Inside KPEX: the story behind New Zealand’s premium ad exchange

As media companies ramped up their capabilities to sell ads across channels, 2015 became one of the more competitive years in recent history. So it came as a surprise when four of the biggest players—Fairfax Media, MediaWorks, NZME and TVNZ—banded together to form a premium programmatic exchange called KPEX. NZ Marketing/StopPress looks at why they’ve made this move.   

Mimeographs, rotary printing presses and linotypes today stand in museums, collecting dust and serving as reminders of how far the publishing industry has come. In lieu of these archaic instruments, we today have the internet, which allows for publishing to happen any time, anywhere. But this story isn’t only about the production of news. The faster and more widespread the online publishing process has become, the better it has become at spreading the messages of advertisers hoping to reach increasingly segmented audiences.

Alongside the evolution of publishing, the business of selling ads has also changed shape, shifted online and evolved into something very different from what it once was. 

Previously, advertising agreements were generally made with a shake of the hand between the interested parties. But over time, the need to physically do things was abrogated by technological advances that allowed processes to be completed faster and more efficiently. And the latest step in this evolution is programmatic ad buying, which allows advertisers to buy advertising space instantly. 

From the moment programmatic advertising hit the market, it carried the promise of targeting consumer segments that fell within specifications set by the advertisers. The idea is that consumers can be targeted across the internet regardless of where they are. And this certainly works. Tech giants like Google have developed sophisticated technology capable of targeting individuals across all recesses of the net.

But it also became evident that this carried problems that didn’t exist previously. By following eyeballs rather than placing ads on a specific and trusted media channel, advertisers could potentially have their ads served onto any of the numerous—sometimes dodgy—websites strewn through the internet. Add to this the additional issue of ad fraud, which recent studies show accounts for 34 percent of all impressions sold, and it’s clear there’s room for improvement. And this is where KPEX comes in. 

Quantity and quality

In the latter half of 2015, Fairfax Media, MediaWorks, NZME and TVNZ sent out a joint statement announcing the formation of KPEX and the appointment of Duncan Arthur as the consulting chief executive of the organisation.

“We’re a one-stop shop,” says Arthur. “We make it easier to buy quality inventory. So rather than having four different places to get this quality inventory, you just get it from a single place.”

This play allows the local publishers to  aggregate their audiences and create scale (letting buyers use the new tools that they favour) but doing so only across quality, local content. 

Arthur explains that the main motivations behind the formation of the alliance was to provide brands with an alternative to the global networks that have until now dominated the programmatic market. 

“Context is important,” Arthur says. “We all want to get great results, but just sticking ads in front of eyeballs is not enough. It opens up risks around where those ads are appearing, even if it is technically in front of the right person. The first aspect [to KPEX]is really brand safety.”

The internet isn’t renowned as the most savoury media landscape, and Arthur explains that brands (and the chief marketing officers that run them) are becoming more concerned about where their ads are served. 

This, of course, isn’t applicable to all advertisers. As Arthur explains, some brands might be satisfied by simply having their ads seen regardless of what site the consumer is visiting. 

“If you’re a brand that just wants to buy cheap and is totally focused on ROI, and doesn’t care about the other stuff, then maybe global is fine,” he says.

However, marketers interested in safeguarding their brands without having to maintain an endless whitelist of acceptable sites would be better suited to buying from KPEX.

Arthur says the KPEX exchange is made up of all the unfilled inventory of the online properties owned by the publishing partners. These are all reputable sites, which are well visited by Kiwis and are already used by many of the nation’s major advertisers.

Arthur says that KPEX already has the scale to target 70 percent of the Kiwi public through the founding partners, and he’s looking to add new local publishers to the mix currently available. 

“The kind of publishers we want in KPEX aren’t necessarily the ones with enormous scale,” explains Arthur. “The more interesting ones are actually about having a very local aspect, a proper relationship with their audiences—either in a very particular niche or geography. It stops it from being generic. If we can keep this going the right way, we’ll see a lot of local talent represented. It’s about adding something uniquely Kiwi to the mix, not just a bunch of eyeballs.” 

