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Now, a site to trade online inventory.
August 24, 2011
It's a quarter past eight on a week day morning. At the lobby of the Taj Lands End, located by the sea in the queen of Mumbai's suburbs, Bandra, one is witness to the flurry of guests leaving for their day's work. One also notices an influx of guests coming in for their first meetings of the day.
Roy de Souza, CEO and co-founder of Silicon Valley firm Zedo (1999) and Managing Director of Zinc India, is amongst them. After apologising repeatedly for his 15-minute delay, he explains the rationale behind the launch of online ad exchange Zinc India.
Zedo, which claims to be the third largest online ad serving company in the world, has soft-launched the online ad exchange Zinc India for Web publishers and media buyers to trade online inventory on. The project is currently in the Beta phase and is expected to go live in September.
The Online Ecosystem
According to de Souza, this will be a first in India where online ad inventory is currently sold through ad networks (which aggregate multiple online inventory, group them by client need, and deliver impressions to the target audience through them), or like traditional advertising inventory (print and television) - individually, by media owners, to media planners and buyers for the use of their clients.
With Zedo's relationship with media publishers born of 10 years' experience in building technology for their online advertising, it hopes Zinc India will receive a good response.
Ad networks deal largely with remnant inventory, and cannot offer 'professional content sites' in the news vertical like Zinc India, contends de Souza in conversation with BrandLine.
"Online ad networks exist, but they deal largely with excess inventory for which buyers pay very little. For a brand looking to target a specific consumer segment through multiple publishers of repute, a media buyer has to interact with multiple media companies today. Media planners can now tap into all companies on our exchange on a single platform," explains de Souza.
One of two trends that have sparked the birth of Zinc India is that 'ad networks globally are dying and so will those in India'. The other, according to de Souza, is that 'brand advertisers are losing interest in social networks and moving their ads to 'premium content' such as newspapers' Web sites'.
The first 'trend' cited by de Souza is strongly contested by ad network executives BrandLine spoke with. Kiran Gopinath, CEO, Ozone Media, notes that the Indian market is not comparable with the US and other evolved digital markets.
Gopinath says, "Internationally, the evolved markets are sellers' markets - there is a huge demand for online inventory. In the US, the size of display advertising alone is $14 billion. In India, we are at hardly $100 million. So the trend, if at all, is some time away."
He adds that in the US, it is the ad networks that are selling inventory on exchanges, making publishers 'twice removed' from the buyers.
An exchange is a virtual trading market, where, besides getting transparent rates, the seller can choose the type of client he wants, and the buyer would get a good mix of publishers and, thereby, audience, notes a media buyer.
"Exchanges will only benefit publishers if they get them new advertisers or get them a premium. Why would I want to go to an exchange when I have a sales team selling online advertising in addition to being served by networks?" he asks.
There are benefits that an exchange could provide, he acknowledges, if the context is apt.
He notes, "Only networks can give you scale. We at Ozone alone have tie-ups with over 2,000 publishers. However, if the campaign is very strictly performance-driven, in the form of a specific lead-generation exercise, there are instances of exchanges coming into play."
Another ad network executive reminds us that at the core, it's the price that determines the effectiveness, which a network is better positioned to provide.
de Souza is convinced that the trend of a move to exchanges from networks will follow in India. At the centre of his belief is the premise that ad networks may offer more effective rates per impression, but that doesn't suffice for marketers as the context is not clearly defined.
"We've seen a shift and publishers such as Yahoo! have understood this. In the US, everyone is now asking us for newspaper sites. There was a time two to three years ago when we saw huge advertising interest in social media. There was huge investment in behavioural targeting, because one thought that with targeting, we could find the right ad for the right person. What we found is that the performance is not as good on social media," explains de Souza.
According to him, 'performance' - or the number of clicks - was found to be far better on mainstream publications' Web sites. Time spent on social media sites with high traffic does not translate into clicks, he argues. The other contention is that brands are worried about the context in which their ad appears, which they would have complete control over through the exchange.
On the premise that online ad buying is shifting to the exchanges from networks in evolved markets, there are counter viewpoints. Tushar Vyas, Managing Partner - South Asia, Interactions, GroupM, notes that even in the US market, exchanges would account for purchases in single digits of online inventory. While there are no online exchanges for ads in India, he points out that some online ad inventory of Indian sites is available for trading on international online ad exchanges.
On the usefulness of the exchange platform for the online media planning process, he explains, "An exchange which treats inventory merely as a commodity doesn't add any value. An exchange which provides audience understanding - such as user details such as age, target profile and past behaviour - will benefit buyers. Otherwise, it is the inventory information from the exchanges, layered with additional information from audience analytics companies, that will be used for online media planning and buying."
While ad exchanges such as Zinc India exist in developed markets, Zedo has chosen the Indian market to launch in first to leverage its equity with publishers here. de Souza claims that around 75 per cent of sites with 'professionally generated content' - largely Web sites of mainstream media companies - use Zedo technology for online ad sales in India. The intent is to start facilitating their advertising sales through Zinc India, which will manifest itself as 'an e-commerce site that sells advertising space'.
According to Zedo's co-founder, publishers already using its technology are working on the pricing of different inventory options, and would be willingly migrated to the Zinc India platform. Those not using Zedo technology are being asked to switch one unit of their online inventory on to Zinc India's Web site to start with.
"We've built the technology over two years now and, initially, the team will be of 30 people. Exchanges are typically heavy on technology, not on people," adds de Souza, but notes that Zinc India would look to scale up to 200 people 'in a few years'.
A new office will be set up for Zinc India, replete with a new CEO and team. In India, Zedo has chosen to start a new company to run the exchange, given its confidence in the scope the market provides. Next up, the company will target an exchange in West Asia through a joint venture model, for which it is in talks with media companies in that region.
Rs 1,000 crore and growing .
Zinc India will offer media planners the advantage of information from a variety of publisher sites with news content on one platform, facilitating the planning process which is business-critical for online media planning and buying agencies, notes de Souza.
"Agencies such as GroupM have a separate division for platform buying (which buys bulk inventory), and another team of online planners and buyers. Platform buyers can now also look at reserved inventory through the exchange, and for planners, the information on the exchange will help create the media plan that drives the business," adds de Souza.
The size of the online advertising market was estimated by KPMG to be around Rs 1,000 crore, of which search (sponsored advertisements in search engines) accounted for 50 per cent. Zedo is working on estimates that say the market is over Rs 1,300 crore currently ($300 to 350 million), and set to triple in the next three years.
Of the over $1-billion market in three years, de Souza expects that search would still account for half, direct sales for $150 million, and the remaining $350 million accruing to exchanges such as Zinc India and the ad networks.
"It's an opportunity that can't be missed," asserts de Souza, before apologising again for being late for the interview. Clearly, he doesn't want to be late to the online ad party.