The Future of Online Advertising in Brazil

When we talk about online advertising, a lot of people have a series of companies and acronyms in mind, such as: Google, Yahoo, CPC, CPM, and so on. In recent years, online advertising in Brazil has been done exclusively through advertising agencies, and it has been almost impossible for advertisers buy ads on major portals. The market favors the advertising agencies, as only they get discounts of up to 99%. Not to mention that in Brazil, according to law, advertising agencies receive 20% from vehicles of investment in media. I do not want to raise any criticism of this model with that introduction, because I already know all the arguments that justify this practice, so let’s look forward. What will the future of online media be, and will the unique agency model continue?

The reality of Brazilian advertising agencies is that few are really concerned with the metrics of an online campaign. When they have a large budget on hand, the media plan is to spend the advertiser’s budget on those portals where traffic is known to have enough to consume this budget. When the campaign ends, the advertiser receives X million unique users impacted! Wow, this is pretty awesome!

The way media is bought in the U.S. has already started to change and mature. In 2009 you could count the number of companies providing Real-time Bidding (RTB) technology on your fingers. In addition to the shortage of companies, the traffic volume was very low, because few publishers provided their inventories to these companies. This scenario started to change in 2010, mainly in the U.S. market, where there are now dozens of companies which use RTB, in addition to thousands of publishers that devote their inventories to this model.

Currently, companies like AppNexus, AdMeld, PubMatic, OpenX Market and others have traffic of approximately one trillion impressions each day. And that number continues to grow…

The model is very simple, and very honest. The advertiser is the one who sets the desired price to run the ad, and when advertising space is available the technologies from these companies trigger a request for a bid, and the interested parties respond. The winner is the advertiser with the highest bid, even if it is just USD 0.01 more than the second highest bid.

The purchase of online media is much more like a financial market rather than arbitrated by publishers and agencies. The advertiser removes an element within the value chain and can most often buy the cheapest media. On the other hand, the owners of large inventories of media do not get more depending on agreements with agencies to ensure the sale of their inventory, and also no longer have to worry about selling part of the inventory, known as the pebble, at a bargain price.

We can not easily predict when Brazil will be ready to adopt this model of Real-time Bidding, but when this happens the advertisers stand to gain a lot through the definition of their aims. Bids can be adjusted in real time, and instead of being committed to a budget in a full month, in a few hours you can reach the conclusion that advertising on publisher X is not the profile of your campaign thus avoiding the waste of money. When an audience fits the profile, the value of the bid can be increased and thus receive more traffic from the right audience. In this way agencies could focus more on the campaigns themselves than in planning media buying.

Ozonion (the company of which I am co-founder and CIO) is also an online agency, but we are working and looking for a more versatile and dynamic practices in media buying. We expect advertisers to start looking outside and wonder, to rethink how the media are bought, because in the end, they decide.