The Programmatic Globe: UK

Our head of Global Advisory Services goes deep on the state of programmatic and e-commerce in the UK.

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Here at Sociomantic, we’re lucky enough to get to work with marketers in over 60 countries, helping them from our 17 offices around the globe to take advantage of the many benefits of programmatic advertising technology powered by local market expertise. In working across these diverse regions, one thing has become crystal clear: when it comes to e-commerce and programmatic marketing, no two countries are alike!
And no one has a better view on the differences and eccentricities of these different markets than our VP Global Advisory Services, Lothar Krause. With more than 13 years of online marketing experience across companies like eBay, zanox and Zalando, and as one of Sociomantic’s earliest employees, Lothar has seen both the company and the industry evolve across verticals and time zones. That’s why we’ve invited him, with support from each of our local teams, to share unique, market-specific insights about the ins-and-outs, the ups-and-downs, the triumphs and challenges of programmatic advertising in each of the countries or regions that we are stationed.
Without further ado, we present the first edition of The Programmatic Globe: UK Edition.

Recently, at the UK’s Marketing Week Live 2014 conference and trade show, nine different stages hosted talks, panels and workshops addressing diverse industry needs. And as at many marketing conferences prior, no slide was more commonly seen in the introductions of these sessions as the now (in)famous LUMAscape.

The slide’s complex arrangement of logos and dotted lines – most of them illegible even to those sitting in the front row ­– proves an important point: digital display advertising is an incredibly crowded ecosystem, and in few markets is this more true than in the UK.

A Crowded Market

From marketer to publisher, the congested path toward the end customer is filled with tech vendors, agencies, trading desks, creative add-ons, ad networks, social platforms and more. Still, despite (or perhaps because of) the crowded nature of the market, there is a palpably high level of awareness of programmatic marketing in the UK. This is thanks not only to the sheer number of companies in the market, but also the fact that the UK shares many players with the US, the “birthplace” of real-time bidding and programmatic marketing, back in 2009.

Thus, the UK market — advanced in its pace of adoption and teeming with buyers, sellers, and plenty of companies in-between — has evolved to become a highly competitive arena. This in turn dictates the rhythm that programmatic advertisers in the UK must adhere to. So what does this rhythm look like in reality, for the players that make up the UK landscape?

A Formal — and Thorough — Procurement Process

The first major differentiator in this market is vendor procurement — the process by which an advertiser or agency chooses which of these myriad partners to work with to achieve their goals. Because of the crowded landscape, advertisers in the UK tend to manage lengthy tendering processes in order to qualify potential vendors. Numerous programmatic players might be competing for an advertiser’s finite marketing budget, and new players often come up against long-term contracts in which advertisers are already locked in for a year minimum with an incumbent vendor. Sometimes, the advertisers have defined budgets per advertising channel, and only have the flexibility to adjust the vendors within that channel budget, a limitation which could prevent proper budget allocation base don efficiency.

These tendering rounds are initiated by RFPs (request for proposals), which allow the advertiser or agency to get an outlook of the competitive landscape and find out what’s new and innovative in the market. In many cases, the procurement process can take up to a year or more before an advertiser signs on with a new programmatic partner. Lengthy selection processes mean that advertisers in the UK can be less flexible or less dynamic than those in other markets, because of the long periods before they are able to adopt new and innovative technologies. We Germans often assume that we have the most process-intensive culture on the continent, so it was a funny surprise for me to learn about the UK’s even-more-lengthy and complex vendor procurement processes.

Notably, this is a market where agencies often have their own trading desks (in-house real-time bidders, either home-grown or white-labeled from technology provider) and own 70 to 80 percent of performance budgets. This inclination for advertisers to spend through agencies is paralleled to the situation in the US, another agency-driven market.

Outsourced Business Intelligence

In general, we’ve seen that advertisers in the UK market tend to have small internal business intelligence teams compared to some other European markets. UK online marketers in particular tend to adopt a variety of third-party solutions for a queue of tasks. Day-to-day, this may include involvement from the likes of tag management and product data feed providers — solutions that might still be built and managed in-house by advertisers in other markets.

If all of the data required to drive intelligent marketing is available within these tag management and product data feed systems from the start, then code integration (getting set up to start programmatic campaigns) can be a quick and straightforward process. On the other hand, the multi-vendor integrations that are common in this market can sometimes produce an opposite effect: any updates or changes, such as choice to adopt a new technology, can lead to extensive and complicated implementation processes — which in the long run drives up costs for advertisers. An additional risk is that the advertisers work with so many vendors as to become so removed from the intelligence processes, adding more room for misunderstandings than insights.

Less International Competition in E-Commerce

This is what is often referred to as “the warehouse problem.” Across continental Europe, there is high level of competition due to the relatively short distances and easy trading laws. When it comes to the UK, continental European advertisers who don’t have warehouses on the island are at a distinct disadvantage when it comes to competing with local UK players. The channel of water separating the UK from the rest of the continent also tends to protect its e-commerce companies from aggressive competition of their continental neighbors. The extra shipping costs often mean that continental companies will be less likely to offer offer free deliveries and returns as they do in the continental markets.

The lack of pressure from competition on these points means that UK advertisers often only offer free deliveries/returns after a reaching a certain minimum basket size. On the other hand, while physics protects UK advertisers from competition, it can be limiting to internationalization to match the speed of continental competitors. Finally, the lack of aggressive competition can result in the UK having a less dynamic market, so e-commerce companies may be slower to innovate.

And of course it is worth mentioning that this is one of the few EU countries operating on its own currency – another differentiator that can have a chilling effect on cross-border e-commerce.

Measuring Multi-Click, Budgeting on Last

Similar to other markets, the UK is often still reliant on the last-click attribution model. That said, some advertiser are already taking so-called “assisting clicks” (the clicks leading up the the last-click before sale) into account, and some are even capable of measuring the full (online) customer journey. But tracking and measurement is only half the battle — when it comes to actual budget (re)allocation, most adjustments are still made based on the last click. Nevertheless, it’s encouraging to see that advertisers in the UK are interested in advancing their attribution strategies, as conversations on the topic abound at industry events and in strategy meetings with clients and prospects.

“UK marketers demand to be challenged and educated,” says Gavin Wilson, Sociomantic MD for Northern & Southern Europe, who has run the UK market since he joined in 2012. “After detailed tendering periods in the early days in this market, today we have a solid and quickly-growing customer base spanning several verticals. Advertisers in the UK now recognize the value of customizable programmatic solutions that allow them to run first-party-data-driven campaigns for more personalized interactions with their best customers and prospects. The possibilities ahead with our new parent company, dunnhumby, mean that that future in the UK looks especially exciting.”

Despite the complexities of this crowded landscape, in the end it’s clear that online marketers in the UK are keen to adopt innovative methods and advanced technologies to grow their marketing efficiency and effectiveness. That said, even if the market is huge in terms of revenues and quite advanced in terms of tech options, UK advertisers still have something to learn from their continental counterparts when it comes to driving very efficient performance marketing and in the speed of innovation adoption.  Still, when programmatic players offer intelligent tech supported by quality service, UK marketers and vendors can work together to deliver more relevant, efficient and effective personalized media to one of the world’s most active e-commerce markets.