Yahoo launches advertising platform for Southeast Asia

Published in BusinessMirror, April 2007

(It always frustrates me that some people in the advertising industry could be so fixated with circulation numbers. Few realize the importance of reader engagement. This is why I enjoyed writing this article -- Yahoo articulated the new dynamics of reader engagement in the digital world.)

Southeast Asia’s advertising landscape is quickly changing. As people’s lifestyles change, with many logging in 36 hours of activity in a 24-hour day, advertisers have recognized that the traditional advertising media – TV, print and radio – cannot hold consumers’ attention long or well enough. Multi-tasking has led to shorter attention spans, and reaching consumers alone just won’t cut it. The challenge, instead, is to engage them.
Engagement, indeed, is the new “reach.” As the behavior and consumption patterns of people continue to evolve, more advertisers are realizing that in the new digital era, the traditional metrics of reach and frequency have gone the way of the dodo bird. Relevance, not reach, and engagement, not frequency, have become the thinking advertiser’s yardsticks in choosing the appropriate media for their clients’ campaigns in the digital age. And only the Internet – personalized by the user to suit his own purposes -- manages to stay both relevant and engaging to its user with every click of the mouse, whatever time of the day, from the kid out to duel warriors in the latest online game down to the businessman seeking real-time market information.
Recognizing the transformation of the advertising landscape, and the glaring absence of a platform that will enable online advertising to take off in the region, Yahoo recently launched Panama, its new advertising platform for Southeast Asia.
Panama is Yahoo’s search-based, self-service, cost-per-click advertising platform that offers the potential advertisers the promise of relevant eyeballs. This enables advertisers to make sure that their sites come out when the user types in keywords of the advertiser’s choice. The advertiser himself sets his own budget and pays Yahoo only for each click made on his ad. For Yahoo, this means giving the right user the right ad at the right time at the right cost. For the advertising world, this is the opportunity to test how far online advertising can take them.
For Yahoo!, online advertising has reached its “inflection point.” “The users are there, and they’re becoming advanced,” said Ken Mandel, Yahoo vice-president for engagement, noting how “online is fast becoming an important part of the advertising mix because of its high engagement.” In fact, Panama sponsored search is expected to generate $7 billion in ad revenues in Southeast Asia alone by 2010.
More importantly, Panama offers advertisers instant and more metrics, such that an advertiser would know quickly if his ad is working properly. “You can see the number of clickthroughs; the research is automatic. You can change your creative strategy right away if you see your ad is not working,” pointed out Mr. Mandel. Compared to traditional media where the advertiser essentially takes a leap of faith with every campaign whose results cannot be measured until after some time, Panama offers advertisers a good measure of certainty with its instant research and analytics. In a nutshell, Yahoo, through Panama, “takes the friction out of digital buying.”
Panama, in fact, allows even small and medium-sized businesses to mount their own online advertising campaigns to suit their own budgets and preferences. No clicks and the ad is free. For larger advertisers, Panama offers Yahoo’s targeting capability and reach of 53 million users monthly in Southeast Asia. For the smaller guys, it offers cost effectiveness. In the Philippines, a version that will allow advertisers to target specific regions of the country is in the works.
Reaching 86.4 million users in Southeast Asia alone -- far more than all the publications of the region combined ever can – the internet follows people wherever they go, engages them like no other device in modern times can, and even tracks their behavior. More importantly, it provides instant feedback and the necessary metrics on the efficiency of one’s advertising campaign, ensuring that no advertising money goes to waste. In a short span of time, the internet has become a consumer aggregator, relationship manager and a key advertising and sales channel.
As access to PCs rises across the region, the number of Internet users in Southeast Asia is expected to reach 94 million in 2008 (for a penetration rate of 18%), and 122 million (for a penetration rate of 23%) in 2011. Interestingly, in the Philippines, more than 75% of Internet users access the web through neighborhood Internet cafes.
