The Programmatic Globe: Germany

Our head of Global Advisory Services goes deep on the state of programmatic and e-commerce in Germany, our founding market.

Programmatic-Globe-Infographic_DE_01

Here at Sociomantic, we’re lucky enough to get to work with marketers in over 60 countries, helping them from our 19 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.
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. This time it is his home market and the market our company was founded – GERMANY.

When Sociomantic entered the market as the first European-founded demand-side platform (DSP) to offer real-time bidding, the RTB players in Europe could be counted on one hand. In the beginning, a lot of market education about programmatic display was necessary, but today Germany has grown to be the second largest online advertising market in Europe, second to UK and followed by France, according to the IAB.

Over the past five years, as we have expanded our business from our German home base to 20 offices in 17 countries, the opportunities and challenges in our home market have become ever more clear in contrast to the others.

Live from Berlin: the ins and outs of programmatic marketing and e-commerce in Germany.

Cautious Adoption of New Marketing Tech

Germany is famous throughout history for its engineering: Gutenberg’s letterpress, the light bulb, the phone, TV, chip card, audiotape, MP3, the car and the helicopter are just a few examples of German innovation at its best. It’s no wonder that “Made in Germany” is recognized as a seal of engineering quality worldwide.

In online marketing, Germans often stick to tried-and-tested methods while simultaneously investigating new technologies. When programmatic display buying was introduced to the market, the efficiency gains provided by the new buying mechanism caused the demand for programmatic technologies to increase faster than the supply.

For us as a technology vendor, German marketers’ tendency to trust established technologies rather than industry hype means that we must deliver detailed performance and optimization insights, real-time reports, customizable campaigns, thorough consultation and reliable performance.

Berlin: European Startup Hub

Unlike many of its neighbors, Germany’s major industries are distributed across the country. Almost every large city has its specialty: finance in Frankfurt am Main, telecommunications in Düsseldorf, media in Cologne, IT and engineering in Munich, and the industrial and manufacturing cities of the Ruhr region. Yes, building client relationships in Germany requires a lot of traveling! Luckily, you can reach all major cities from Berlin by plane within one hour.

Berlin – Sociomantic’s founding city – is Germany’s political heart and a bustling startup hub. On average, one business formation in Munich equals 2.8 new startups in Berlin. While investors spent up to 24 million Euros in other federal states of Germany in 2012, the state of Berlin – which in fact consists of only one city – was supported with 133 million Euros. It’s not surprising that entrepreneurs, startups, incubators and venture capitalists have discovered Berlin’s potential to become Europe’s equivalent to Silicon Valley. Affordable rents, high quality of living and the charm of a cultural metropolis have attracted ambitious professionals from all corners of the world to form a highly skilled yet affordable workforce.

As a native Berliner who grew up in West Berlin – “the island” that was surrounded by the Berlin Wall – the city’s transformation has been an exciting and enlightening experience. When I joined the online marketing world at eBay in 2000 and even during my time at zanox, our industry was still in a fledgling stage. Companies like eBay, zanox and Jamba (yes, the company behind the crazy frog ringtone ads all German readers are thinking of right now) were the few big players who launched what would become one of the country’s fastest-growing industries.

Startups Pioneering Data-Driven E-Commerce

The e-commerce industry is changing rapidly, and German startups are at the forefront. Flat hierarchies, dynamic processes, flexible teams and the professional experience of a skilled, international workforce – startup business models foster a culture of pioneer thinking and eagerness to experiment.

This is what allowed German e-commerce startups to gain a major competitive advantage over traditional retail companies, namely better business intelligence. Established retail companies are trying to make sense of big data, but they tend to produce and collect data in silos, making it difficult to use it across functions. Meanwhile. young pure-play e-commerce companies have had the luxury of starting their data strategies from scratch, building cross-functional business intelligence systems that can be used for everything from churn management to online marketing.

These state-of-the-art data infrastructures allow innovative startups to collect, structure and access customer data in order to utilize it for aggressive yet precisely targeted and personalized online marketing strategies. German startups now seem to tackle the mobile challenge in a similar way. While many young companies are based on “online first” business models, increasingly more entrepreneurs are even moving to a “mobile first” approach.

Catalogue Companies – The Forerunners of E-Commerce

For decades, our parents and grandparents had shopping catalogues­ as heavy as bricks delivered to their doors. It was normal to flip through thousands of pages, fill out the order form in neat handwriting, call friendly customer service employees, and then eagerly wait for packages to arrive. What used to be a lucrative retail concept today seems to be the cornerstone of the massive success of the e-commerce industry. The German population was already familiar with the concept, so the transition from offline catalogues to online shops was, if anything, convenient rather than revolutionary.

With customers buying online, traditional catalogue companies encountered fierce competition and decreasing market shares. While some of the catalogue companies failed and disappeared, others mustered all their courage and digitalized their businesses. This was no easy task considering the industry’s long-standing offline processes, extensive decision making machineries and the lack of online expertise, but the strong succeeded nevertheless.

