Like much of the European adtech community, Mobinner sent a team to DMEXCO 2019 in Cologne (Köln), Germany.
Now, if you’ve ever been to DMEXCO, you know that it is massive. And the convention center where DMEXCO takes place, Koelnmesse, is even bigger. In many ways, it’s like a small town all under one roof and getting from place A to place B without any public transportation can be exhausting.
Check out our takeaway from DMEXCO!
Luckily, this author’s job wasn’t to run around to meetings, but instead to attend the various sessions that DMEXCO has to offer.
Now at the convention, one can find sessions on just about every major topic in the ad industry, from relatively technical subjects to high-level overviews of entire market GEOs.
And it was precisely one of these high-level overviews that piqued my interest and, in the end, turned out to be one of the best presentations at the whole conference.
It was called “Digitale Werbung in Deutschland und Europa– ein Überblick” (Digital Advertising in Germany and Europe – an Overview) by Thomas Duhr, Daniel Knapp. The latter being the Chief Economist for the Interactive Ad Bureau in Europe.
Germany lags behind
During this presentation, the state of digital advertising in Germany was presented and dissected. In many ways, it’s not the prettiest picture. At least at first glance.
Compared to the United States, the United Kingdom, and other highly developed nations, digital advertising in Germany lags in terms of the total percentage of gross ad spend in the country.
Whereas in the United States, digital has made now makes up over half of total ad spend, in Germany it is only around 34%.
But it’s not just significantly lower than the United States in terms of digital’s share of total ad spend. Germany is also way behind its neighbor across the channel, the United Kingdom.
In the United Kingdom, digital advertising is responsible for an even more significant percentage: over 63% percent in 2018!
So, Germany is quite a way behind other developed, Western countries.
As was indicated in the session, this means that there is an opportunity here. Even if digital growth in Germany has been slower, there is nothing to suggest that traditional media will be able to win out in this one GEO in the long run.
But growth is solid
Growth is relatively good in Germany. For the last ten years, it has always been in the low double digits. This kind of growth is naturally tough to come by in a developed, Western nation such as Germany.
This is also where the opportunity lies, the online advertising industry in most western, developed countries is hitting a post-growth era. Or at least a period of growth that is relatively low for the tech industry.
To adapt to this new era most adtech companies, agencies, networks, DSPs, etc. are expanding towards markets that still have a lot of growth potential, that is to say, developing countries and underdeveloped regions.
Germany, however, is a relatively rare opportunity. A rich, highly-developed country that still has a lot of growth potential.
And very robust
The industry itself in Germany is quite robust. Even in the 2008 crash, the German digital advertising market managed to continue growing. The fact that the market grew even in such dire straights indicates extreme resilience and a strong trend towards digital marketing in the long run.
So why is Germany behind?
Still, the question remains: why is such an advanced country, a country that boasts tech hubs like Berlin, so far behind the other highly developed western countries?
In many ways, it is deeply unfair to compare Germany to the United States and the United Kingdom. The entire digital advertising industry was born in the United States, giving it a definite lead that it has never really lost.
In fact, the modern digital advertising industry is more or less a Google-Facebook duopoly. And both of these companies are American.
The United Kingdom is an anglophone country that is tightly integrated into the American tech industry and boasts a robust ecosystem of venture capitalists, developers, and entrepreneurs. So it’s not surprising in the least that the UK tends to be ahead of the curve when it comes to tech adoption.
But it’s not just the natural advantages that the United States and the United Kingdom have over Germany that led to this situation.
Germany itself is also a special case.
German specific issues
All nations are different, but not many are quite so unusual as Germany. There are just a lot of things that are specific to the country. Lederhösen, Bratwurst… an intense appreciation of privacy!
And it’s not just privacy that can cause issues here. The country is just old-school in a lot of ways.
Old-school, but not so cool
If you’ve spent any time in Germany as a tourist, then there is probably one thing that stood out to you. Okay, there’s probably a lot of things that stood out to you, but the fact that so many places only allow you to pay in cash would be one of the things you’d notice.
Restaurants, stores, vendors, even the coatroom at DMEXCO (a TECH conference!) only accept cash.
And if you want to get cash, you’re probably going to be paying 5 EUR for a withdrawal that would likely be free in most western countries.
And that’s just if you’re a tourist.
If you’ve ever spent any time living in the country, then you’ve come in contact with it’s byzantine, practically unnavigable bureaucracy.
