Emerging markets could be the next, new revenue streams for technology firms if they can convert fast-growth Internet economies into fast-growing spending. Many initiatives underway that bring Internet to developing nations – from Facebook’s Internet.org Google’s Project Loon Balloons – signal a trend towards capitalizing on the yet-unexploited potential for new user acquisition.
For advertising technology providers in particular, usage patterns in developing countries demonstrate a huge potential for monetization. Take Facebook, for instance, which has made significant adtech investments with its Liverail acquisition. Behind the United States, India and Brazil, Indonesia has the greatest Facebook user-based, with 69 million monthly active users.
Though Facebook – and other leaders that have made adtech investments, like Yahoo (Brightroll) and RTL (SpotXchange) – have much to gain, penetrating regions outside of the Western world is a complicated endeavor. To overcome the speed, infrastructure and connectivity challenges inherent in serving developing regions, advertising technology providers must consider where to locate a Point of Presence (PoP,) as well as how to manage connectivity.
Today, to address a global market, adtech companies typically have a data centre presence in one European, one or two Asian, and two or three U.S. locations. Yet, the shrewd adtech providers will soon look to positon themselves in gateway markets to capitalize on the emerging nations’ revenue opportunities, whilst maintaining the coverage and performance of where the majority of the revenue is today, without having to put infrastructure in multiple cities.
For instance, Stockholm is the connectivity node of the North and the best strategic location for reaching both Northern Europe and the rapidly growing Internet economies of Russia and the Baltics. Vienna serves western European economies, central and Eastern Europe and is the entry point to Turkey and the Middle East; Marseille, with its submarine landing stations, is ideal for adtech firms looking to serve the Middle East, Northeast Africa and Asia.
Considering the development of the digital advertisement industry to date, it’s only a matter of time before adtech PoP “hubs” will emerge; firms in digital advertising communities have always deployed their infrastructure in response to where the revenue opportunities lie. For instance, the digital advertising and automation opportunity started in the U.S., which is why most of the leading adtech firms come from the West Coast, USA and New York. Firms deployed their infrastructure in the U.S. and served their limited European business from there. As the wave hit Europe and it became a larger part of the adtech business, latency performance issues and the risk of lost business caused the firms to deploy infrastructure in Western Europe as well.
Now the next wave is coming and moving to Central and Eastern Europe, Africa, Middle East and Turkey, begging the question: Will the adtech firms locate their infrastructure to pick up the revenue from this wave now or wait for it to pass?
The key success factor for adtech companies will be adopting strategies to optimize their infrastructure investment. The development of financial trading hubs provides a lesson in what might come of the adtech landscape. Just as financial communities in New York City, London and Vienna have been built up around financial exchanges and their matching engines to achieve ultra-low latency speeds from high frequency algorithmic trading so, too will communities be built up around ad trading. One of the key differences is that the adtech community will be far more complex, given the multipart value chain – the supply side platforms for publishers; demand side platforms and trading desks for agencies and marketing departments; the DMPS, advertising networks, ad exchanges; and then the CDNs for content delivery.
However, in both industries, Internet exchange PoPs housed within highly-connected facilities play a crucial role in helping traders deliver optimum network performance, minimize latency and minimize cost.