Fireside Chat: Is it Time to Rethink the Ad Monetisation Waterfall

um so uh next up uh we're gonna we're gonna stick with martin who's already given us a great introduction we're gonna have a i believe it's a fireside chat with uh with bojo yankovic i hope i've got one of those those right bojo i think that's right uh from gabriel who's going to uh hi is that right was that about right yeah it was it was really really good no i know it's english english people trying to pronounce a name that is with accents is always the higher us um but you you guys are going to talk now think about rethinking the ad monetization waterfall that's what it says in my notes anyway so um we all like waterfalls right so that's good so um so are you are you all good to to crack on here in the background if you need me i'll go and collect the questions again but uh you're all good yeah i i think it's good we should probably we'll do some kind of i'll do re-intros just in case people are tuning in for this yeah absolutely the last one so yep

the floor at the floor is yours well actually before you beaujo where are you where are you in the world at the moment uh based in belgrade serbia oh serbia lovely lovely lovely lovely lovely places it was whether like over there you uh it's boiling hot 40 degrees today the hottest day this year so yeah bit of a bit of a heat wave there okay fair enough well i hope you stay nice and cool in this chat i'm gonna leave leave martin to take over now thank you great stuff thanks chris um cool so thanks for tuning in for this uh this firesides um we were going to be talking here some interesting things happening in the ad monetization world uh the move to header bidding so we thought it'd be interesting to kind of um to to to kind of uh get um get bosch's insights in into this and to talk through uh uh some so some some changes and how they're kind of affecting developers so quick intro for me i'm marty mcmillan i'm the founder and ceo of pollen vc we provide um credit facilities to uh to game and app developers allowing them to scale their their ui

faster um so uh without further ado um let me let me pass over then perhaps to do quick intros then we can we can get into the kind of the the main topics absolutely yeah uh so hello everyone thank you for joining my name is borja yankovic and i work as a business development manager at game business consulting we're a consultancy firm for the video games industry one of the areas in which we help game developers is monetize their games with ads this means that we're basically helping developers to increase their revenue and our dau by offering our expertise and knowledge in this area um so yeah we've been lucky enough to work with the likes of war gaming good game studios lockwood publishing creative mobile nanobit and many other developers and then we managed to help them grow their ad revenues cool that's great the um so i i guess things that things

have been changing a lot in the uh in the ad monetization world and there's this sort of this the this move this kind of it feels like it's kind of inevitable from um sort of traditional waterfall structures into um into into bidding but just you know generally i mean maybe it's worth doing just like a little quick recap of recent history and the sort of like the the direction of travel if you like yeah absolutely so um i think that we can probably summarize it in a few sentences in how basically this ad serving ecosystem has evolved in the last few years um i'd say that the the basic setup in which developers um used to work was you know you just plug in one ad network you choose one and then you get ads from them of course that um very quickly involved into into a more complex system where you know instead of working with one ad network onenet partner you wanted to introduce more of them this was

for various reasons such as scales of the scale of the game if you have millions of players then one ad network will not be enough to to suffice all of those users then the other obvious reason is increasing competition uh so trying to make the networks compete with each other uh to pay the best price for each um and every uh impression and then like we went from that model where you're working with the with the black box mediation where network is getting impressions but you don't really know what's going on in the background um developers and networks became more savvy they started doing these first field deals so you basically negotiate with a network which price they're going to pay for a first impression in a specific country and that was a lot of um you know back and forth a lot of manual work communication between the network and the developer and i'd say that from that we've come

into a place where we started doing multiple instances or multiple calls where each network could be pulled several times within the mediation within the waterfall and the developer would be the one who is going to really define the price at which the network can buy those impressions and this is where more control got into the hands of developers and i'd say that it brought a lot of benefit probably 20 30 percent increase in ecpm and consequently at revenues for the developers but on the other hand it increased the heavily the manual work the operation the operational work this is where heather building or in-app billing came in conveniently into place where you're kind of getting those benefits of getting more granular and maximizing the price for each impression but on the other hand the manual work uh got down quite

