Does slow uptake of DSPs make Japan a digital-marketing laggard?

I have worked for a foreign ad firm for quite some time. Many of the overseas digital marketers I speak with are convinced that digital marketing in Japan is nearly a decade behind the rest of the world because demand-side platform (DSP) services have made so little headway here. They think that DSP has failed to take off in Japan because most of their local counterparts do not understand it.

But nothing could be further from the truth, which is that in many cases there are few financial and or other incentives to use DSP services.

Foreign digital marketers are often initially skeptical when I tell them that, but once I outline digital marketing’s unique backdrop in Japan many of them realize that the field is actually quite advanced here. So, here I will try to explain why Japanese digital marketers are sidelining DSPs.

Marketers seek direct results

A Fujitsu Research Institute survey of digital marketers in Japan found that 76.9% of companies with track records in that arena have established key performance indicators in terms of such elements as lead and order numbers. In other words, many digital marketers in Japan set themselves the challenge of delivering results within certain budget parameters that can maximize sales.

Digital marketers in Japan accordingly follow the formula below:
Customer acquisition cost = Cost (number of clicks x cost per click) ÷ Conversion (number of clicks x conversion rate)

So, to maximize returns on investment they have to choose approaches with low costs per click (CPCs) and high conversion rates (CVRs).

DSPs tend to increase CPCs more than ad networks do

Ad networks generally deliver lower CPCs than pure advertising. That is simply because ad networks bundle huge volumes of advertising space and that they can provide more cheaply. Note, however, that CPCs from going through ad networks include margins when those networks buy publishers.

Supply side platforms (SSP) buy DSP services, and some SSP-bundled advertisements are purchased through ad networks. That means margin payments by DSPs to SSPs and by ad networks to publishers, and this is one reason that CPCs are higher for DSPs than for ad networks.

Obviously, DSP CPCs are not necessarily always higher than those of ad networks with similar targeting.

Retargeting the choice if prioritizing conversion rates

A key feature of DSPs is that they offer targeting alternatives for various data multiplication settings. While I would not deny there are performance and feature benefits, approaches need retargeting if you seek high CVRs. DSPs offer retargeting, but ad networks also offer that. There is almost no difference between the CVRs of DSPs or ad networks in terms of distributing advertisements to users once they visit a site.

The notion that DSPs offer broader reach is illusory

Another feature of DSPs is that they can broaden reach. That is certainly true to the extent that some DSPs are linked with major ad networks. But you also have to remember Yahoo! Display ad network and Google Display Network already offer very broad reaches in Japan. Around 80% of people accessing the Internet in Japan use Yahoo! JAPAN. Google Display Network’s reach is 90%.

In recent years, people in Japan have spent more time on Facebook, Instagram, and other social media channels that also deliver tremendous coverage.

DSPs are ultimately a means to an end

To be clear, I am not saying that DSPs have no place. They do, and you should use them for the right reasons.

For example, at Beacon Communications K.K. we use the AD EBiS tool of Lockon Co., Ltd., for view-through and attribution analytics. The analysis enables us to learn what banners will prompt user searches or which banners will offer CVR gains from multiple interactions. Our future approaches for advertisement distribution would look something like the following:

• Data showing high CVRs for users who have visited sites organically after banner interactions
• List users who have undertaken such activity
• Synchronize the user list with DSPs linked with AD EBiS
• As part of subsequent retargeting, thereby engage with users who seem highly motivated.

This is using DSPs based on a clear goal of engaging with more highly motivated users and efficiently monetizing  ads. Lockon has already amassed successes with almost 40 companies through this approach, and will continue to use it.

Conclusion

So, there are indeed reasons for Japan’s DSP deployment to lag the rest of the world. At the same time, I see opportunities for leveraging DSPs in Japan. I think that their use would steadily rise if for clear purposes, with a solid track record and best practices accruing. Adoption should speed up if DSPs gain more capabilities and tie in more with other tools.

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Hiroyuki Akita is a senior strategist at Beacon Communications, part of Publicis One Japan.

(Translated from Japanese by Mark Darbyshire)