How Canada’s Programmatic Market Will Evolve to Match the U.S.

by Julia Casale-Amorim (CMO)

Programmatic ad buying is flourishing in Canada with estimates that real-time bidding (RTB) will experience 50% growth this year on the back of a near doubling of the domestic RTB market in 2013, according to global market intelligence firm IDC.

This increase in advertiser investment coupled with growing supply side involvement, including the introduction of new major Canadian sources of supply, will continue to propel the market forward.

Besides Canada’s slower move into the channel – it trails the U.S. by roughly 18 months – there are several unique characteristics of the Canadian advertising landscape that may explain some of the differences in how programmatic is taking shape here relative to the U.S.

Unlike the widely dispersed U.S. market, the digital media landscape in Canada is largely composed of a relatively small number of major media players. To date, these premium publishers have been reluctant to make their inventories available for auction, while those who have done so opting to funnel access through privately operated exchanges.

Not only is this a reflection of the direct selling preferences of major Canadian media companies, but Canada’s market has not yet achieved the density needed to elevate market eCPMs to premium direct levels. The conservative rise of RTB in Canada and delayed start is reflected in lower national bid density than we see in the U.S. – in Q4 2013, bid density (measured as the average number of bids per impression or BPI) in the U.S. was more than double what it was in Canada over the same period.* This at least in part contributed to elevated U.S. RTB CPMs, which averaged 15% higher in Q4 2013 than they did here. As more advertisers earmark budgets for programmatic and current advertisers expand tests into larger commitments, we expect to see bid density rise.

In contrast to the fragmented and more widely dispersed U.S. market, Canada is dominated by a considerably smaller number of major marketers, many of whom are environment conscious and well educated on the fraud that can plague open exchanges. It is no surprise then that these advertisers value the security that comes from directing buys at trusted national publisher brands, which may also help explain the market’s largely programmatic direct approach to selling.

Compared with the U.S., the majority of programmatic spending in Canada is controlled by a much smaller number of marketer brands (in Q4 2013 only 10 brands were responsible for nearly one-third of all programmatic spending*). Many of today’s active buyers were led to the channel by their agency partners and the direct response efficiencies that could be achieved through audience-based impression level buying.

Programmatic is still complex and smaller players without the support and guidance of an agency partner may not be equipped to test the waters in the market’s still developing stage, but this will likely change in time as ad technology venders evolve their platforms and expand their capabilities to cater to the needs of a broader advertiser segment.

Retail has been a major driver of programmatic spending in the U.S., outpacing the second largest sector, automotive, by nearly double throughout most of 2013*, yet in Canada retail lags behind. One explanation for this is that Canada is still developing e-commerce landscape. In the U.S., retail spending is heavily direct response focused relying on retargeting tactics to drive online sales. As Canada’s e-commerce market picks up steam, it is likely that similar spending patterns will emerge and contribute to overall RTB growth.

Through a private exchange, publishers can enhance the value of run-of-site inventory by packaging buys with rich data products and audience analytics not available through an open exchange. This is especially attractive here, given Canada’s relatively poor third-party data market. Data has been a significant contributor to the growth of RTB in the U.S., aiding marketers in their audience selection and bidding decisions, but to date access to rich third-party sources of Canadian audience data have been limited at best. As Canada’s data market matures – driven both by aggregators and investment into brand operated data management platforms – advertisers will be better able to identify and assign value to impressions, which is likely to result in a corresponding lift in RTB spend.

The last two years have made their mark on Canada’s still budding programmatic market. As more major Canadian publishers adopt a programmatic approach to selling, we expect to see continued growth. This, coupled with the channel’s ongoing evolution – fueled by things like wider support for richer ad formats, improved cross-platform buying capabilities, and operational simplification – will all cement the place of programmatic on buyers’ media plans. If bullish predictions for the channel’s growth materialize, we are on the cusp of a new and exciting time in our industry, with limitless potential ahead.

Source: Index Exchange platform data

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