The European market has adopted programmatic technologies, and isn’t far behind the U.S. in many aspects. But while saying “Europe is using new ad technology” is easy, and technically true, it’s not enough.
That’s because “Europe” is several dozen countries, and each country uses technology in different ways. One way to break it down -- although admittedly still not as specific as it can be -- is to compare Western Europe to Eastern Europe.
To do this, RTM Daily spoke with two executives from RTB House, an ad agency that houses its own real-time bidding technology: Maciek Mikolajczak, business development director of Central and Eastern Europe; and Robert Geruszczak, business development director of UK and Ireland.
RTM Daily: First things first: which countries qualify as "Western Europe" and which as "Eastern Europe"?
Maciek Mikolajczak: Eastern Europe is tricky to define as a region, as the boundaries vary depending on political, geographical, cultural, or socioeconomic contexts. Note that Europeans in business generally use the term CEE (Central and Eastern Europe) when referring to the region instead of “Eastern Europe.” Anyway, when most people think of Eastern Europe or CEE, they usually are referring to ex-communist countries. However, at RTB House, the CEE label encompasses all countries that are south and/or east of Poland. This includes Southern European countries such as Bulgaria, Romania, ex-Yugoslavia, Greece and Turkey. Overall, we currently operate in 11 countries in the CEE region.
Robert Geruszczak: Western Europe is easier to classify. From our perspective, it includes all countries west, southwest and north of Poland. At the moment, RTB House is active in 17 Western European markets, including France, Italy, Spain, Portugal, Benelux (Belgium, The Netherlands, Luxembourg), DACH (Germany, Austria, Switzerland), Sweden, Denmark, Finland, Norway, Island, Great Britain and Ireland.
RTMD: Which region, Western v. Eastern Europe, is more forward in terms of technological advancements for advertising? How big is the gap?
Geruszczak: Without a doubt, Western Europe is currently more technologically advanced. To understand why Western Europe is further along in terms of online advertising, it’s important to understand some general background knowledge. In more developed Western countries, there are much more efficient financial and logistical systems, not to mention a relatively wealthier society and Internet penetration reaching up to 90% of the population, for example, in Nordic countries. Countries like Iceland even reach 94% Internet usage among their citizens, according to recent Eurostat data. These factors all contribute to the fact that Western Europe has a larger share of all kinds of transactions conducted online. As a consequence, online ad spending is higher and technological advancements in advertising follow spending.
Mikolajczak: All things considered, the East is catching up quickly. Estonia is a great example, with its Internet penetration reaching 73%, a figure higher than in Western countries such as Spain, Italy or Portugal. The technological gap is shrinking. People in CEE are generally better technologically educated and have easier access to world-class technology. The share of online total ad spend is growing extremely fast. Western European and American companies are investing here, too, giving people an opportunity to gain experience. CEE markets are rapidly improving productivity and are quick to adopt effective modern technologies.
RTMD: Is the available supply similar? What about the demand?
Mikolajczak: If by supply, you mean online ad space, then yes. There are no significant differences between online ad space between the two regions. RTB House and all the other ad channels and techniques of ad serving are available. If you mean technologies -- it’s also a yes. There are no ad technologies or supply chains that we don’t have access to in the CEE region. In terms of demand it’s similar in both regions in terms of proportions. As for technological demand, it’s worth noting that we are all big-eyed here in CEE and have every intent to be at the forefront of the global online race.
Geruszczak: I would say that supply is the same, but the dynamic of growth in the West, in comparison to East, much lower. Mature markets, as the West is, are struggling with stagnating innovation. So any changes occurring are not that spectacular. As far as RTB technology is concerned, there are many more market players in Western Europe and more money to invest. High competitiveness, in turn, pushes the market players to look for even more advanced solutions.
RTMD: How do the prices differ?
Geruszczak: Well, usually prices for advertising are higher in Western Europe. It’s all based on incomes. Big brands are ready to pay more for their branding campaigns, as the audience is wealthier and can spend more.
Mikolajczak: That’s true in general, but in performance advertising, which we do in RTB technology, the differences are much smaller. This is because shops pay us only for results. We are looking toward ROI optimization, and we'll be setting up cost per sale or per order goals. Prices and margins for electronics and fashion products are not that different in Western and Eastern countries. So the money that shops are ready to spend is more or less similar. If the campaigns in RTB are more expensive in the West, this is because the display campaigns run in the RTB environment are more expensive.
RTMD: Are there any glaring differences in the way Western Europe marketers use the RTB technology versus Eastern Europe marketers? (direct response v. branding; mobile v. online; video v. display; etc.)
Mikolajczak: From the CEE perspective, there are far less branding campaigns in the East, and far less mobile (although it exists). The potential is still too small to invest real money in that channel, and much less video due to the same reasons. This may be the future, but we shall see which direction the market develops.
Geruszczak: And the West is counterbalancing. We can observe significant growth of new ways to use RTB here. Mobile and video are the main drivers of ad spend growth. What's more, video and mobile ads in the RTB model are used as a normal way to promote products and services. Companies are not only keeping an eye on the potential of RTB, as it’s still how the East works, but they are looking for more advanced tools and new ways to advertise via net.
RTMD: Is it unfair when reports lump all of Europe together? Are the differences between Western and Eastern Europe really so large that they should be categorized as such?
Mikolajczak: Coming from a business perspective, these regions should definitely be treated differently in regard to reports and analysis. The two regions of Europe represent different dynamics, different levels of development, different mentalities, and different business potential. I am absolutely sure that there is no universal strategy or no unified way of communication to be successful for both European realms equally.
Geruszczak: From the technological point of view, however, the differences are small between Western and Eastern Europe. We use very similar tools and solutions, but penetration of the internet, maturity of online marketing, and marketing communication strategies are key differences. As Maciek stated above, we would advise not to take both these parts as one.