The launch of KPEX at the end of last year was met by immediate scepticism from the industry, with many questioning whether the whole collaborative edifice was simply going to collapse. And this wasn’t entirely unwarranted, given you essentially had four competitors shaking one hand while continuing to fight with the other. To outsiders, it was a pact that seemed very uncertain, despite all the good intentions and joint press releases of those involved.
However, despite all this doubt, Fairfax Media, MediaWorks, NZME and TVNZ stuck to it, adding in their ad inventory and establishing a platform that advertisers could work with.
Once KPEX was established and launched in the market, it still needed a respected and savvy digital operator to run it—and in this instance it turned out to be former Contagion partner and channel director Richard Thompson.
While taking charge of an operation that involves four of the biggest media companies in New Zealand would’ve been an appealing career opportunity in its own right, Thompson says he was also drawn to KPEX because of the importance he sees in the organisation.
“One of the main reasons I came to KPEX is the cause that sits behind it,” he says. “It’s really important to all of us and to the industry that we enable New Zealand’s publishers, broadcasters and content producers to thrive in a digital world.”
It’s no secret local publishers are struggling to compete in an online environment dominated by the big international tech companies. As shown in the submission made by NZME and Fairfax to the Commerce Commission in respect to their proposed merger, local publishers lag well behind the likes of Facebook and Google in terms of digital revenue. This coupled with declining revenue from traditional channels—particularly print—has left Kiwi media in a precarious position. And to make matters worse, the vast majority of the money spent on digital advertising through the international players ends up offshore—leaving the local economy out of pocket.
Quick out of the gates
Although KPEX will never be a catch-all capable of solving all digital woes for publishers, it has had a strong start and bodes well for the future.
“We’ve had over 145,000 advertisers in KPEX in the first six months of trading,” says Thompson.
“A huge percentage of those are based in New Zealand, but there is also a number based out of other markets. We’re attracting budget we wouldn’t have normally seen in these parts. We’re seeing increased activity out of markets like London, Sydney and New York. It’s really exciting to start seeing the momentum.”
This shows that while we are still losing some of our potential local budget to international exchanges, we are making some of that up through international advertisers looking to reach New Zealanders or Kiwi tourists in foreign countries.
Provided that KPEX can maintain this momentum and continue evolving, the amount of revenue earned is only projected to increase. Data from the IAB NZ shows the interactive category is already the largest contributor to overall ad spend in New Zealand, accounting for over $800 million in 2015. And this year it is on track to be even bigger.
Acquire Online programmatic director Zane Furtado has his hands full maintaining an up-to-date blacklist of sites advertisers shouldn’t be advertising on.
“You need to have strict brand safety measures in place that involve pre-approving or excluding websites,” he says. “We have a master blacklist of about 3,000 sites and 1,000 keywords which range from gambling, dating, pornography and negative news.”
Furtado says his ad analysis has shown Manga and anime sites, Cool-Math Games, iflscience.com and mobile ad networks to be among the worst performers online.
“[These sites] can give you great clicks, but you need to measure traffic quality, and I’m pretty sure the bounce rate for many sits north of 90 percent,” he says.
“Because we are buying across the entire digital ecosystem, it gets difficult to keep a close track on smaller publishers that serve less than 1,000 impressions.”
While issues such as these are a major concern for the programmatic industry, they also present an opportunity for KPEX, according to Furtado.
“KPEX’s uniqueness lies in the quality of its partners,” he says in explaining that the decision to focus only on premium publishers has resulted in a much safer offering to brands.
And as an added bonus, at least he doesn’t need to continuously audit countless small sites to determine if they are safe when dealing with KPEX.
A burgeoning slice
The 2015 ad spend data from the IAB shows programmatic accounted for only 16 percent of the $145 million spent on display over the course of the year. While still relatively small in the overall context, programmatic spend trends coming out of the US—which is slightly ahead of the local market—suggest where things are headed.
In the United States, over two thirds of display advertising is now sold through programmatic platforms—a trend largely driven by the growth of mobile advertising.
Although this shows promise, Thompson believes there are still a few hurdles to overcome in the local market.
“There’s still a perception that programmatic is a race to the bottom,” he says.
This is particularly evident on the supply side, with publishers often expressing concern they can’t generate enough money from programmatic advertising.
“There’s a big challenge in ensuring the yields from programmatic advertising continue to be a positive on the balance sheets and that it contributes to a sustainable business model,” says Thompson.
“It’s important that we ensure the pricing in the market is a win-win on both sides. It’s important that advertisers achieve their goals as affordably as possible, and that publishers can make a decent yield.”
KPEX also hasn’t been helped by the general reputation of programmatic, which has been severely sullied by ad fraud, viewability issues and dodgy sites. If anything, this put KPEX at a massive disadvantage in that the platform had to provide compelling evidence that it works.
“It’s been a process of proving the value as we go,” says Thompson.
Proof’s in the numbers
As more and more advertisers have started using KPEX, Thompson and his team have been able to collect results that provide a reasonably compelling argument for using the local exchange in favour of the international options also available.
“Our ads are on average 15 percent more viewable than ads we’re seeing on other exchanges, so there’s 15 percent more chance that your online activity will actually be seen,” he says.
In addition, Thompson points to the fact KPEX is made entirely of inventory from some of the most trusted names in New Zealand publishing.
“All the sites on KPEX are premium, all the content is created by professionals and journalists, and these are websites that advertisers want to be associated with,” he says. “It’s really important for KPEX to be differentiated from those darker corners of the internet that you find on other exchanges. Brand safety is really important to us.”
Under usual circumstances, the onus rests on the programmatic specialist to create a blacklist of websites that are unsuitable for a clients’ advertising, but Thompson doesn’t really think this is practicable.
“How are you going to audit the whole of the internet?” he asks, adding that certain sites will always slip through the cracks.
“We’re very much in favour of a whitelist when it comes to advertising in this space. Rather than just picking out sites that your advertisers have already appeared on and then blocking them, we think you should have a large list of sites that you’re happy for your brand to be associated with. A whitelist is far more effective and KPEX is a shortcut to this.”
Leading the conversation
In the early days of programmatic, much of the conversation was focused on audience, with proponents saying that audience—regardless of its location—was the most important aspect in advertising.
The argument went that as long as the right people saw the ad, it didn’t matter where it appeared. But, as the industry has matured, so too has the thinking. And Thompson says discussions are coming full circle in some regards, with advertisers talking more about branding than audience.
“The environment remains incredibly important,” says Thompson. “So, while you might be able to reach these audiences in other places, it’s really important that you surround your advertising with credible content trusted by the audience.”
This shift in the narrative around digital advertising plays directly into the strengths of KPEX, because this is precisely what the platform offers.
“We see a lot of potential in KPEX, because it offers the best of both worlds,” Thompson says. “You can be in trusted high-quality environments, but also have all the benefits of targeting and the efficiency of programmatic.”
And as more and more advertisers come to realise this, what started as a tiny snowball only six months ago has the potential of turning into something that even the international juggernauts might take notice of.