The Tech That Makes Us See Ads
We speak with Bastian Winterkemper, lead in the Berlin branch of mobile ad giant Liftoff, about adtech and programmatic advertising.
When you watch a beautifully shot advertisement film featuring a big Hollywood star and lots of special effects, you might think to yourself that they spent an awful lot of money making that 30 second ad. But the fact is that they spent far, far more money to make you watch it. The placement of advertising is a lot more expensive than its production, however flashy it may be.
Considering that it might cost thousands of Euros or Dollars to put one print ad in just one newspaper, or run one radio ad on national radio, or cover billboards in just one city with posters for a product, it is no wonder that a sort of science has developed around so-called media planning, the more technical side of advertising, performed by less than glamorous agencies without art directors and that no-one has made a TV series about yet.
Since the advent of the digital age, with Google ads, Facebook ads, messenger services and apps like Tiktok, the mathematics of working out where to reach a target audience has become far more complex than in the twentieth century. To find out how adtech is shaping how we are persuaded to buy products and services, we spoke to expert Bastian Winterkemper, ‘lead’ in the Berlin branch of the international adtech player Liftoff. He explains how it is now, as against how things were “back in the day…”
Bastian, thanks for joining us. There’s an old adage, which I think might be attributed to Henry Ford, that half of the money that you spend on advertising is wasted money. The trouble is, you don't know which half it is. Is this saying no longer true because of adtech?
That's a good saying. Yeah, I’d say it’s not true anymore because with adtech and the whole industry that we are in, which is performance marketing, almost everything becomes trackable. There are some caveats and data privacy rules that come into play. But in general, that's the essence of performance marketing: everything has a direct output. It's also called direct response marketing.
Think Facebook, or Google, and how they make most of their money. They have brand advertising and then they have performance marketing. For brand advertising you've got big companies like Nike for instance spending that kind of money that Ford referred to, where you don't know anything, you’re just showing ads to anyone, getting impressions, but you can’t really track what’s going on.
Despite the diversity of their customers, for Facebook and Google [including YouTube] the gaming sector is hugely important, so let’s take gaming as an example. For the biggest gaming companies, which are companies that you might not even have heard of because they're not so present in the mainstream media, we're speaking about probably $100 million ad spend per month, just for performance marketing. They have highly sophisticated data science teams, and they can spend that amount of money because after one day they already know the return on investment that they would get after a year, they can predict it.
So coming back to your question, I think Henry Ford wouldn’t be right anymore these days because pretty much everything is trackable.
Mind you, let’s not ignore all the privacy regulations coming into effect like GDPR or Apple’s App Tracking Transparency Framework (ATT) that takes the advertiser ID away.
So it is going to be hard in the future to actually track. And Google is probably following suit soon, over the next two years, meaning in a way we’re actually going back to a Henry Ford world where, well, we don’t know anymore exactly what our customers or audience are really doing and which activity is the one that drives the purchase, subscription or checkout.
I actually learned media planning back in the old days, back in the 20th century, when it was all about comparing the reach of particular media and the affinity of their audience to the product that you were supposed to advertise. If you wanted to place an ad for an expensive watch, for example, you'd look at the size of the readership of magazines read by people with high incomes. Now that we have online media next to old media like print and radio and outdoor and TV, how has the decision making process concerning where to place an ad changed?
The essence of adtech is that algorithms, machine learning, is making those decisions, in milliseconds.
There are players in the industry that claim that they are adtech companies, but at the end of the day they don’t have ad tech and it’s actually all manually placed, so then you’re still back in that old school world where you try to identify suitable publishers that have an audience that are likely to convert into paying users.
But when we’re speaking about true adtech, we are speaking about Google, Facebook, the other socials, TikTok, SNAP, and of course us, in the programmatic advertisement space.
As a publisher, you have two ways of monetizing, right? So either just show ads, like in the newspaper world, or you drive subscriptions or purchases. If you want to sell your advertisement slots you can trade them in an exchange. Then you have a variety of players bidding in real time for this placement. And that’s where the tech comes into the game. It works very similarly to the stock market. At Liftoff, we buy ad space across almost 30 exchanges that are connected to publishers from all verticals, news apps, sport apps, gaming etc, all the apps that make money showing ads. We make hundreds of millions of predictions per second to estimate the probability of a conversion (ie purchases) and then place a bid according to the value we assign, three million bids per second.
