How The “£130 Million” Automated UK Ad Market Is Affecting The Traditional Ad Network Model

Looking at these figures released by Comscore during the week about the UK display market confirms to me that nobody in our industry knows how big the ad net market actually is. Apart for the finger-in-the-wind estimation carried out by ExchangeWire earlier this year there is little out there to benchmark against. Despite all the missing hard data on the ad net market, I did think Comscore’s assertion that 20% of the display UK market would be automated was interesting. I estimated the automated market to be worth around £40 – £50 million based on industry feedback several months ago. But there’s been a lot of movement in the siaply space over the last few months.

Since its $70 million Invite acquisition, Google has been very active in the DSP market here. In case you haven’t noticed Invite is hiring like crazy, and is now offering a managed service to some of the biggest spending agencies in London. Added to this there’s consistent agency talk of budget shifting through DEMs, DSPs and automated platforms. This has to be hurting the ad networks. The traditional arbitrage model is getting hit hard by price and inventory transparency – as well as self-service audience buying.

If the Comscore figures are correct, then the automated market in the UK will be worth around £130 million by year end. While these figures are bullish there’s some evidence to suggest that 20% is not a fanciful stat. This is significant for ad nets as the automated market is eating into their allocation of ad spend. Although it must be said that it is likely that ad nets are the biggest buyers through these channels. What could really propel growth in the automated market growth over the coming twelve months is RTB. Early evidence suggests RTB inventory is returning significant lifts in CPMs. And if these numbers continue to hold don’t be surprised to see an increased number of publishers offer greater volumes through RTB. This will ultimately attract more bidders into the market, increasing demand for inventory.

Budgets are going to be sucked away from traditional ad net routes, and pushed through DSPs and automated channels. Agencies will increasingly use Invite, AppNexus or simply work with a DEM to trade across the European exchange eco-system. The portal ad nets – the big three, namely AOL, Microsoft and Yahoo – will continue to thrive given their size and scale, but increasingly they will be bought around. Vertical ad nets will also prosper given their particular market knowledge. But sales houses and arbitrage ad net models here are going to get crushed by automation. The options available are simple: either buy from exchanges and optimise better than the next guy; or build your own trading desk and compete with agencies for marketers' ad budget. The display market is changing rapidly, and if RTB grows at its continued rate, I wouldn’t be surprised if automated ad trading accounted for £200 million plus by the end of 2011. Hiow about that for a finger-in-the-air number?