Despite the fact that Southeast Asians are online 18% of the time, advertisers continue to regard online advertising with skepticism. In 2007, advertisers put just 3-8% of their advertising budgets into online campaigns, spawning what Mr. Mandel calls the “digital divide” or the yawning difference between the time people spend online and the advertising dollars spent online. He notes that in more sophisticated markets such as the United States and Sweden, this gap is shrinking, but for the rest of the world, including Southeast Asia, there is much room for growth.
Claus Mortensen, principal of the IDC Asia-Pacific, Digital Marketplace, likewise noted the big gap between online advertising and online activity in the Asia-Pacific region (excluding Japan) in 2007.
While $735 billion went into B2B transactions and $100.1 billion worth of B2C transactions were noted in 2007, online advertising stood at a paltry $2.7 billion. Korea was the biggest online advertising spender in 2007, but China is expected to outpace the rest in 2009. The Philippines, Thailand and Indonesia combined accounted for less than 1% of online advertising spending in 2007. Asia, he noted, is still very much into online display advertising as opposed to search-based advertising, although the two are seen to strongly rival each other by 2012.
In fact, Mr. Mortensen does not expect much growth in online advertising in the region, projecting a consolidated aggregate growth rate of 8.5-12% between 2007 and 2012. Online advertising, he predicts, will account for less than 7% of the entire advertising spending in the Asia-Pacific region in 2012.
In the Philippines in 2007, less than 1% of the $2.2 billion spent on advertising went into online campaigns, noted Yahoo strategic consultant Cris Concepcion. In 2008, he says a lot of advertisers “are in the cusp,” and are beginning to allocate more funding into online campaigns.
He estimates that 3-5% of advertising expenditures in 2008 will go into the online space.
Mr. Mandel, for his part, believes that the low advertising numbers are all rooted in advertisers’ fear of the unknown, which for many, is what online space represents. Fragmentation of audiences is also a valid fear of advertisers
Mobile advertising is another sleeping giant that advertisers have yet to understand and exploit. Mr. Mortensen noted that handsets – which he calls “the most valuable piece of real estate” for display advertisers because people cannot seem to live without them -- are now more accessible to the mass market, such that 1.2 billion people worldwide, and 430 million in the Asia-Pacific region (excluding Japan) have handsets of their own. This figure should go up to 2 billion worldwide in 2012, and 700 million in the Asia-Pacific. In 2008, there will be 1.2 billion mobile subscribers in the Asia-Pacific region (excluding Japan), and this number should reach 1.9 billion in 2012. For now, however, only around 160,000 have mobile internet access. The number of users is expected to reach 450,000 in 2012, following the increase in phone applications. When asked through which device they access the internet daily, only 35% said they did so through their mobile phones. The overwhelming majority or 90% still used their PCs.
Mr. Mortensen noted that “there are still no budgets for mobile, but it’s getting a lot of traction.”
In the United States, mobile marketing expenditures reached less than $500 million in 2007, and is seen hitting $1.5 billion in 2010. He predicts that mobile advertising will be a “huge market” and as with online advertising, “it’s a matter of when, not if.”
Going forward, Mandel sees advertisers using multiple platforms for their campaigns, and moving from single campaigns to broader ones, as advertisers move from reaching the masses to chasing relevant eyeballs.
Yahoo, for its part, is betting on three things to keep its market dominance in 2008 : starting points, must buys and open platforms. Starting points – which is the page that users start their internet surfing with – “are valuable for our consumers,” says Mr. Mandel. “For our advertisers, we bring starting points with scale, and we give scale in a fragmented environment. For our users, we manage a complex web for a simplified experience and provide relevance to improve their surfing experience.” This, in turn, “preserves trust,” which is probably why Yahoo has the numbers that advertisers can only die for: 305 million homepage users, 50 million personal homepages, 262 million Yahoo email users, and 19 million mobile internet users in Southeast Asia, as well as being the second largest search engine.
Preshant Mehta, vice-president for Yahoo’s advertiser and publisher group, emerging markets, sums it up: “We want to transform the industry. Today, there are too many touch points, everything is manual and error-prone. Advertisers deal with fragmented audiences, opaque systems and pricing. We offer a common hosted platform. Unified processes standardize low value transactions so that audiences and inventory are aggregated across the web.
Pricing transparency reduces arbitrage. Now, everything is fast and easy; it takes just minutes to a few hours to launch a sophisticated campaign.”