The top of Outbrain Japan talks about the state of the Japanese digital advertising market and the path to future growth[インタビュー] -Exchangewire Japan

With the socio-economic environment undergoing major changes, such as the coronavirus crisis, the Ukraine crisis, and the ongoing depreciation of the yen, what trends are the digital advertising industry currently following?
We interviewed Mr. Atsushi Masuda, who assumed the post of general manager of Outbrain Japan in October this year.

(Interviewer: ExchangeWireJAPAN Tomoyuki Noshita)

– Please briefly introduce your background.
I joined Outbrain in September 2018 and was in charge of the publisher department until September 2022.
Prior to that, I worked on the publisher side in Microsoft’s advertising department from February 2014, and then worked at AOL and Oath, which was renamed after the advertising business was transferred to the Verizon group. Until then, I had been involved in digital advertising-related businesses at major Japanese companies for about 14 years.

Economic environment and the impact of cookieless on the digital advertising market

– Please tell us about your impressions of the digital advertising market.
I think 2022 will be a great year for the digital advertising industry. In 2020, there was a big drop due to the spread of the new coronavirus infection, and I think everyone felt the sense that the economy would once recover from the latter half of 2021. Until the January-March quarter of 2022, each company was doing well, but after the invasion of Ukraine in February, I heard that the advertising expenses of automobile and manufacturing companies began to be affected.

The image of the digital advertising market over the past six to nine months is not that the market has turned negative due to the economic environment, but that it will not grow.

Besides the economic environment, another industry shadow is the trend related to cookieless. In July of this year, Google announced a two-year extension to implementing the end of support for third-party cookies. As a result, there was a two-year grace period before the Chrome browser started cookieless, but cookieless is actually making great progress. Mobile has already accounted for 70% to 80% of the total digital advertising market in Japan. And in Japan, more than half are iPhones. Regardless of Google’s move, cookieless is on the move and impacting the market.

Our business does not rely heavily on third-party cookies, so the impact is relatively minor. We often hear that the unit price of advertising in some media has fallen to about 1/3 of what it used to be.
Among advertisers, I have heard that in the travel industry, where nationwide travel support was rolled out this fall, print media has relatively benefited, but digital advertising has not benefited much. In the current situation where the self-restraint of going out has been lifted and everyone wants to go on a trip, the reality may be that people are moving without much promotion.

On the other hand, digital advertising is currently increasing in e-commerce and human resources companies, where online purchases have become established due to the pandemic. It seems that the world is generally short of human resources, and there are many industries and business categories that are in need of people.
Considering the problem of vehicle supply, we can say that the automobile manufacturers, which are our major customers, are doing well.

The recommendation-type native ads (hereafter, native ads) that we provide are positioned as part of the display ads in the digital advertising budget. The business climate for native advertising is linked to demand trends in this area. Although the exact size of the current market is not certain, it is estimated at several tens of billions of yen, and continues to grow steadily in tandem with the Japanese digital advertising market.

From quantitative growth to qualitative growth

－Please tell us about the current state of Outbrain’s business.
Business in Japan is currently doing well. However, as is often the case with foreign-affiliated companies like ours, annual targets are set on a dollar basis, so the depreciation of the yen will reduce real growth in Japan when viewed on a dollar basis. It is also true that the growth of sales seems to be slowing down depending on how you look at it.

－Do you feel anything about the differences between the overseas and Japanese markets?
There are differences in how native ads are used in North America, Europe and Japan. In North America, native advertising is primarily used for performance marketing purposes.
In Europe and Japan, there are many cases where brand advertisers use it for the purpose of conveying the message correctly, and brand advertisers such as automobile manufacturers account for a certain percentage.
In Japan, there are also cases where performance marketing is the focus of foreign-affiliated BtoB businesses that have recently increased their ad placements.

Another difference between Japan and other countries is that media in East Asia, including Japan, tend to have more ad space per page.
As a result, when comparing the media revenues of Japan and Europe and the United States, the level of RPM in Japan tends to be lower than overseas, and is said to be about one-third. This is why there are more than three times the number of ad slots per page.

－Please tell us about the status of introduction on the media company side. Is it correct to assume that native advertising for media companies has almost been introduced?
Well, I think most publishers have adopted native advertising. In the future, if you have been using native as a method for simple monetization and internal migration, we will take it to the next level and adapt it to the issues and needs of each media company. I think we are entering a phase where advertising platform solutions will be selected. For example, a content provider that has provided subscription-based content may start a new advertising model.

Evolution of technology, cookieless solutions and video are the paths to growth

－Please tell us about the future growth factors for native advertising.
We believe that the evolution of technology and cookieless solutions will drive the growth of the digital advertising market in the future. Outbrain is not completely free of third-party cookies, but it does achieve performance without relying on cookies.

－Conversely, what are the bottlenecks to growth?
In the Japanese market, there is a feeling that the total number of PVs is approaching or reaching the upper limit. Therefore, we are in a situation where we are competing for PV between mobile and PC, or between media. And it is becoming quite difficult in the Japanese market to expand business through mere quantitative competition.

However, on the contrary, in such an environment, we are originally good at it, and we can increase the amount as we have users see various contents, It is also something that Outbrain should work on to improve its effectiveness. We believe that it is necessary to solve the business issues of the media in such a way.

Another thing is that native advertising is sometimes said to be bad manners among advertisements.
We take pride in the fact that we are doing a good job of reviewing advertisements, but unless we all work together to keep the area of ​​content recommendation beneficial to users, eventually no one will be able to see it. increase. This is the biggest bottleneck.

－Regarding future focus areas
We will continue to work on expanding the pattern of advertising formats and expanding the types of advertising expressions.

Until now, the ratio of “still images + text” was high, but we would like to introduce video and develop solutions that show articles in a carousel format.
We would like to continue to expand our options while strengthening the point of delivering value to users not only as advertisements but also as a recommendation service.

We would also like to collaborate with other companies’ platforms so that customers can use Outbrain’s solutions more effectively.
Up until now, Outbrain has provided ad delivery with CPC billing as its main service. We have already started using the technology of other solution vendors, and we are updating it sequentially.

The video solution we are planning to offer in the future is not just about creating video ad space, but we are thinking of a service that provides media with video content and ads as a set. I want to do a video, but it’s hard to make a video inventory.
As a content recommendation business, we also want videos to be useful for users. We are trying to develop a business model to have advertisements put in.

This will create new video inventory for advertisers and increase opportunities to meet users. From the media point of view, new ad slots will increase and sales will increase. It can provide monetization opportunities for video content holders. In January 2022, Outbrain acquired a solution from a company called Video Intelligence, originally headquartered in Switzerland. We would like to start by distributing content that is popular overseas that even Japanese people can find interesting just by looking at it. And in the future, I hope that new business opportunities will be created for those who create primary content, such as working on content for local media in Japan.

In this way, native advertising is evolving day by day, and steady growth is expected in the future. I would appreciate it if you could take a look at it.