significantly so i'd say that we're right now not not in bidding yet but it's that we're definitely getting there yeah see it seems like there was a you know a lot of people were really having to you know it's very very manual exercise managing all these different waterfalls and the everything was kind of backwards looking right so you were looking at sort of historicals as opposed to kind of real times if you like so you know it'd be fair to draw the comparison maybe like a darwinian you know evolution from uh you know from from one thing to the next right the so so then in terms of in terms of you know like a what is it like a like a full bidding scenario look like and there's obviously like a transition step so so who's him you know who what sort of people are embracing it are are some people kind of behind because obviously you don't just flick a switch and move to a whole new world uh overnight right what's the what's the sort of the transition um that's going on you're absolutely right there's definitely no

magic switch that that can just make this possible to switch from hybrid media from from let's say a waterfall with multiple instances to a full bidding setup i think that for the last two probably three years already we've been talking about bidding and you know in the beginning there wasn't much going on but now there definitely is i'd say that we're right now in the hybrid mediation model this is probably the dominant solution which developers are using at the moment which means that some of your partners some of the ad networks that we're working with they are providing their uh inventory their demands through the bidding technology so you don't have to manage anything and you just need to plug them in and they're gonna bid for every single impression so for them you can work like that but there are still several uh several networks especially like on the the big the big guys who are not bidding

yet um and they are not providing their demand through a bidding source which means that you still have to manage them manually and this is why i say it's hybrid because some networks are bidding and some networks are not bidding yet um and so basically the ad monetization managers are kind of in between um these two setups a full being setup would be of course when each and every network that you work with is providing a bid so how much money they're willing to pay for every single impression without the developer without the ad monetization manager having to uh worry about the prices manual work and things like that right so and then i mean full bidding would that be um would that be like it just a completely if that what's the utopia here is it like you know press you know select your you know your networks your mediation partner you know press the button and then sit back and just know that know that it's all being done kind of completely in a completely optimized way yeah so i'd say that you know it's still

not that simple uh you would still need to choose with which networks you work you want to work with and that would be one you have you always have to make sure that you're working with partners that are credible that there's no fraud things like that so there's still some due diligence that needs to be done there probably wouldn't be that much work on a daily basis to optimize things but you could still run some a b tests and try to optimize in different ways maybe for some specific territories you would like to choose some additional partners so there's definitely a shift going on in what the ad monetization manager would do in a scenario where you have some of the networks bidding or where you have all of the networks um bidding um how long do you think it would be for that sort of that that hybrid world will everyone be you know i mean it's hard to be compelled to move to full bidding but is there a sort of natural selection that those that aren't embracing it will be you know will be sort of disadvantaged down the stack or whatever because they've not embraced it or

how do you think that that plays out over the next couple of years well uh that's an interesting question and i've been like quite optimistic that that would happen you know even um in the previous year or so however there seems to be still some reluctance from some of the networks to move fully to bidding or at least to provide a bidding technology outside of their mediation so now it's a little bit of that power play who will provide a bidder for which mediation so there's definitely something going on there but um yeah i'd expect that you know within year year and a half maybe two um this will become if not all of them majority of the networks would uh would do the bidding piece right so there's still a big role to be done for you know ad monetization managers and stuff it's not it's not going away it's not going to be a sort of you know push button automation anytime soon and and obviously yeah you can see the different power playing positioning but but i mean overall do you think you

know if the market were to embrace it overall does that mean the the networks make more money or less money for the networks it's hard to say like it's you know it's because it it has that ua component where the advertisers are paying the networks and on the other hand the networks need to pay to the developers and in between they need to figure out which bids they're going to provide um i'd say that you know with bidding what they are getting and which might not be available to them through a multiple instances technology is that they get to see every single impression and then depending on their demand and depending depending on their you know technology it's up to them to to manage to win that auction uh so i think that they are definitely gonna have more visibility uh because they're gonna have a full view um of the inventory so that i think that's that's something that's um that's in perspective for uh for the for the networks

