Q&A: Hdtmedia on the supply-side vs. demand-side debate

How significant is your new SSP addition to the already-mind-boggling ad-tech space in mainland China?

There are two types of companies that will launch SSPs: ad networks like us who traditionally lean closer to publishers; and ad serving companies. SSPs usually do not operate on their own. I haven't seen one in the market yet. It's hard to name the first-ever SSP in the market for this reason. [Editor's note: For an alternate view, consider the ad-tech ecosystem below, updated as of June 2014].

Ad networks like us, apart from having better understanding of the mentality of publishers, are clearer about how the whole ad-tech supply chain works. This is because a lot of the modules in an ad network are similar to that of an ad exchange, such as frequency capping and cookie mapping. Pure ad-serving companies are good at the delivery of ads, but not good at the optimisation of it. That's our superiority. Plus, we already have expertise in ad serving with our iCast product, considered a first-generation ad server that has rich-media distribution agreements with all major portal and vertical sites like Sina. In the market, publishers should be the most important. Consider the major-listed internet companies in the stock market, many of them are publishers that hold dual roles as content providers and advertising platforms.

From the aspect of an ad-technology provider, to be honest, the market in China is in chaos. It is still in its infancy. Many companies are publicising their products as demand-side platforms (DSPs), but in reality those are SSP-wannabes, as they have no way to judge if DSPs or SSPs will gain more importance in the future.

So why do SSPs matter?

SSPs sell the surplus ad inventory of publishers in a more efficient method. In future, current SSPs in the market may become repackaged as private ad exchanges. Why? They will sell more premium inventory, typically released into a self-controlled private ad exchange, in order to satisfy publishers who are unwilling to release all their inventory openly to the likes of Google, Baidu and Taobao. If one masters SSP technology well, it may guarantee a smoother shift to a private ad exchange, but there are no straight answers at this point.

At the same time, DSPs may in future become DMPs (data management platforms). What's difficult is DSP providers also want to move in the direction of an ad exchange. It is complicated, but competition is fuelling the complication. DSPs may combine with DMPs to compete with SSPs combining with private ad exchanges. PMPs (programmatic marketing platforms) that combine the data management capabilities of a DMP with the media buying capabilities of a DSP are emerging.

What are the threats of supply-side automation to media agencies?

I would say multinational 4A media agencies are filled with apprehension as they face challenges brought by the internet causing the redundancy of the traditional agency model at speed. Of course, the high-level strategic thinking and planning services (along with the suave suit-wearing executives who can articulate those services) they offer are still needed, as digital marketing has generated a massive quantity of real-time data that requires analysis. Media agencies are acknowledging that their biggest competitors are the likes of Google, because advertisers can buy and optimise their ads directly on these open platforms. Here's an intriguing observation for you: as DSPs are entry points to the ad-tech landscape, many media agencies promote their DSP technology to be their own when they actually license the technology from outsourced providers. In short, these are trading desks—fancy user-interfaces that link to the real DSPs behind. We also have our own DSP because we would like presence in this first level of the ad-tech ecosystem where the money starts its flowthrough and where we can gain client recognition by doing it well.

The open secret about online traffic is that a lot of it is made up of fraudulent or ineffective impressions. What do you think?

In the past, programmatic campaigns have relied more on long-tail remnant inventory, but the ad-tech war will be won by premium inventory bought and sold in a closed environment. I believe Hdtmedia's SSP will help set up a system for publishers to participate in the private ad-exchange market without them doing business with third-party ad networks. If private ad exchanges become mainstream in future, publishers will be able to be the first to place their inventory on these platforms. However, the irony is that neither publishers nor agencies are particularly willing to dabble in programmatic buying as that suggests little or no human intervention needed [laughs]. There are a variety of reasons. Some publishers wish to have their attention on producing content or feel that payment models such as CPD (cost-per-day) suits them; while some agencies want to prolong their lifespans, if you know what I mean.

What is your crystal-ball view about programmatic advertising?

Broadly speaking, possibly 80 per cent of media budgets in the future will be focused on smart devices, especially smartphones and smart TVs, with the rest still on the usual media channels like print and outdoor. It took ten years for programmatic advertising to take up 20 per cent of online budgets, from just one per cent, but I don't know how long it will take for the current 20 per cent to grow to 80 per cent. It depends. It's like driving a car on first gear initially, but the higher the gear ratio, the faster the vehicle can go.