europe AUDIO REVENUE Understanding the adoption and development of Programmatic Audio in Europe.PG 02 europe We're buoyed by the confidence that buy-side stakeholders will very likely plan to increase programmatic audio spend in the near future, although there is work to be done to educate. We see consumers become more connected with the media they consume; marketers are in a prime position to take advantage of the capabilities programmatic audio can deliver to their marketing outcome. Programmatic transaction mechanisms have enjoyed widespread adoption in display, mobile and video advertising. Programmatic audio is still at a nascent stage but growing quickly. Innovative European companies, both those with a history in radio and online streaming, are helping to drive growth. Audio's high level of consumer engagement married with the efficiency of programmatic delivery and brand safe environments creates a highly appealing media channel for brands. JOHN WITTESAELE EMEA PRESIDENT, XAXIS DANIEL KNAPP CHIEF ECONOMIST, IAB EUROPE “ “EXECUTIVE SUMMARY PG 03 This survey was undertaken by Xaxis, in association with IAB Europe, the leading European-level association for digital advertising and marketing, in order to understand the drivers, barriers and adoption of programmatic audio advertising in a changing audio landscape. THE FUTURE The results show that the full potential of audio is not being realised within Europe but also an underlying optimism on the buy-side regarding increased spend over the next 18-24 months whilst recognising several challenges to be overcome. THE PRESENT Although 59% are already utilising the capabilities of programmatic audio to some extent, spend is low - over three quarters (79%) invest less than 10% of total ad spend on audio, and two-fifths (41%) allocate no budget to programmatic audio. Surprisingly, confidence in understanding is low, with only a small proportion of buy- side marketers (15%) feeling confident in their understanding of programmatic audio. However, when speaking to the sell-side, this is doubled with 30% stating confidence in programmatic audio understanding. OPPORTUNITIES Despite the fact marketers are conservative in their approach to allocating significant budgets to audio, the top three drivers for investing in audio advertising are recognised as complementing the media mix (63%), reaching specific audiences (59%), and raising brand awareness (58%). The key drivers for programmatic audio investment are achieving targeting efficiencies (63%) and taking advantage of data insights (44%). THE BARRIERS However, two strong barriers to progressing with audio investment are having a clear understanding of the impact of programmatic audio trading on total revenue (49%) and the availability of technology (44%). DEVICE CHOICE The majority of respondents agreed that to reach audiences, device choice is important, with mobile ranking top (88%) followed by laptop/ desktop (61%), in-car (59%) and tablet (46%). WITHIN EUROPE, THE FULL POTENTIAL OF AUDIO IS NOT BEING REALISED BUT OPTIMISM IS GROWING. europeSTATE OF PLAY THE CURRENT STATE OF PLAY OF THE PROGRAMMATIC AUDIO ADVERTISING MARKET europe INDUSTRY CONTEXT Looking back twenty years, the technology infrastructure that underlay much of digital ad buying was designed for display, the format that drove the first wave of digital ad spend. Audio was not then a consideration and consequently missed out on this 'tech wave'. This has meant that audio streaming platforms have had to invest more in proprietary ad tech, which has taken longer. Another area which has lagged behind is audio ad formats, where innovation has been slow and better ad formats are needed to capitalise on high user engagement and strengthen the position of audio as a complement to other media. There has also been an issue around supply of inventory which should improve as digital audio consumption increases. The high user engagement of audio lends itself to branding campaigns yet the metrics to prove reach and effectiveness have also needed to catch up. Latterly, industry agreement on podcast specifications, for example, has improved with the publication of Podcast Measurement Guidelines by IAB US in 2017. (1) 1) Source: /iab/guidelines/podcast-measurement-guidelines/ PG 04 Birth of analogue radio 1920 1922 1980 1990 2016 TODAY 1st audio ad hits the waves Music goes portable with cassettes, later CDs Internet radio/ MP3 formats herald's music digitalisation Tech innovations allow on-the-go connectivity On-demand services, multi-device access and ad personalisation AUDIO'S COMING OF AGEA udio D MP acquired acquired built partners with partners with partners with partners with channels demand BU Y - S IDE funding from Note: Not exhaustive. Aim is to demonstrate variety of activity for ecosystem building. built Ad S tudio SEL L - S IDE PG 05 europe STATE OF PLAY USAGE GLOBAL LANDSCAPE AND KEY PLAYERS (5) GROWTH PREDICTIONS Digital audio advertising is set to become a Û1bn market by 2022 (6)driven by podcasts, music streaming services and digital radio. As was the case when display started to be traded programmatically, the programmatic share of audio advertising is still small but will grow with the connected car, a key driver of growth. (7) 1,400 1,200 1,000 800 600 400 200 0 EuropeDigital Audio NAR Mil 2017 2018f 2019f 2020f 2021f 2022f 2023f F Fo recast 90 80 70 60 50 40 30 20 10 0 Annual SalesConnected Cars il connected not connected 2017 2020 2025 2030 2) Source: Music Consumer Insight Report 2018, IFPI Global (Global data) 3) Source: MIDAS Spring 2019 4) Source: Bitkom, 2018 5) Source: IAB Europe 2019 6) Source: Company reports IAB Europe, RadioCentre, own model 7) Source: PwC strategy 75% use video streaming services for music and 35% use internet radio. And 39% of time spent listening to music is on connected devices vs 34% on AM/FM radio. (2)More than half of UK adults listen to digital audio each week spending on average, 12.9 hours. (3)In Germany Podcast listening is on the rise. In 2018 22% of consumers tuned in to podcasts, compared with 14% in 2016. (4)METHODOLOGY AND PARTICIPANTS PG 06 SURVEY RESULTS THE 2019 EUROPEAN PROGRAMMATIC AUDIO SURVEY Xaxis, in association with IAB Europe, conducted a survey across Europe to gauge the changing landscape of Programmatic Audio advertising. This online survey leveraged the national IAB network in 30 European countries to ensure a representative sample across European markets. The survey received almost 500 respondents between April and May 2019. Respondents came from buy-side 72% (agencies/advertisers) and sell-side 28% (publishers/media owners) and had both pan-European and global remits. Increased consumption of digital audio presents marketers with greater opportunities to engage with digital consumers. Audience data and creative options have improved yet questions about challenges have nagged the programmatic audio market. europe What are the drivers and barriers to programmatic audio investment? The survey asked: What the stakeholders' knowledge of programmatic audio is? Do you plan to invest in programmatic audio in the future?