and then so so number one thing they care about then uh and this is like we we've been we've been kind of digging into this um a little bit just because we find it really interesting like does everyone just then i mean is it a case of just like i i have an ad impression to fill who's going to give me the highest ecpm and then that one that one gets it is it sort of simple and straightforward as that so i'd say that uh and this is uh interesting and i'd like to hear your perspective on this as well because i think you do have some comments around that from my perspective i think that most ad monetization managers nowadays are focusing solely on ecpm or some other more intangible factors like maybe you know the quality of the ads maybe removing some of the competitor ads um managing the fill rate and the ecpm but i'd say that most of the developers nowadays most of the administration managers would focus solely on ecpm and fill rate without

looking into other business aspects of the relationship with the network and things like that but maybe you have a another perspective for managers so we we've been you know obviously we talk to people all the time and what we've started to see is people look through as as you get towards more of a bidding that as all the kind of the obfuscation of the waterfall kind of not disappears but it is transitioning um we saw a number of people thinking well this isn't just about this isn't about just about the cpm because you've got a you know you've got the uh you know the the the payment delay from the ad networks and this is this is one thing so i'm an ex uh financial markets guy and um so we started to draw comparisons to like a foreign exchange market um for you know which has been you know it's one of the most kind of efficient liquid markets in the world and then digital advertising markets so from a transparency point of view i think it's great uh anything that

increases the transparency and reduces obfuscation as a directional direction travel is great but what we've been very very surprised about is that in this kind of move to bidding if you like the payment terms are not really front of mind and so we we started kind of researching a little bit about you know how much of a difference could that make in terms of you know let's say i'm you know i i got a 10 cpm and one network is going to pay me in 15 days time and the other network's going to pay me in 60 days time is that really an effective you know measure to compare them on the on the same level playing field and go back to the made us think about the financial markets comparison so super liquid market and you know you don't really care who the counterparty is you just want the best bid or the you know best bid or best offer or whichever side of the transaction you're on so because everyone settles that transaction the cash you know if i buy you know currency whatever i have to pay for it tomorrow so from the point of view of like i'm

totally agnostic between the counterparty because provided they don't go bust overnight that that trade is going to settle tomorrow and then you take that logic and you apply it to the the ad networks and you're kind of thinking well you know that 10 cpm that's gonna pay in 15 days if i have to wait 60 days for that money it's you know i i need to i need to think about this differently so yeah we're kind of like we're kind of toying with the idea of like you know how do you do do you then kind of reorder your stack based not just on the um on a on the effect of cpm but do you do you pull in some kind of discount factor say you know what what is this in real money now in real money if you were to say well okay i have to borrow the i have to borrow the the ten dollars for 15 days versus 60 days or 45 days whatever it may be that's gonna make a little bit of um of impact to it but what we saw developers look at who were tuning into this kind of way of thinking was like

this is not really just about the interest cost to borrow the money for 10 days this is about the opportunity cost of not being able to reinvest and the the the particular genre we saw it happening in was in hyper casual which obviously the time scales can be really short so you know particularly you see hyper casual developers uh normally looking to go with publishers because they the the the capital incentiveness of of you know pushing a game all about the chart could could uh you know could be really um could be really you can go into millions to do that so then we started looking at well if the you know i'm having to do this i'm having to spend my 20 or 30 or 50 000 a day on this because and it is capital intensive because it takes so long to get the money out so should i then be thinking you know this idea of like is it time to rethink it based on who's gonna pay when and the opportunity cost how much money am i leaving on the table of not taking this money and reinvesting

it into my into my ua so i think it's you know it's we don't have some kind of silver bullet we don't have uh you know um some big grand reveal but i just the more conversations we've had about this as the world goes to bidding this idea of a of a discount metric um i think's important so um i think it's not something that people have been that focused on today but um i don't know do you think that's that's something that people will start to focus on a little bit more over time so i have to admit that i haven't been taking this particular factor into an account when i'm uh managing um mediation on behalf of my clients but it seems to me that like you know having worked with different developers like of different sizes from companies with 3000 employees and who have like you know liquidity and they have a lot of cash laying around to companies that you know they don't have just simply don't have that much resources sitting around it seems to me that like you know

