european trends and upcoming challenges

Dr Daniel Knapp

Chief Economist, IAB Europe

@_dknapp

07th November 2019

European Trends and Upcoming Challenges

Is this the most misleading chart in advertising?

The end of the mass-media / mass-consumer complex changes everything

3

But total ad growth underperforms the overall economy

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Ad spend is getting decoupled from wider economic growth

US total ad spend GDP

16.5%

13.8%

11.8%

10.4%

7.0%6.6%

2.7% 2.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

LATAM Africa ME APAC World CEE US WE

Ad spend CAGR 2016-2021

Source: corporate filings, local industry bodies, GroupM IAB Europe, own calculations. Paid-media only.

Brands scrutinize spend

5

8.6%

8.4% 8.4%

8.3%

8.4%

8.3%

8.4%

8.2%

8.0%

7.9%

7.4%

7.6%

7.8%

8.0%

8.2%

8.4%

8.6%

8.8%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

A & P spend/revenue for top global advertisers

New brands think differently about marketing

200

95 8876 70

56 5635 29 21 15 12 11 11 5 4 4 4 3 2 2 2 2 2 1 1 1 1 1 1 1

0

50

100

150

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250

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DTC: Number of Companies per Category

Outcome-based: from media KPIs to business KPIs

14%

9%

45%

33%

“Does your marketing organization have its own P&L to capture revenue?”

No, but plan to in the next 24 months

No, and no plans to add within next 24 months

Yes, has own P&L

Yes, but shares P&L with other business units

Source: Gartner, n = 348

Agencies must rebuild and re-emerge as very different companies

8

2017 marked a watershed moment for agencies

9

The agency economic model has been under a pressure for a while

10

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

Agency fees in long-term decline & down 3.5% CAGR since 2007

0

1

2

3

4

5

6

1992 2000 2005 2012 2015

…while workload for creative staff has been increasing

Fees per Scope Metric unit (in 2016 dollars) Scope Metric Units per Creative

Source: Michael Farmer – Madison Avenue Manslaughter; Deutsche Bank; own extrapolations

142.8

79.9

36.8

19.515.4

10.8 7.8

79.4

35.728.3

19 16.89.6

0

20

40

60

80

100

120

140

160

IBM Accenture Deloitte WPP Omnicom Publicis Interpublic

The size of consultancies is daunting, in revenue & market cap…

Revenue 2016 Equity Value

But are the consultants really coming to eat the agencies’ lunch? Data looks daunting at first…

11

414

384

244

133

79 79

50

0

50

100

150

200

250

300

350

400

450

IBM Accenture Deloitte WPP Omnicom Publicis Interpublic

…and in terms of employee base

#employees in 000sUSDbn

Source: Factset, company websites

…but in reality both compete for ‘digital transformation’ budgets that are incremental to traditional marketing

12

4%

23%

15%

13%

12%

11%

7%

6%

5%4%

Market share ‘digital transformation spend’

Omnicom Health Accenture Interactive IBM iX Deloitte Digital

Publicis.Sapient PwC Digital Epsilon Wunderman (WPP)

Ogilvy (WPP) HavasSource: Deutsche Bank, Bloomberg

$20bn market8% yoy growth

13

We are entering a new phase in the evolution of digital advertising

Digital advertising in Europe more than doubled since 2012

6.69.2

14.5 15.818.8

21.924.4

28.632.1

37.141.8

48.4

55.1

0

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total digital ad spend: historical perspective€48.5 bn

Source: IAB Europe AdEx Benchmark 2018 Study

New market high driven by digital: media channel shifts + incremental spend

97.1 101.4 96.977.9 82.9 82.7 79.2 75.1 73.2 72.3 70.8 69.1 66.4

6.79.3 14.7

16.019.1 22.2 24.8 29.0 32.6 37.7 42.5 48.4 55.1

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Europe: traditional vs digital advertising (€bn)

Other Media Online

Digital: 45% of all paid-media

advertising


Belgium

Bulgaria

Croatia

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary Ireland

Italy

Netherlands

Norway

Poland

Romania

Russia

Slovakia

Austria

Slovenia

Belarus

Spain

Sweden

Switzerland

Turkey

Serbia UK

0%

5%

10%

15%

20%

25%

30%

- 50 100 150 200 250 300

Ukraine

Markets in Europe differ: Ireland well-positioned vs peersYe

ar-

on

-yea

r g

row

th

European average linesSource: IAB Europe AdEx Benchmark 2018 Study

Digital ad spend per capita

Display excl. social is 21% of the market

100.0%

42.2%

21.3%

45.3%

12.5%

20.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Total Search Classfieds &

Directories

Total Display Social Display Non-Social Display

Europe: Total digital ad spend split (2018)

€11.7bn


2,234

3,831

6,522

9,306

12,589

16,781

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2013 2014 2015 2016 2017 2018

Total programmatic (incl. social)

