Thanks for taking the time to interview with us Noshita. ExchangeWire is a well-known trade publication in Western markets, especially in the UK and US. When did your Publisher decide to open up a Japanese brand of Exchangewire (www.exchangewire.jp), and what was his reasoning for doing so?
I have worked for the market research company named Seed Planning, Inc. (www.seedplanning.co.jp/) and been in charge of the market analysis for Japanese digital advertisement market.
Seed Planning takes charge of the market analysis and estimation with regard to the variety of segments in the digital advertisement market. We publish our findings through several channels, by the form of the market reports, corporate press releases and other media.
ExchangeWire.jp launched in 2012. I have been the editor-in-chief since 2015, after succeeding the business from the predecessor. The site was created in order to share the global ad-tech and mar-tech trend as well as the hot industry topics with readers in Japan. We also play a bridging role between European/US ad-tech vendors with Japanese, through our media activity.
Japanese digital advertisement market is the 3rd biggest in the world. Many Japanese players take in the latest trend from Europe and US, come up with the proprietary business models, and build up the sophisticated ecosystem.
Although there may be different opinions, I see little differences between Japan and Europe or US, in terms of how the market is made of. We both have such players as DSP, ad-tech exchange and SSP, surrounded by the advertisers, agencies and publishers.
Having said that, Japan may be unique in terms of the number of ad networks. There are many prominent players especially in the growing segment such as mobile and videos. This may imply that business of ad networks fit better in Japan. Recently, I see the several cases that big application media has entered into ad network business.
Although they have high interests in the latest technologies from US, they usually express reservation about the prompt adaptation of the services. Japanese advertisers and publishers pay attention to the quality of advertisement so much. Having said that, more people come to recognize the programmatic advertising. The penetration gets higher although we are still behind of US.
Japanese publishers as well as advertisement agencies look at the best timing when to invest into programmatic. Yahoo!Japan, the biggest publisher in Japan, started to open their advertisement inventory to Criteo and Google gradually. Dentsu started to create the private marketplace together with Google.
There has been an onslaught of adtech companies in the US and Western markets, as is seen to be the same case in the Japanese market. How long has fragmentation of number of players existed in Japan, and how do you see everything playing out?
In Japan, Google had the bigger impact on the industry change than onslaught of adtech companies. Off course, a number of local ad tech ventures came in & their impact was not small.
The ecosystem of the industry has been influenced by the advertisement agency and media, who had absorbed the business models and technologies that ad network and DSP had.
We have a number of ad network players regardless of the sizes, and each has its own inventory. I do not deny the fact that this fragmentation has caused the inefficiency for the marketers. Japanese marketers usually use multiple DSPs while publishers employ multiple SSPs. The current market is not sophisticated yet for marketers, and there are rooms to be improved.
On the other hand, the service variety somehow helps the market become more exciting. In Japanese ad networks, we have many niche players, and there are cases that even affiliate or media providers offer ad network services. Although we see the service consolidation through the competitions, I would assume that Japan market will boast for its service variety, in niche segments.
What are some of the biggest challenges that exist today in the Japanese advertising market?
One is the development of human resources. While the ad market shift into digital, we need to develop the personnel who understand both of digital and mass media, as well as those who are familiar with both of marketing and technology.
It is also important that we increase the exposure in the global market. As Japanese population decreases, it is natural to assume that the advertisement market would have to start to the same direction as well.
Personally I think 2020, when we have Olympic in Tokyo, might be the turning point.
Although we see the big investment from the agencies like Dentsu, there is no strong presence in the segment of IT and technologies yet.
Personally, I am concerned that there is lack of PR about Japanese market on the global basis. Although it is true that the language can be the barrier, I feel the issue is more in the attentions. Korea and China have the agency to post the industry news in English. What I have realized, especially when I talk with those from overseas. is that how little they know about Japan. One VC capitalist from Germany, that I had met, does not even know the name of Japanese biggest digital agency, although he seems to have some investments in Japan. I see the cases that Japanese market is just summarized as “matured”. There should be more things to say.
How is digital advertising typically bought and sold in Japan? Do most brands use agencies? Do most marketers execute campaigns through self-serve platforms or through paper RFPs and Insertion Orders?
Japanese advertisers use agency for advertising and rarely take the option of the self-services. The agencies take care of most support that the advertisers need.
Not sure the exact figure, but I guess we have 70 to 80 vendors who offer some kind of digital advertisement services, excluding agencies. We have 300 to 400 publishers who sell advertisement directly, if we include niche or small players and the ones that have the advertisement products but rarely sell them.
What are some innovative things as it pertains to digital advertising in Japan that you are excited about?
I would say that the in-store conversion test case that was conducted between Japanese biggest retail chain store and Google. It is nothing but exciting to see the digital ads get connected with offline. It also is epoch-making that the retail chain, which had smallest business with digital advertisement industry, had started to invest in it.
Some trends happening now in the US are the rise of native advertising, the marketer want for viewability, and ad blocking. Are these key topics in the Japanese ad buying market, and if so, what is your opinion on each?
Similar to US, there has been a huge discussion over viewability and ad blocking in Japan. Although these requires to be solved, I would say that these are the issues which could happen when the industry is in growth.
The industry has a series of discussions over the viewability, which I think, will follow the direction of where US industry goes. Google and Facebook has a big influencing power. Yahoo!Japan, which are the biggest publisher, will have the biggest impact to fix the direction of where the industry would go.
It may take time to change the barometer that we are familiar with, as it requires to adjust the interest of each party. The big budget are invested by the direct business marketers, who pay attention to (last) clicks or conversions. In that sense, the short-term impact may not be that big.
The issue of ad block results in the discussion of what has to be done in order to get along well with consumers. Same as US, we pay attention to the native ads as its solution.
What do you think the future of digital/mobile advertising in Japan looks like?
In terms of the technology, the evolution will go based on the trend that US/European companies would initiate. Japanese enterprises will come up with unique services based on these trends, which might lead to the proprietary cultures of Japan.
The advertisement market trend will be positive in mid-term, providing that Chinese market remain stable, despite of the increase in the consumption tax rate in 2017. The market will be stable until 2020 when Olympic will be held in Tokyo. The same can be said for the digital advertisement.
After Olympic, I estimate the advertisement market will start to shrink. I am not pessimistic, however, about the digital advertisement market as I predict the budget will shift from the mass advertisement like TV to the digital.
In addition, the business with other Asian market will be accelerated. Japanese market had been rather isolated having little market communications, in terms of both In-Out and Out-In. I see the signs of better communication with the other South East Asian market, though.
2015 was the year when many Japanese digital agencies and ad tech ventures launched into the global market, especially for “into the SEA”. There was also a case that big Chinese company had invested on Japanese ad tech venture. The market expansion to other Asian countries will be accelerated steadily although slowly.
ExchangeWire Japan tracks ad trading and the exchange marketplace in the Japan region.
Founded in 1983, Seed Planning, Inc. has been specializing in marketing research and consulting services. On behalf of international customers including private and public/government organizations that are seeking opportunities in the Japanese market, our company is capable of meeting their needs in English.
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