Oh ad:tech ASEAN, the annual conference where all the big names in Southeast Asia tech, advertising, and marketing huddle together for two days of showing off the latest bling-bling in advertising technology fueled by free coffee and snacks. Native ads? Check. Mobile DSPs? Check. Programmatic buying? Awesome.
All this ad technology is great but the question is does it really work in Southeast Asia? It may work in Singapore because the country is such an anomaly (in a good way) compared to other SEA countries like Thailand and Indonesia where Internet developed at a much later stage. Unfortunately, many global ad tech firms who have their regional offices in Singapore suffer from “Ivory Tower Syndrome”, where they lose sight of local – and more lucrative – markets like Indonesia.
Reading tea leaves: why ad tech may be in for a surprise in SEA
When analyzing SEA, I like to draw comparisons between China and SEA, not just because I used to work in China, but because there are historical and anthropological reasons as to why SEA Internet and e-commerce seems to follow China.
The bottom line is: it’s due to the fact that both China and most of SEA never really went through the Web 1.0/1.5 boom. If you compare Internet penetration data from the US, China, and Thailand (latter as a proxy for SEA, excluding Singapore), you’ll notice that the US went through the Web 1.0 and “Web 1.5” booms while having significant double-digit Internet adoption rates of 36% and 61% respectively (source). In China and Thailand, these numbers were in the dismal single digits during the same periods. It wasn’t until Web 2.0 that China and Thailand started to see Internet adoption take off rapidly.
Internet penetration rates in US, China, and Thailand
Source: Pew Research Center, CNNIC, NECTEC, Wikipedia
The Web 1.0 and, more importantly, Web 1.5 developments in mature markets like the U.S. and most of Western Europe led to an eco-system with a long-tail of publisher content on platforms such as Blogger.com, MovableType, and WordPress that gave rise to ad networks like Google Adsense and premium ad networks. In SEA, when the Internet started taking off the market was already at the very tail end of the Web 2.0 wave. This resulted in content creation going straight onto closed systems such as Facebook, Instagram, and Twitter. This phenomenon caused what we call a “no-tail” landscape with lack of quality long-tail publisher inventory.
Because of the lack of this long-tail in China and most of SEA, the online advertising industry has lagged behind, forcing both established firms and startups to look for non-advertising based monetization sources such as e-commerce and digital goods. This is further exacerbated by a vicious chicken-and-egg cycle where brand advertisers buy ads directly on big portals/forums like Sanook in Thailand and Kaskus in Indonesia as well as closed systems like Facebook. This results in low RPM (Revenue per 1,000 impressions/pageviews) for local ad networks which then fail to incentivize long-tail publishers to create quality content outside the closed systems because they can’t make enough money.
Mature markets in Asia, such as Korea, Japan and Singapore, have a better developed online advertising eco-system due to the presence of a long-tail publisher ad inventory. As a result, these markets are less likely candidates for benchmarking the development of ad tech, Internet, and e-commerce in SEA.
No-Tail implications on the ad tech eco-system in SEA
Running programmatic display advertising in most of Southeast Asia is like buying a Lamborghini but driving it in the traffic jams of Jakarta. Adding third-party data for better targeting is like using an expensive GPS system in the same traffic jam with the same end result — you’re still stuck and not going anywhere soon.
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