Advertising Research
IHS Screen Digest
Published March 2011
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Trans-national trading is the term used to describeinventory that is purchased in one country for campaigns tobe executed in another country. The deal can be crossnational, multi territory, featuring two or more territories(e.g. Germany and Switzerland or UK and US), panregional, so featuring a group of territories in a region suchas Europe, or global, featuring a selection of territories frommultiple continents.
This process is of course only practical for media owners,publishers and advertisers that operate in multipleterritories, but the ecosystem of digital advertising is wellsuited to trans-national trading, and it is therefore likely tobecome an increasingly important revenue stream for somemarket players.
Key findings
1 Centralized booking is a small part of digitalmedia buying today, even for multinationaladvertisers. The bulk of digital media buyingremains on a country-by-country basis, evenwhen booked with international mediaowners.
2 Reasons include the legacy decentralization ofmarketing decisions and marketing budgetsacross European markets, and the multiplicityof media buying agencies working formultinational advertisers.
3 The amount dedicated to international tradingis extremely variable depending on the nature
Survey on Trans-national onlineadvertising trading in Europe
of brands, their history and legacy marketingorganisation. Luxury, travel, banking, BtoBbrands do a lot of it. FMCG or automotiveadvertisers do very little of it so far.
4 However there are signs and reasons toexpect more international buying in the shortand mid-term: centralization in marketingorganisations and advertising contracts, rise ofinternational media owners taking directbookings, social media and automatedtrading platforms. Media agencies areincreasing their international teams to facegrowing demand.
This paper from IAB Europe and Screen Digest sets out toexplain how trans-national trading works, to give anoverview of the advantages and benefits, and to indicatethe trends that will drive trans-national trading. It is basedon the output of interviews conducted by Vincent Létangand Cyrine Amor on behalf of IAB Europe, March-July 2010,with representatives from key international advertisers,media owners and agencies.
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What are we talking about?
‘Centralized international media buying’ includes:
l Cross-national media buying. For instance: a Frenchonline publisher or a specialist international sales houseselling display inventory on a French website to aGerman company, and billing a German address or anon-European address.
l Pan-European media buying: a brand centralizing partor all of its European internet media buying, eitherdirectly or through an agency, with a specific centralisedbudget and a dedicated team, on top of its country-by-country media buying activity and national marketingbudgets. For instance, a global brand managing itsonline advertising budget from London through theinternational team of a media-buying agency.
National media properties(eg ITV1, El Pais, Google Spain)
International depts
Media agencies(eg: Mindshare, OMD, Zenith)
International reps(eg: Publicitas)
Multinational media owners– pure players: Google, Yahoo,
Microsoft, Orange– multi-media brands: CNN, BBC WW– digital aggregators: ad networks
Multinational brands(eg: Coca Cola)
Dem
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International media trading in the value chain
Source IHS Screen Digest/IAB Europe
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International media buying trends
Degree of media buying centralisation across industries
Today centralised trading accounts for a small part of totaldigital media buying by multinational advertisers. This ismostly due to the prevalence of decentralised marketingdecisions and organisations across Europe, and themultiplicity of media buying agencies working formultinational advertisers.
The amount dedicated to centralised trading is extremelyvariable depending on the nature of international brands,their history and legacy marketing organisations. Someindustries are showing a lot more centralization in digitalcampaigns: luxury, travel, hotels, banking companies withbrands such as HSBC or Rolex often mentioned.
L’Oréal combines local and international buying, especiallyfor luxury brands, although planning remains local andcampaigns are rarely simultaneous. But things are changingslowly. European marketing organisations are beingsimplified or revamped. In some cases, Pan-Europeanheadquarters by product categories or regionalheadquarters - covering for instance South Europe or
For a company operating over multiple territories, there are many levels of centralisation between fully local and fullycentralised digital media buying. The degree of centralisation is closely correlated to the nature of the brand and the activitysector. In the table below, we split advertisers into three categories:
Benelux - are now empowered with marketing andadvertising budgets for multi-country campaigns.
