Industry welcomes KPEX, but also asks a few questions

  • Media
  • October 9, 2015
  • Damien Venuto
Industry welcomes KPEX, but also asks a few questions

While yesterday's announcement by the nation's big four publishers about the creation of a joint ad exchange has largely been welcomed by the industry as positive move that could, if effective, serve to keep a bigger chunk of ad spend in the local market rather than feeding it into the international exchanges, it has also raised a few questions that will need to be answered as it comes into effect. 

From the outset, one notable absentee from the list of publishers was Bauer. And given it has been making a massive digital push in recent months, a local ad exchange focusing on premium content does seem like a good fit.

That said, Bauer's head of digital Michael Fuyala has previously told StopPress that it has been able to sell out its inventory through direct sales, meaning that it has not had to rely on programmatic sales. And yesterday, when asked why Bauer was not included in the list of founding publishers, Fuyala reiterated this point but also left the door open to joining the exchange at a later stage.    

"This year our focus has been on growing and engaging audiences around premium brands and specialist verticals like food, home and fashion – and we’ve been consistently sold out largely with content-led solutions," Fuyala said. "This is an area we’ve really managed to differentiate ourselves. However, we’re always open to collaborating with other publishers where it makes sense."

One thing that would help collaboration make sense is if the KPEX starts making money for the parties involved. But this will ultimately depend on whether advertisers see value in investing in premium ad placements, when they could perhaps reach the same audience elsewhere through the open exchange.

"In both traditional and digital media some advertisers will be willing to pay a premium for placement, while others will chase the lowest price," says ANZA chief executive Lindsay Mouat. "There's no right or wrong approach. The extent an individual advertiser will be willing to invest in premium online space will come down to campaign objectives – and the level of premium demanded."

Countdown was asked whether it would be willing to shift some of its spend into the new exchange, but national comms manager James Walker would not comment beyond saying it was a move Countdown was watching with interest. 

Foodstuffs general manager of marketing Steve Bayliss similarly said he was interested to learn more, but also expressed some uncertainty about whether KPEX would be able to compete with the options currently available in the market. 

"I suspect, like most clients, we’re interested to know more, but really don’t have enough detail yet to have a view one way or another," Bayliss said. "The partners certainly offer a good local inventory pool, but whether it ‘chins the bar’ in terms of reach and/or rates based on existing terms of trade factoring in our online and offline spend is an unknown factor."

The premium inventory on offer has been pitched as an alternative to the open exchange, which features an infinite mass of impressions that could see ads served onto numerous—sometimes dodgy—sites strewn through the internet. KPEX, in this context, carries the promise of brand safety in the sense that ads will only be delivered onto reputable sites.

However, OMD managing director Andrew Reinholds says the promise of brand safety can't be guaranteed in all circumstances. 

"It can’t deliver complete brand safety, which is becoming an increasingly hot topic with clients, as a client’s ad may still be served next to inappropriate content i.e. an airline ad next to an air crash," explains Reinholds.

Despite these reservations, Reinholds sees the move as positive step for the industry. 

"We are very supportive of the move – it demonstrates that the local market is beginning to recognise the increasing influence of programmatic ...  Unison means greater efficiencies and potential effectiveness to a client’s digital media buying which is what we strive for at OMD," he says. "The big benefits are that it’ll streamline the buying process. But it’s also important to remember this is just one programmatic platform in a plethora of options out there, so it’s important to keep it in context of the bigger programmatic market."

Advancements in automated ad buying have led some to question whether the role of the media agency might one come under threat because of the ease with which advertising can be traded, campaigns tracked and results generated. But Reinholds says the proliferation of options available makes it more important than ever for clients to tap into the strategic advice offered by media agencies.  

"With the increasing number of publishers/technology providers playing in this space (and despite partnerships like this) it’s still vital that clients have an impartial advisor in this space," Reinholds says. "They can then assess the right options (including brand safety and viewability) to meet clients' objectives in an unbiased manner. This is what our programmatic trading desk Accuen delivers every day for our clients."

Except for a few clients who choose to purchase exclusively from these trusted local publishers (possibly in an effort to support local business), the vast majority are likely to develop a complementary strategy that taps into both the open exchange and the KPEX.

As Vivaki head of digital Nick Boulstridge explains: "This is clearly a first step at making Kiwi sites highly relevant to brands in one location to tackle the issue of ad spend naturally going to Facebook and Google who are offering scale and a relevant audience. As a singular the big four have the audience but not necessarily the reach in comparison ... Hopefully, agencies are already buying local inventory as this is far more relevant than eyeballs on international exchanges."

Acquire Online programmatic director Zane Furtado says this complementary approach is already being used in Australia, where advertisers buy ads through both the open exchange and APEX. And Furtado believes that even publishers in KPEX could potentially find themselves relying on the open exchange at times. 

"Publishers are flushed with inventory and if KPEX doesn't help them with their fill rate, they will have to release it to the open exchanges," Furtado says. "It’s a tricky place to be in for publishers. They could all value their remnant the same and set a floor price or they could just let the market decide. Time will tell ... Let's just hope they play nice and it’s a win-win for everybody."

Furtado also posed a series of questions he felt needed to be answered: "Will agencies and direct clients need to have access to a DSP or have an account with Rubicon? What kind of targeting options will be available? ... And will we have access to the on demand inventory by TVNZ?"

In response to the first question, KPEX consulting chief executive Duncan Arthur says that agencies will at first need a Rubicon account but adds that the publishers will review other means of buyers accessing inventory in the future. 

Arthur went on to say that the the targeting options will be simple at first and become more elaborate over time to meet market demand. 

TVNZ commercial director Jeremy O'Brien also elaborated further on which TVNZ inventory was going to sold through KPEX.

"TVNZ will maintain its direct relationships with agencies and clients with remaining online inventory available through KPEX, and in the future this may include inventory from TVNZ OnDemand," he says.  "Our inventory available through KPEX will not be available via any other exchanges ... TVNZ has recently signalled that we would be looking to partner in order to face increasing competition from large overseas players, and we are really pleased to be able to work with New Zealand’s leading media businesses on this initiative and we hope our clients will appreciate the premium environment we are trying to create with KPEX."

This last point is particularly important. More so than the willingness of clients to immediately shift large chunks of their ad spend across to KPEX, the early success of the exchange will depend on the ability of the various publishers to work together on the project. As seen in Australia, where squabbling between media companies led to APEX eventually being limited to only Mi9 and Fairfax, collaboration between competitors can be tricky. 

And Mouat warns it isn't uncommon for such co-operative efforts to flounder, even after a promising start.     

"KPEX is built on a proven co-operative model, so it has every chance of success. [But] ultimately, that comes down to the publishers remaining committed – we’ve seen collaborative models in traditional media grow, but then wane when partners have no longer seen the benefit of collaboration, particularly when the media has come under revenue pressure."

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