As German store owners and vendors love their cash, so too does the German bureaucracy love its paper. The number of forms required to get things done can make you wonder if you’ve stumbled into some bizarre Kafkaesque parallel dimension of paper and stamps.
But that’s just how it is. Institutionally Germany has proven itself time and again resistant to change. Or, at least, very slow on the uptake.
In Sweden, for example, many stores don’t even accept cash anymore. They’re 100% card-only. Likewise, here in Estonia, the bureaucracy is incredibly efficient and seems to shun paper for digital in any and all circumstances.
This isn’t Germany – neither in business nor government. Germany will likely undergo these transitions, but deliberately and with time.
But a general resistance to change is not the only thing at play here.
Germans are also much more privacy-conscious than the average person — significantly more privacy-conscious.
And this can have a severe impact on tech. For example, just look at all the problems that Google had when it first tried to launch Google Maps StreetView in Germany.
It still hasn’t managed to overcome the hurdles. If you look at a StreetView Map of Europe, there is a Germany-sized hole in the continent.
Check it out
As a whole, Germany is just a country of more privacy-conscious people, and tech has to work around this. Working around this can take time, and it can also slow down industry growth.
This is especially true in an industry like adtech – an industry based on collecting data on users and targeting them specifically.
In order to adapt to this, we might need a German-specific solution. Or, at least, what works in the UK and US might have to be better adapted to the market.
A German Specific Solution?
So what does this solution look like? For one thing, it starts with education.
Google and Facebook already know FAR more about their users than most adtech companies can glean through third-party cookies, cookie matching, DMPs, etc. This massive data advantage is why those walled gardens manage to dominate the whole industry. They just have so much more data.
Perhaps executives in some parts of the Germany economy are still not sold on digital advertising to the same extent as their British and American counterparts.
Likewise, while the concerns about tracking and privacy might be misunderstood by both users and executives in many cases, that doesn’t take away from the real importance of confidentiality.
In terms of privacy, the world is becoming more like Germany.
The consumer is becoming increasingly interested in maintaining his privacy. For years and years, we were content to put as much information about ourselves as possible on Facebook. We were okay with Google giving us ads based on the content of our GMail inboxes. We didn’t think about third-party cookies and how retargeting was occurring.
That’s no longer the case.
It’s partly a function of just how good digital advertising has gotten at putting the right ad before the right user. He starts to wonder, well just how much do these people know about me?
Further, customers have become less tolerant of aggressive ads, as seen with the mass adoption of ad blockers.
So, in some ways at least, the average digital customer (in the West) is becoming much more, well, German. Privacy is becoming more critical.
With the application of GDPR and as Google and Apple start to crack down on bad ads and even third-party cookies, the industry is going to have to become more privacy-conscious.
And this could help a lot in the conquest of the German advertising industry.
A quick note on a Europe – A fractured market
This session at DMEXCO didn’t focus entirely on Germany, but also on Europe as a whole. And there is a lot of potential in Europe.
While Nordic and Western European countries have very developed digital advertising industries in terms of the total percentage of national ad spend, there is a lot of potential in both East and West.
In the East, this growth is two-fold: On the one hand, there is the general massive economic growth that the East is currently experiencing. On the other, there is the fact that digital advertising remains a relatively small portion of total ad spend in the country.
In the West, there are more opportunities like those seen in Germany. Countries that have a well-developed tech industry, but where digital advertising remains behind the curve compared to anglophone countries.
Incomparable with the US
The thing about Europe is that we cannot look at it as one giant homogenous mass. The fact of the matter is that Europe is simply too unequal, too diverse, and too fragmented. It cannot be compared to the US or other large states like China.
In Europe, not only do a wide variety of languages need to be taken into account, but also economies in greatly differing stages of development and wealth.
When targeting GEOs, we need to take all of these things into account. But if done correctly, digital advertising companies will likely be able to find substantial growth in Europe – specifically in the East. They might even find the kind of enormous growth seen in other developing areas – but with much more stability and transparency.
The European market is an extremely exciting place. It is a diverse continent with a myriad of opportunities. And some of those opportunities lie in already rich countries like Germany.
Others lie in the rapidly developing nations to the East.
But as the major anglophone countries such as the United States and the United Kingdom continue to approach a post-growth era, Europe becomes increasingly attractive.
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