On the other hand, most FMCG brands are historicallydecentralised in terms of operations and marketing.Marketing and advertising budgets are decided andmanaged locally for all media, and internet – even search –is no exception. There might be global framework dealswith global media owners like Youtube on discount rates,according to annual volumes, but there is no centralisedbuying. Some international brands have no need ofcentralised international media buying policy becauseadspend is not big enough to generate economies of scaleor because there is too much variation in advertisingregulations across markets (e.g. alcohol).
Some multinational companies have a marketing andmedia team in each country and European co-ordinationwhen it comes to digital marketing. Their focus is not only,or not primarily, to centralise media buying, but to provideco-ordination, guidelines and best practice.
Degree of Description Examplescentralization
LOW
MEDIUM
HIGH
Budgets, planning and buying are decided andmanaged by local marketers in each market wherethe company operates
A part – often small - of total European advertisinggoes into centralised operations, often through theinternational team of a media buying agency. Thesebudgets focus on ‘corporate’ or branding campaignsmore often than products (making them more volatile)
Does not always entail media buying
Execution is still mostly localised (at least translatedinto local languages)
A large proportion of European advertising iscentralised, with dedicated budgets for centralisedbuying (not only strategic planning or co-ordination)
FMCG and automotive companies, reflecting decentralisedmarketing organisations
Banking, travel, technology, media-entertainment. BtoB andcorporate brands (pharmaceuticals, energy etc.). Any brandtargeting business executives on the move
Some FMCG companies starting to reduce the numbers ofmarketing directions in Europe and creating regional (multi-territory) directions, or Pan European divisions for someproduct lines
Luxury. Tourist boards. Online retail. Direct Response. Non-European brands with little or no local marketing operations in Europe
Source IHS Screen Digest/IAB Europe
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characterized by stop-and-go fluctuations. This is becauseinternational campaigns are frequently ‘corporate’ ones,aimed at building brand awareness or company profiles,rather than selling products, and that type ofcommunication is the very first to be cut in tough times –like 2009 when online display advertising growth was flatacross Europe.
However it is more likely to happen for digital media simplybecause there are Pan-European and global media ownersto deal with. By contrast, to launch large co-ordinatedinternational campaigns across traditional media is alogistical challenge: an advertiser generally has to rely onthe international team of an ad agency – Mindshare, OMDand Zenith have such teams in hubs like London and Paris–and the agency will often deal with an international saleshouse like Publicitas to do it in a cost-effective way.
In traditional media, few properties are offering multi-territory reach. These are international TV brands (CNN,MTV, BBC Worldwide, Eurosport), international businessnews publications (The Economist, International HeraldTribune). Several of these international properties arealready making the majority of their sales centrally(including with non-European clients) and their digital salesrepresent more than 15 per cent of total ad revenues.
From an advertiser’s perspective there are pros and consassociated with centralised media buying that are related toscale and transaction costs.
For big campaigns conducted in several countries at thesame time, it might be cost-effective to buy media market-by-market because local buyers can leverage theirpurchasing power and expertise locally. Besides anadvertiser can have international framework agreementswith international media owners like Yahoo, Youtube orFacebook on volume and pricing, while still decentralizingadvertising decisions and campaigns. These deals arebecoming more common.
On the other hand, when an advertiser runs rather smallcampaigns in each market (perhaps big Europe-wide butthinly spread across multiple territories), the economies ofscale made through international buying becomesignificant, as opposed to the addition of local transactionand operational costs for a relatively small media value.Then the support of international buyers like Mindshare orOMD and the role of international ad sales houses likePublicitas or World Web Networks can make a lot of sense.