“Often it’s counter-intuitive.”
The tech estimates in what kind of audiences we find users that have a high likelihood of converting. And the interesting thing is, it’s really hard to say in what kind of app, which person will be converted because often it’s counter-intuitive. We advertise in publishers where we might not think we have a strong audience, but maybe there is one user that still converts and yields a healthy return on ad spend. And we get that information typically via advertiser IDs – which are now disappearing again, as I said.
Meaning we are moving slowly back to the old world, which we call contextual targeting. Where we actually look in which environment the ad is placed. And I might say, okay, this publisher attracts males of a certain age and so on and so on. Like the old school that you just referred to. So we are slowly going back to this world, which doesn’t make it easy for the advertisers, for the adtech companies.
So in a nutshell, what is adtech really?
I’d say, it would be any technology that supports a marketer in the modern world, helping to understand the data, the value of a user, and showing this user the right ad at the right time in the right environment with the right format in an automated way.
In our world, when we speak of programmatic advertising, we need to process bids in milliseconds. 350 million predictions per second and three million bids that are sent to the exchanges. So the technology is required because a person just cannot do that manually, send millions of bids to an exchange. It is basically like a modern brokerage system. And there’s a lot of infrastructure behind that, a lot of server power.
You have the demand side platforms, which is what we are. We’ve got an exchange that is connected to a supply side platform connecting the publishers that want to make money with their advertising slots to those exchanges. So that’s a whole programmatic system.
Then you also have creative production houses that probably work with a lot of data as well, based on which they then create their creative assets. So this whole section is data driven as well.
And then you have all the analytics platforms.
Does adtech apply only to digital media?
Good question. I have not worked in print offline media myself. I’m sure there are potentially things that you might call adtech when it comes to PR companies or so, but that’s out of my scope.
It’s interesting that you mention the creative assets, the ads that people actually see. You used to have these high profile creative agencies that people have heard of and that they make TV series about. And then you had the boring media agency that no one had ever heard of, really. How does the sector work today?
First, there is this massive difference between performance marketing and brand marketing.
I have not worked with big media agencies myself, but they would all use adtech now, have their own ‘trading desks’ in-house with which they set their campaigns live.
Working with the bigger brands, for instance there’s the brand safety topic. Big brands are more sensitive. The Nikes of the world want to control the environment much more in which their ads are shown. That’s more important than performance optimization.
A gaming company might be a bit more flexible. There it’s all about lifetime value and return on ad spend. They don’t have brands, they don’t have so much visibility, because each game is at the forefront.
In the media world now all the players have to work with tech because they have to compete with companies like us. The typical player doesn’t book a slot in the newspapers manually because that way they don’t get performance.
You have divisions in those big ad agencies that have performance marketing teams and mobile teams. But in the mobile first world, I’d say they’re still a little bit behind. That's why we try to go into those agencies, run educational workshops together also with our mobile measurement partners, those analytics companies. Trying to educate them on how they can actually measure the performance. If they come from the brand world, they’ve never had to do that before. They had to do A/B tests, brand impact studies, that sort of stuff. But moving forward there’s no chance for those big media companies to work without adtech. So they have teams they’re gearing up and obviously they have massive budgets as well to set themselves up for the future.
Back in the day, when I booked a print ad in a magazine, I then saw the ad in the copy of the magazine that they sent me. When I buy Google ads or any digital ads, I don’t really see where they run. I don’t know where they run. I just get a list of numbers. But really it's like a black box. So how does someone who pays for advertising know that the ads are running and are having an effect?
Again, I can speak only on our behalf. You can technically see in which apps the advertisement is published. Going back to those exchanges that I mentioned, you do have that visibility to see the placement. You can see which creative has worked, which format is it, a banner or a video for example. So this transparency is given.
But then there’s some truth to calling those big networks black boxes, because they basically grade their own homework, right? Because they have their own inventory. You have third party tools that allow you to run analytics. But ultimately, you don't really know what’s going on.
How accurate is analytics now that so many people don’t give their consent to cookies and analytics?
There’s something called probabilistic matching. The bad word is fingerprinting. So that basically tries to tie different data points together, such as IP address and the device model. That is still what companies are currently doing on iOS. We don’t know when that is going to be made impossible from a technical standpoint by Apple.