Integrating online and offline channels into a seamless multi-channel strategy, however, remains a challenge. Former “offline” players like catalogue companies are champions of CRM. Every customer segment receives a specialized catalogue version tailored to its needs, and catalogue companies’ business intelligence departments are even able to forecast the incremental orders based on the circulation of catalogues. Yet some catalogue companies are still struggling to mirror this high level of business intelligence in their online departments, primarily because of data silos.

Revolutionizing Measurement: Attribution Made in Germany

Germany is one of the global business intelligence heavyweights. German retail marketers are true analytics mavens who value deep and detailed insights and extensive reports when it comes to performance metrics and campaign optimizations. While eCPO (effective cost-per-order – especially as attributed to different CRM groups) and other hard KPIs are the kings of efficiency for German marketers, so-called “soft” KPIs like views are often deemed as unreliable and vague. Over the last years, advertisers and agencies have come to understand the value of combining soft and hard KPIs, as well as the benefits of expanding performance campaigns further up the funnel, ideally in a relationship with their trusted performance partner.

The performance-driven thinking that dominates German online marketing has fueled the need for better measurement and optimization – especially among the more data-driven retail startups. The result of these efforts is what online marketers all over the world have come to know as attribution models. It’s due to the eagerness of young and data-savvy German retail startups that nobody frowns upon the word “bathtub” in an online marketing discussion (also known as the attribution u-curve, for newbies). These companies are constantly pushing the development of even more sophisticated attribution models that take into account additional customer journey touch points – even across devices.

Advertisers Challenging their Media Agencies

For decades, advertisers have been trusting media agencies in handling their lucrative branding budgets. In Germany, most of these budgets are in the hands of the country’s top six media agency networks, but independent agencies and specialized performance agencies play an important role, too. Today we see more advertisers trying to utilize the benefits of programmatically traded inventory for their branding and upper-funnel campaigns, which is often a challenge for them. DMPs, SSPs, DSPs, trading desks, dynamic banner agencies – the bottom line is that programmatically traded advertising involves far more players than traditional online media, not to mention TV or print advertising.

Advertisers know about the complexity of programmatic mechanisms all too well. In the past, advertisers gave their agency partners a lot of freedom in planning their media budgets. When it comes to programmatic technologies, they expect to get involved to better understand the benefits and possibilities of the changing media planning and buying process. This has started a transition from buying vague audience packages to seeking to buy most valuable impressions for the most valuable users.

Another new frontier, especially for media agencies, is first-party data integrations with programmatic technologies, which bring new technical challenges. This changing media landscape opens valuable opportunities for advertisers, agencies and technology providers to work closely together in creating sophisticated full-funnel strategies. Today, we see an increasing awareness of these opportunities in Germany.

A Vertical-Specific Approach

From day one, it was clear that we would need to be able to provide customizable solutions to succeed in working with Germany’s largest e-commerce advertisers. To do so effectively, we have had to work in close contact with our clients to better understand the pains and gains they deal with every day, because our clients know their customers, margins, return rates and yield management best. It is our job to serve them as a flexible technology provider that offers best performance based on their business intelligence.

Customizing our solutions for our clients is what led us to innovate specialized solutions for different industries. Retail, classifieds, telco, travel, finance – every sector has its very own data assets and technology needs.

Let’s use the airline industry as an example: hardly any other product or service sold online is being updated as often as flights. Prices and availabilities can change every second, and in Germany in particular the airlines have tough competition from the Deutsche Bahn and even increasing pressure from low-cost bus lines. Therefore German airlines’ online advertising must be capable of reacting to competition and ingesting customer data in real-time in order to reach their best possible customers with the right travel offers.

Revenue management systems are a powerful first-party data source for airline and travel advertisers, and in Germany we also see travel marketers recognizing the importance of leveraging CRM data assets like frequent flyer or leisure travel segments. In 2015 we expect to see even more of these airlines start to use first-party, real-time user data (for example, travel data segmentation or segments driven by revenue management goals) to reach users in a more intelligent and efficient way.

From a Local

Our Managing Director DACH, Karsten Müller, weighs in on the trends:

“Our clients’ pains and gains have always driven and shaped our business – especially in our German home market. Today we offer customizable campaigns that meet the needs of every partner, no matter if retail or travel; finance or telco; catalogue company or start up; client or media agency. The performance-driven thinking of German advertisers as well as their business intelligence expertise allow us to enrich their programmatic display campaigns with first-party data assets, and to enhance their retargeting campaigns with additional upper-funnel campaigns. Better performance metrics prove that this is the right approach – for both our clients and media agency partners. We are excited to expand our business to even more programmatic full-funnel and branding campaigns in the future.”

Want to learn more about using programmatic display to drive sales growth and customer loyalty in Germany? Be sure to reach out to our Berlin team to learn more.


Check out previous posts in the Programmatic Globe Series:

  1. United Kingdom
  2. France
  3. Turkey
  4. United States
  5. India
  6. Russia
  7. Brazil