Kiwi cash

At the IAB end-of-year event held last year, guest speaker Ryf Quail (who organises the annual ad:tech events) expressed concern about the extent of interactive ad spend leaving Kiwi shores.

“As much as $500 million of overall ad spend for 2015 will end up abroad,” said Quail. 

The problem with this is that most of the money isn’t invested back into the local market, and this is further exacerbated by the well-reported fact that most of the major tech companies have very crafty tax avoidance strategies

The loss of this ad spend comes largely at the expense of the local media players that are already under strain due to declining circulation, readership and viewership numbers caused by digital disruption. 

Arthur wouldn’t be drawn into commenting on the dominance of the major international players, but he did say that he hoped Kiwi advertisers would be motivated to purchase through KPEX on account of the fact that it was a local coalition. 

“It’s important to support local industry generally and I think New Zealand has a history of buying local and not only from big international corporates,” he says. “The media industry should be no different. And if KPEX can generate comparable results then I see no reason why local buyers won’t continue to support us strongly.”

As a corollary of supporting these businesses, Arthur says advertisers are able to maintain another important aspect of the industry. 

“CMOs have always had, and like to have, relationships with their publishers. It’s a symbiotic relationship. Brands need channels to get their messages out and those channels are going to struggle unless those brands are supporting them with advertising.”

In addition to Kiwi ad spend in the local market, KPEX is also starting to attract interest from international advertisers hoping to reach Kiwi eyeballs. “Immediately from day one, we saw bids coming in from all over the place—it’s quite mind-boggling actually,” says Arthur.

And if the latest ad spend numbers are anything to go by, then the bids are set to continue rolling in for both KPEX and the international players. In the third quarter of 2015, the IAB’s ad spend figures showed that the programmatic industry was one of the fastest growing categories in interactive advertising. Over the first three quarters of 2015, programmatic spend was at $16.41 million, which was more than double the $7.56 million recorded in 2014 and the $6.51 million tallied over the same period in 2013. And while this growth is still off a relatively small base, programmatic is widely tipped to continue its upward trajectory over the next few years—making it an integral space for Kiwi publishers to occupy. 

Free time

While talk of automation is always accompanied by fears of redundancy as jobs are shifted from human hands to machines, Arthur says this isn’t the case with KPEX. As things stand, all the direct sales teams are still in place and the founding partners are only feeding their unused inventory into the exchange. “Once KPEX is looking after this part of ad sales, then it means that publishers can focus on developing everything else better than they could,” says Arthur.

In saying this, Arthur alludes to the bigger branded content projects that publishers are increasingly selling to advertisers. He argues that because sales teams don’t have to scramble to sell every ad space available, they now have more time to focus on the bigger projects that drive higher revenues. 

Arthur says the founding partners have no qualms about relinquishing this inventory to KPEX, because the Rubicon technology operating behind the scenes has a proven track record across the world.

“We’re working with a partner that powers nine of the 13 alliances around the world, so there is no one more experienced than the Rubicon team. Having them as a partner has been really important in terms of picking up best practice from what they’ve learnt from alliances in the Czech Republic, Denmark and France.”

While Arthur trumpets the effectiveness of the programmatic technology behind KPEX, he warns that it will never remove the need for strong strategic and creative thinking (DDB’s chief creative officer Damon Stapleton has also been a strong proponent of this). 

“You still need planners and good thinking and clients with great ideas for great advertising to work. Those things haven’t changed. We’ve just taken away some of the more tiresome bits of it.”

And in much the same way the telephone removed the need to physically walk to a client’s office to finalise a deal, so too does programmatic ad-buying provide a shortcut by which to roll out a creative idea. The only catch is that you still need the idea before a click, a bid or an impression can be helpful in any way.

This series has been produced in association with KPEX.
A new KPEX article will be published every Monday over the next few weeks.  

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