I believe they’re looking for some technological means to make it impossible to do fingerprinting. Apple have their own measurement network and that’s what they want to be reliant on. It sends some data points but they are deliberately not 100% accurate.
All that being said about Apple, there’s still Android, right? There has been a slight shift in budgets from IOS to Android from what we see. But, stay tuned.
All in all, the industry is definitely changing over the next one or two years.
If advertising is getting so techie and all the advertising agencies have access to these shiny new adtech tools that can reach consumers ever more effectively, doesn't the degree of competition just escalate the battle for the attention of the consumer? So any advantage that you get from using some new ad tech tool is quickly canceled out because every advertiser is doing it?
There are several price points, right? It all doesn’t come cheap. So technically you need to have some volume. In Facebook and Google, it’s relatively easy to set up a campaign. But you want to diversify your marketing mix and you don’t want to put all your eggs in one basket, as we say. And most importantly you want to have the right people, the right team, and talent doesn’t come cheap.
If you look at some forms of advertising, such as recommendations on the web or in feed ads or even stuff that’s within an app or YouTube product placement, some of it is hardly recognizable as advertising anymore. Is this effect making it all wishy washy? What’s advertising? What is real genuine content? Has that been exacerbated by adtech?
I think Facebook, I am not sure, started to capitalize on native content in a very smart way, and other publishers followed since it generated good conversion rates, and Facebook/Meta ultimately is an adtech company.
I mean, as a publisher what you want is to identify and develop those working formats further and maximize your yield. Since all those decisions are based on data, one could argue it’s been exacerbated by adtech, yes. The crux, though, is to keep the users within your app and you don’t want to annoy them or mislead them.
“Berlin has a massive ecosystem … And there’s a lot of talent.”
Okay. Now, finally, let’s get to your company. What does Liftoff do exactly?
Liftoff is a mobile growth and acceleration platform, we help companies market and monetize their apps. We are at the core of programmatic advertising. We are a DSP, SSP, as well as an exchange.
Just to recap, in the programmatic world, you have demand side platforms (DSP) like us that connect the advertiser with an exchange. Then you have the supply side platforms (SSP) that connect the publishers with the exchange to sell their ad.
Liftoff is essentially bidding on behalf of an advertiser for a specific ad slot being sold by an app publisher. If you think about Google and Facebook, we are doing the same thing, just that we are placing ads in any other app.
We have access to 4 billion users globally. Basically, every user across the globe can be targeted by our platform. We do so as a managed service and have our own creative technology as well. That’s becoming more and more important. So we put a lot of effort and money into educating and developing all our creative teams.
Why did you come to Berlin? Liftoff is international. Why choose Berlin?
We have always had a strong customer list in Germany, Germany being the 5th biggest app market globally when looking at the generated revenue. And it just made sense to be physically closer to our customers.
Berlin has a huge digital ecosystem and has been on the forefront for a while now. I mean, it started with Rocket Internet here, back in the day. And then from there, this whole ecosystem evolved. You have big gaming companies like Wooga. And there’s Delivery Hero, Fintech companies too, etc etc. And because of all that, Berlin attracts a lot of talent.
London may typically be the first destination for companies from overseas, also for us, but what with Brexit, Berlin gives us much more flexibility in hiring. Furthermore, especially the Russian speaking countries are a big market for us, looking at the gaming world particularly. And it tends to be easier to find Russian speakers here in Berlin than in London. We can obviously help people with visas, but all in all it is just easier to find talent here.
And of course Berlin Partner can help you help your Russian employees to get their visas. Is Russia still a big market for you today as well?
Yes, it is. What happened is that a lot of companies moved or they already had offices outside of Russia. So they continue to roll. And it’s not only Russia, but all the Russian speaking countries.
Getting back to Berlin, you’ve already described a bit that there is a lively adtech scene here in Berlin. What other players are there in town that do what Liftoff doesn’t do?
In Berlin there’s Adjust that comes to mind, who are a mobile analytics platform that we partner with. They founded in Berlin, are headquartered here. A Berlin original that recently got acquired for $1B by Applovin, another global adtech player that also owns several gaming studios.
Bastian, thank you so much for explaining adtech and sharing your insights!
Some of the other Berlin companies in the adtech scene that Bastian didn’t mention include:
Interview: Olaf Bryan Wielk, ideenmanufaktur
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