Last week we made a bold prediction that the upfronts market is approaching its inevitable collapse, and perhaps a testament to that is how a host of budding online ad tech start-ups are thriving. Faultline Online Reporter spoke to one such company called Cedato this week, an Israeli firm which has grown to 45 employees in just 18 months – handling a video budget of “a few hundreds of millions of dollars” and running 15 billion video views a month.
Cedato provides programmatic software to publishers and networks for serving online ads, for which it has built its own proprietary algorithms to measure in “real-time” (a term we use tentatively), which platform is the best source, based on a score mechanism. Price is the primary KPI of interest for publishers here, but others include networks, users, geography and history.
Cedato CMO, Dvir Doron, claimed proudly to Faultline Online Reporter that Cedato is a “silent giant” in the online video ad world, primarily due to positioning itself as a VAST (Video Ad Serving Template) platform. He added that Cedato differentiates itself by focusing on minimizing latency and enhancing fill rate, suggesting that these are afterthoughts for competitors in this space. The process of reapplying principles of display yield optimization to video is no easy feat, which is where others struggle, Doron claimed.
Header bidding is a core focus area for Cedato, an emerging method for increasing ad revenues, which works by contacting multiple exchanges with inventory bids to see how much money is on the table for every impression. Doron cited Amazon as a force investing in header bidding, having recently rolled out its Amazon Advertising Platform, a product providing a type of programmatic advertising which started on the client-side, before shifting to DSP (demand-side platform).
The primary challenge of harnessing header bidding, according to Doron, is overcoming the VPAID issue (Video Player-Ad Interface Definition) whereby ads leaving the client side cause a risk of ad delivery failure due to a lack of visibility of VPAID errors. A lack of client side software is what apparently caused US cloud-based software firm AppNexus to “fail miserably” at header bidding, noted Doron.
Facebook just announced this week that it is partnering with five ad tech industry players for header bidding – AppNexus, Index Exchange, Media.net, Sonobi and Sortable. Getting the nod from the social media giant suggests to us that AppNexus hasn’t failed as miserably as Doron believes.
Header bidding is tipped to replace tag-based waterfall approaches, which detects that an ad has not been returned and attempts multiple tags down a list until an ad response is eventually returned. Doron called waterfalling a “cumbersome procedure,” adding that the buy party can also have last minute regrets – claiming that header bidding is making the whole process more efficient and increasing exposure to demand.
There was a major move in the ad space this week, with Adidas announcing it is pulling more of its ad budget away from pay TV in favor of online formats – part of a long-term plan to grow e-commerce revenues to $4.25 billion by 2020, from $1.06 billion last year. A company of this global scale, with annual revenues of $18 billion plus, putting so much faith in online advertising will almost certainly open the floodgates for more to follow suit.
Adidas CEO, Kasper Rorsted, told CNBC: “it’s clear that the younger consumer engages with us predominately over the mobile device. Digital engagement is key for us – you don’t see any TV advertising anymore.”
However, Doron didn’t want to close the door entirely on TV, claiming that traditional pay TV ad revenues are ten times larger than online as it stands. This is partly due to technical factors hampering the progress of online formats, which he said has contributed to a growth rate slightly slower than his expectations, and those of the industry.
A frustrating factor in this market is that companies similar to Cedato are sometimes too hasty to claim that their products are powered by AI and machine learning technologies. Doron agreed with this statement, saying that Cedato is careful about throwing about these buzzwords, and instead prefers to describe its algorithms as using “deep learning” or “knowledge graphs” – which Doron essentially described as some rather clever number crunching.
It’s worth repeating what we said last week, that the only thing that’s really preventing a mass-migration to programmatic advertising is the need for ad systems to have some form of third party verification that the reported number of ads have actually been viewed in their entirety.
Doron both agreed and disagreed with our view, adding: “I think it’s deeper than that. Buying video at scale, programmatically, still involves value chains that are long and complex, and many things tend to break up along that chain. The biggest losers in that scenario are the supply side platforms and eventually the publishers, since in case of a problem in the value chain, their impressions are getting lost. Therefore, publishers (and anyone working on their behalf) are wrapping their media sales with multiple “fall-backs” for each impression. It will take a while for the industry to settle on adequate programmatic solutions.”
To this end, UK broadcaster Channel 4 announced this week that it is teaming up with ad analytics firm Moat, which determines whether a video has been viewed and listened to by a person or a bot, by monitoring sight, sound and motion. Facebook and Snapchat have also employed the expertise of Moat.
The proliferation of ad blocking software has had some negative impact on Cedato’s business, confessed Doron, adding that Cedato is essentially part of the problem as to why consumers are downloading this type of software. We noted that AdBlock Plus runs an Acceptable Ads initiative for allowing non-obtrusive ads to bypass its blocking software, but Doron said the guidelines laid out by Adblock Plus had not been considered by Cedato.
Instead of trying to partner with the enemy and urge advertisers to meet these guidelines, Cedato is encouraging its customers to embrace user-friendly formats such as skippable and interactive ads, for which the company offers a tailor-made open video API. Although, there is currently a reluctance in the market to shift to these types of formats, with a preference for scale rather than uniqueness, stated Doron.
Programmatic video spend is set to reach $10.65 billion next year, according to eMarketer, and Cedato claims to increase fill rate and yield by between 50% and 100%.
Cedato is placed in the market somewhere in between JW/Brightcove and SpotX/TubeMogul, in the way that it offers a video delivery platform on a SaaS basis, but is geared towards media monetization.