Programmatic in Europe is a €16.8bn market

72.1%

27.9%

2018

programmatic non-programmatic

20.0%

80.0%

2013

programmatic non-programmatic

Share of Digital Ad Spend in Europe by Transaction Mechanism

Programmatic is the new ‘digital’ - an unnecessary prefix

4,3255,477

8,264

11,30512,589

16,781

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2017 2018

Europe: Programmatic Ad Spend (EURm)

total programmatic (excl. social) social as programmatic total programmatic (incl. social)

Applying a narrower definition: different picture for programmatic

Belgium

BulgariaCroatia

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

ItalyNetherlands

Norway

Poland

Romania

Russia

Slovakia

Austria

Slovenia

Belarus

Spain

SwedenSwitzerland

TurkeySerbia

UK

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

YoY

Gro

wth

Programmatic Share of National Display Total

Size of bubble: size of market

Programmatic Ad Spend in narrow definition (Open RTB Standard)

2nd mover markets have caught up: markets become more similar

We are entering a new phase in the evolution of digital advertising

0%

10%

20%

30%

40%

50%

60%

70%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Europe: digital advertising spend YoY growth*

Emerging Established Mature

*formats & categories captured in Adex Benchmark today. Excl. Audio, OOH, ‘New TV’, Influencer & non-paid media.

Source: IAB Europe

‘New TV’ is a €28bn opportunity in Europe

23

Growth in connected devices is coming from the living room, not the smartphone

0

200

400

600

800

1,000

1,200

1,400

2015 2017 2019 2015 2017 2019 2015 2017 2019 2015 2017 2019 2015 2017 2019

USA UK Japan France Germany

Connected devices installed by type by country (m)

PCs Smart TVs Pay TV STBs DMAs BD players Game Consoles Tablets Smartphones

25Source: IHS Markit

Roku: bellwether for the streaming explosion

26

284 326

225

417

0

100

200

300

400

500

600

700

800

2017 2018

Roku revenue ($m)

Player revenue Platform revenue

9.2

24

0

5

10

15

20

25

30

2017 2018

Roku: Streaming hours on Smart TVs (bn)

+161%

Source: Roku letter to shareholders, Q4 2018

Next TV advertising: What are we actually talking about?

(Broadcaster) AVOD

Addressable TV

Programmatic TV

Data-driven linear TV

Connected TV

Uses cable and

satellite infrastructure

to deliver household

addressable ads via

set-top boxes. Each

household watching

the same program will

see different ads. Can

be served

programmatically, but

does not have do.

Uses data, science

and software to

optimise campaigns

on an audience basis,

to reach specific types

of people or to drive

particular outcomes.

AVOD/OTT,

which delivers

ads, many of

them targeted,

into the streams

of video services

like RTL,

Mediaset,

Channel 4, etc.

Delivers digital ads into

apps or streams on

TVs connected to the

Internet, ranging from

banners in EPGs over

YouTube videos or

inventory on premium

programmers’ content

through streaming

devices (e.g. Amazon

Fire, Smart TVs).

Form of traditional

television advertising

with a data-driven

slant. Certain TV ad

slots are made

available for

programmatic

purchase, which are

carried out by DSPs.

“Advanced TV” (if ad appears in trad. TV broadcast stream)

9.4%

13.7%

19.9%

34.9%

48.2%

54.4%

0%

10%

20%

30%

40%

50%

60%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2013 2014 2015 2016 2017 2018

Europe: Digital Video Ad Spend by Transaction Model (EURm)

programmatic video other video share programmatic video

Note: includes in-stream, out-stream and in-feed video

More than half of all video spend is programmatic

Where are we now?

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

Programmatic TV

Data-driven linear TV

Connected TV

AVOD

Addressable TV

Europe 2018: Estimated Ad revenue ‘New TV’ formats (€m)*

• Numbers are indicative only: estimates to zone

in on current market size

• Lack of data means we have to revert to

sometimes simple estimations

• Limited consensus about the current definition,

size and value of the market(s) outside of

AVOD

• Boundaries between these new forms of TV

advertising are unclear & overlapping

• Local specifics of ecosystems hamper

comparison

Source: own model. Programmatic TV = assumption is 1% of TV ad market vs. 2.5% US benchmark, data-driven linear as 5% of campaigns that use some type of non-

standard advanced data analysis for planning & buying, addressable TV estimated Sky Ad Smart revenues & using ratios to capture other markets

New TV: real opportunity is to combine2 distinct logics

0.0

0.5

1.0

1.5

2.0

0

200

400

600

800

1,000

1,200

1,400U

S s

ate

llite

AT

&T

Am

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Apple

Netf

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ube

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Reach (

bn)

AR

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($)

per

year

ARPU equivalent per subscriber / device / active user / account (reach)

ARPU Reach

30

Technology & bundles Content & advertising

Addressable in the UK has now reached scale due to industry partnership

Household

Addressable:

1st party & 3rd party

(Experian)

2014 2019 2019

Expansion to 100+

channels & 30m

targetable TV

viewers, 40& of UK

population

True scale through major

free-to-air broadcaster

media planers can’t go

without

2017

First free-

to-air

partner

32

Audio: screen-less world is looking for scale

UK: Music industry income 2018

3.1%

32.8%

-22.5%

-27.9%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Industry total Totalstreaming

Physicalformats

Downloads

UK: Music industry income 2018 (YoY growth)

0 200 400 600 800 1000

Industry total

Total streaming

Physical formats

Downloads

UK: Music industry income 2018 (GBPm)

2018 2017

Source: BPI. Physical formats include CDs and vinyl.