depending on who you are what kind of developer you are you mentioned also hyper casual developers for whom this seems particularly important particularly relevant so am i right to say that this is kind of like you know it depends very much on who you are and what you're trying to achieve because if you're a hyper casual developer and you're waiting for 60 or 90 days or 45 days to get those payments then you're burning a lot of cash every single day to bring those users it seems that like taking this discounted rate like ecpm or however we want to call it would be a very important thing if you want to you know be smart about how you invest and how um how you're managing your money yeah i think it depends on what sort of size and scale you are right so um and look if you if you want to if you want to use the the sort of the intellectual capital efficiency argument it should it should apply to everyone because the concept's the same the

numbers are just bigger um so would it be but you know if you have you know if you're generating several million dollars a month in revenues are you really that focused on it um because you'll also have you know large credit facilities and stuff anyway one of the things we have seen is some of the networks doing um doing set off transactions so for example say hey you've got all this money in my monetization if you spend on my user acquisition i'll just i'll flip it and allow you to do that so you don't have to wait the 60 days because you're spending it back on ua and it's staying within my kind of closed loop network and the pushback we saw on that was really some people that were um some people that were kind of kind of focused on um wanting the best of breed right so you might be the best monetization network for me but actually the user acquisition is not as good so i'm basically i'm taking a i'm taking a second best option in order to do this just to solve this problem so

that that's something we we've definitely seen a few times obviously there are different ways if you use a if you use something completely third-party you get around that problem but um yeah i thought you know just like an interesting direction travel i thought it's great overall for the industry that you have this um this rise towards greater transparency ultimately the developers are gonna are gonna gain uh open question i don't see why the why the advertising network shouldn't be you know big beneficiaries as well you just drive all the inefficiency out and then the market grows for everyone so that would be our our hope and expectation but um yeah um any other i don't know that i know we're kind of we were kind of out of time in a second but uh you know i don't know any other sort of like closing thoughts or um yeah i think that like in general it's a very interesting idea that that you brought here that like you know it's not only about the ecpms it's not only about the fill rate you have to take other things into an account especially if you're uh heavily relying on spending a lot of money in ua

so it's not the same when you're going to get the money that you're making every single day um i'd say like is there something maybe this is a you know something to think about or maybe you already have something in mind um is there a way like to to calculate okay if you know if i'm getting a 10 ecpm right now what is the difference if a network is going to pay me in 15 days 30 days 45 days 60 days 90 days is there a way for an ad monetization manager to kind of have a formula an idea okay i should still give the advantage um for you know nine dollar ecpm because i'm gonna get it much faster yeah i mean most people we've seen just calculate that stuff themselves but yeah i i agree would be useful to have a have a resource like that so um maybe that's something we'll uh we'll look at there's an idea cool uh great well listen chris i don't know if we've got time for it yeah we have got time we've always

got time for you and questions there's a chunk more in here uh some of them are very specific so i'll throw them out and you might be able to answer them because i i certainly couldn't so i if this is if you can't answer these or you don't want to it's totally fine to say so for whatever reason um so i'm going to start with one from psy um who says admob mediation claims they have 200 plus bidding sources it looks too good to be true this is the case why many companies not not using this service it's 200 bidding sources that sounds like a lot to me um i know you don't comment on admob obviously a particular company but is that is that does that does that seem reasonable um i i can take this one okay yeah i mean i might be very quiet there i decided i'd say that this is a good marketing um at least for uh you know um probably targeting um people who are not that much into the matter but i'd say that um each mediation nowadays uh has probably five six seven eight maybe

ten bidders at most right and probably two or three of them are the big ones uh everything else is just dsps and other technologies which you can call bidding if you want but i don't think there's um yeah i'm not to comment on any company but like i don't think there's an any mediation right now uh that is offering 200 or any number of hundred speeders at the moment so yeah fair enough no no i'm sure lots of companies use lots of methods for marketing let's assume let's assume we're talking about sort of as you say sort of six to maybe 10 bidders and and 200 might be as other sources um i've got another one very specific question and if you can't answer this i get out all above my head this so there's a question here what is the minimum dow needed to achieve good fill rates and impressions for 100 ad monetized game in tier three to four geos like brazil india mexico argentina that sounds like a question someone should pay for consulting for but um