There is no certainty as to whether multinational advertisersare going to spend more trans-nationally in the future. Untilnow, international media buying has been volatile,
Pros and cons, drivers and obstacles
Pros and cons of centralised buying
PROS
l Economies of scale
l Maximise bargaining power withinternational media owners
l Time-to-market
CONS
l Some brands and agencies have leveragelocally
l Significant local specificities
l Not all agencies are equipped
l Logistical & organisation costs
Source IHS Screen Digest/IAB Europe
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There are signs and reasons to expect more centralisedinternational buying in the mid-term. On the supply side,three factors provide a better environment and moreincentives to centralise international media buying:
l The rise of automated trading platforms for display (AdExchanges) may deliver further display cost optimizationand incentives to centralise for large advertisers andlarge campaigns. More generally, display media buyingis becoming more data-driven and the growing use ofbehavioural targeting justifies larger scale campaigns.However, perhaps counter-intuitively, the mostautomated form of media buying – paid search – is notvery centralised either. This is due to the fact that searchbehaviour varies a lot from country to country and thereare less obvious opportunities for international deal withmedia owners.
l The rise of international media properties is providingreach and the ability to target in every European market.Although international publishers like Yahoo, Microsoftand Youtube do have local sales teams, there are moreopportunities for centralised bookings too. Besides thecoming of age of social media advertising nowincreasingly used by mainstream brands allows them totarget demographics, national or linguistic communitiesacross borders efficiently.
l More international advertising agencies are setting upinternational departments to offer centralised Europeanservices to multinational clients, typically in London.However there is still a chicken-and-egg situationbetween agencies offering such services to their clientsand agency customers deciding to centralise budgetsand campaigns. Some advertisers told Screen Digestthat their agencies – and their online publisher partners- were not fully equipped to deal with centralisedplanning/buying anyway. Among the advertisers thathave an account with one of the internationaldepartments in agencies, the international support isoften limited to strategic planning and co-ordination. Atpresent, only a few have a definite budget forcentralised buying, although agencies are sensing agrowing trend in that direction.
On the demand side, some categories are already increasingmedia buying on a trans-national or Pan European level:online betting (recent liberalisation in various markets such
Looking forward
as France allows European operators to advertise acrossmultiple territories), direct response (insurance, pricecomparison engines).
FMCG brands are not moving so fast but many of them areengaged in re-centralising some marketing decision andbudgets – sometimes at regional level rather than country-by-country. Besides there is a general trend towardsconsolidating accounts and budgets among feweradvertising agencies among multinational companies.Finally, a number of iconic multinational advertisers (P&G,Unilever, L’Oréal, ABI) have recently and publicly pledged asignificant shift to digital advertising.
These convergent trends and expectations from supply sideand demand side will create the right conditions andopportunities to dedicate more budgets to centralised, Pan-European or Pan-regional mediabuying, but it will begradual and limited.
For more information contact:
Catherine Borrel, Research Manager IAB [email protected]
Vincent Létang, Senior Analyst HIS Screen [email protected]
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www.iabeurope.eu
IAB Europe exists to promote the growth of Europe'sinteractive advertising markets through events, partnershipsand communications activity, to protect the interests of theindustry through an active programme of public affairs andto prove the value of the market through research andeducation.
The power of IAB Europe comes from its extensivemembership at both country and corporate levels. Ournational membership of 26 countries spans the entirecontinent - not only the mature markets of Western Europe,but also rapidly evolving markets including Croatia, CzechRepublic, Romania, Russia, Slovakia and Ukraine. Ourcorporate membership includes advertisers, major mediagroups, publishers and portals, agencies, researchcompanies and technology and service providers.
About IAB Europe About IHS Screen Digest
Screen Digest is the pre-eminent firm of industry analystscovering global media markets including film, television,broadband media, mobile media, cinema, homeentertainment, gaming, and advertising.Screen Digest was recently acquired by iSuppli Corporationand together iSuppli and Screen Digest offer the mostcomplete and insightful analysis of the global technology,media and telecommunications (TMT) sector.
Vincent Létang, 41, is a senior analyst and head ofadvertising research with IHS Screen Digest. Vincent hasbeen a leading advertising expert for ten years. He is aregular voice at international events, bringing an informedand insightful mind to strategic advertising questions.
Daniel Knapp, Senior Analyst and Cyrine Amor, Analystworked with Vincent on this report.
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