Content explosion generates reach & diversity of targeting options

USA: Number of new podcasts launched

Source: Chartable.com

Digital audio ads to become a €1.5bn market

35Sources: Company reports, RadioCentre, own model, updated in September 2019 to reflect additional

streaming services and new country data*audio ad formats only – excludes banner & video

ads sold against audio content

• Growth driven by podcasts, music

streaming services, digital/online radio

from ‘legacy’ radio firms.

• Smart speakers have no direct impact

on growth yet but drive awareness of

voice.

• Radio Apps in smart speakers will

become significant growth driver.

• Log-in based streaming services have

advantage due to tracking &

attribution.

• Radio marketers forming alliances &

investing in data pools.

• Around 80% of revenue is mobile.

246.0

349.0

471.0

706.5

960.8

1,249.1

1,498.9

0

200

400

600

800

1000

1200

1400

1600

2017 2018 2019 2020 2021 2022 2023

Europe: Digital audio ad spend (EURm)

Digital audio in context: hype vs reality

23,261

11,751

349

0

5,000

10,000

15,000

20,000

25,000

Display Display excl. social Audio

Europe: Digital audio spend in context (2018, EURm)• Despite fast growth and a vibrant ecosystem:

digital audio market is still very small, ~3% of display market (excl. social)

• Programmatic so early at scale that is is hard to measure

• Benchmark: 25% of Spotify’s global ad revenue ($291m in H1) is programmatic

• Estimated Spotify programmatic revenue for FY 2019: $150-160m

• But this is across display, video, audio

Source: IAB Europe

Opportunity for local players: diversity of offerings

8

11

13

20

67

9 9 9 9 9

1112

13

16

21

5

910 10 10

14

0

5

10

15

20

25

Me

xic

o

Bra

zil

Ca

na

da

US

No

rwa

y

Fin

lan

d

Be

lgiu

m

De

nm

ark

Ita

ly

Spain

Sw

ed

en

Ne

the

rla

nd

s

Au

str

ia

Ge

rma

ny

Fra

nce

UK

Ind

ia

Au

str

alia

Ch

ina

Ind

on

esia

Ma

laysia

Ja

pa

n

Number of Audio Streaming Platforms per Market

Americas

(av: 13)

Europe

(av: 11)

Asia

(av: 10)

Source: MiDiA

DOOH: a different programmatic world

Out-of-Home is digitizing rapidly: €3.2bn by 2023

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Europe: OOH Ad Revenue (€m)

Traditional Digital Digital %

• Largely not cannibalistic

• Urban concentration key development factor

• Street furniture in metropolitan areas & rail dominate premium segment

• In-Store often ignored, strong growth potential due to cheap deployment

Source: local trade bodies, GroupM, company filings, PwC, own model

DOOH share now double-digit in most markets

50.0%

27.2% 27.0%

19.2% 19.2%17.6% 17.6%

16.0%14.4% 14.4% 14.4%

12.8%11.2% 11.2%

9.6% 9.6% 9.6% 9.6%8.0% 8.0%

6.4% 6.4% 6.4%4.8%

1.6%0.1% 0.1%

0%

10%

20%

30%

40%

50%

60%

UK

Sw

ed

en

Po

land

Spain

Ru

ssia

Ne

the

rla

nd

s

Fra

nce

Ge

rma

ny

Sw

itze

rla

nd

Au

str

ia

Fin

lan

d

Ire

lan

d

Ita

ly

No

rwa

y

Po

rtu

ga

l

Slo

venia

Czech

Re

pu

blic

Ukra

ine

Be

lgiu

m

Ro

ma

nia

Cro

atia

Slo

vakia

De

nm

ark

Tu

rke

y

Hu

ng

ary

Gre

ece

Bu

lgaria

DOOH share of OOH Ad revenue (2018)

Source: Magna Global, Fachverband Aussenwerbung, eMarketer, own extrapolations

What about DOOH programmatic?

Fragmentation

Explosion of vendors

and value chain,

DSP & SSP buying

saw strong uptick in

2018

Pricing

Premium

inventory focused

on programmatic

guaranteed, RTB

mostly in-store

Targeting

Not a one-to-one

medium, requires

different approach &

close collaboration

programmatic & OOH

teams

42

The data awakening

AI: fine line between hype & reality

55.8%

44.2%

Europe: AI Start-Ups

found to use AI no evidence of using AI

Source: MMC Ventures, n = 2830

Times are changing: future of programmatic is about reducing supply chain complexity & bringing brands and publishes closer together

In any case: programmatic needs to kick some old habits to grow sustainably

Thank you!

@_dknapp

european trends and upcoming challenges

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