i don't know does that make sense is there a any insight you can offer is that does that need to be discussed at length yeah i'm happy to give uh like a quick comment on that i don't think that uh the you know the number of daily active users that you have will impact your fill rates or ecpm um as long as you are working with the right partners and managing the mediation in in the right way the fill rate should be high i do appreciate the fact that tier three tier four markets might be more challenging to fill than the us let's say and other tier one countries but still if you're doing a good job with the mediation and fill rate should not be an issue regardless of how many daily active users you have great answer very good so far very impressive um i've got a combine a couple of of course questions together which might i i don't know the relevant or not there's we've talked about about it a lot in in the show and before about idfa and and changes do have have these kind of

privacy changes had an impact on advertising rates and i get the question here is another question which kind of related is are there any kind of clear winners and losers in terms of kind of monetization techniques um because of this so the other different advertising opportunities are being created now because certain things might be harder to monitor than before um so i'd say that yeah definitely idfa had an impact maybe we don't even see the full um you know the full scale of the impact yet um i'd say that ecpms have gone down especially the like depending of course on each and every game how much uh how how big your ecbns were previously i'd say that you know the drop could be between 20 to 50 percent wow um yeah so definitely there could be some impact yeah that's a significant significant impact and yeah in terms of winners and losers

i think that you know there are some networks who have not been um focused so much on personalized ads and more focusing on the contextual side of things and they're in at least in the short term they're winning now because uh they didn't have much to lose uh compared to the previous period um and yeah the developers i guess that you know setting aside a lot of development resources to deal with these changes did not do them so well in terms of you know focusing on core business and developing new features it will obviously all change again no no no doubt in a month's time or so uh it's it's certainly interesting times um let's have a look this is kind of a question i'll try and get through one more two more there's kind of a question i kind of have a little listen listening to you um from the publisher developer side in terms of the the monetization sort of manager if if everyone's doing header bidding and every ads being auctioned by your kind of provider is does that mean a lot less work

for the monetization guy because like if everyone's bidding on every ad then the amount of shopping around needed is presumably less right or am i being is that naive yeah i think that there is going to be less operational work on the mediation side martin here uh introduced this interesting idea of taking into account some other factors so this might be something you know where ad monetization managers will need to negotiate these uh deals with the networks and try to push back on these the lengthy payment terms and you know the technology is changing the thing that we have the bidders right now maybe the form of computers changes maybe we get more control from the networks more insights so you know things are changing as we as we speak so it's hard to say whether or not we would you know completely leave it up to the mediation to do the thing its own on its own or there's still going to be um you know significant amount of work that each developer will have to do cool i've one last question which i

can't is a few others in here i'm sure they can seek you out afterwards and ask for advice you seem to be a very knowledgeable chap um so how much of that this is it's something i'm considering how much of the advertising revenue in the mobile games ecosystem is is still internal game advertising versus brand advertising we always say we always see the ad so you know it's advertising other games pointing to the games are we seeing a steady growth of brand advertising external advertising that's kind of money coming in to the industry um as opposed to circulating i guess well i'd say that in general vast majority of the advertising money that is circling around the gaming industry is still coming from gaming games and apps so performance marketing whereas brands i'd say are still a small portion of the revenue whether or not it's increasing i i think it is like with facebook and admob uh in the picture i think that they're they're helping on this matter there are some networks

that are specializing in brand advertising um but yeah the performance i've seen is still definitely limited uh potentially only on tier one countries as well um so yeah you you would not be able to scale um with brand advertising at the mo like still fair enough on that note i'm going to say huge thank you bojo and and let you return to your sweltering uh sweltering conditions at home there and thanks so much for just sharing your inspiration appreciated um you can con track down bojo in the in the meeting system or discord something later on i'm sure he'll be able to help with if you have other questions