A look at Facebook and Google's earnings reports reveals that in the first quarter of this year, 92 cents of every new US dollar spent in online advertising across the Asia-Pacific (Apac) excluding China went to the social media behemoths.
The good news is that digital marketing in the region is demonstrating strong growth, with revenues up by US$1.23 billion (S$1.65 billion) year on year in 2017. However, of that US$1.23 billion in growth, the majority - US$1.13 billion in total - goes to Google and Facebook, with only US$100 million to share across the remainder of Apac publishers.
The threat that Facebook and Google pose to publishers reliant on advertising revenue is growing quickly and it is important that publishers take note. Both tech companies possess voluminous amounts of data and enormous numbers of registered users. Facebook has over 2 billion monthly active users. Google also claims over 2 billion monthly active users on its Android mobile phone operating platform. More than 500 million monthly active users upload 1.2 billion photos to Google Photos each day.
This scale gives them a major advantage over Asia-Pacific news brands, as they can serve up advertising inventories across many channels. This also means independent publishers are losing out on precious advertising dollars.
So, what can publishers do to claw back revenue, and give Google and Facebook a run for their money?
One model that publishers have already been trialling across Europe, Australia and New Zealand is the publisher co-operative model.
Like air carriers, publishers deal in a product (online impressions) that is limited, perishable and variable in price. These characteristics make it possible to control inventory availability in a way that affects prices and maximises revenue. But this complexity may also make some publishers uncomfortable with the loss of control associated with delegating the responsibilities around programmatic sales externally.
Essentially this is an alliance to pool inventory - the advertising space available to advertisers - into one network so advertisers are more easily able to deliver scale, instead of buying directly from each individual website. This approach hopes to better challenge the likes of Facebook and Google which have large-scale inventories in one place. For example, Google can serve up ads on hundreds of millions of websites that its 2 billion users are browsing rather than just a handful.
In Australia, media giants Nine Entertainment and Fairfax Media formed APEX back in 2014. The Australian Premium Exchange is a programmatic exchange for mobile ad inventory, allowing partner publishers to pool their ad inventories to advertisers.
Programmatic advertising refers to the way ads are served on a website using data analytics driven by algorithms in real time. So if you are a shampoo seller who wants to reach female customers aged 15 to 40 in, say, Singapore, programmatic advertising will plant your ads on thousands of websites that are being read by your target customers. How much each ad space on those websites costs goes up and down in real time as the algorithm calculates its value based on advertiser demand.
After APEX, the New Zealanders followed suit, with the Kiwi Premium Exchange (KPEX) formed in 2015 between Fairfax Media, MediaWorks, NZME and TVNZ to create a new local advertising exchange service.
By bringing together the nation's largest and most trusted media owners, co-operative models like APEX and KPEX are offering media agencies and advertisers access to premium advertising environments at scale.
And just last month, print giant Singapore Press Holdings (SPH) and national broadcaster Mediacorp announced they were working together on a venture dubbed the Singapore Media Exchange (SMX).
SMX will commit at least two billion display and video impressions - a "creative" served to a single user at a single point in time - annually across a selection of SPH and Mediacorp platforms. These include the websites and mobile apps of The Straits Times, The Business Times, Lianhe Zaobao, Channel NewsAsia and Today.
In addition to offering brands access to a wide audience of Singapore consumers, the partnership also hopes to address the problem of online ads for some of Singapore's biggest brands appearing next to incendiary content.
For example, in February a video ad by the National Environment Agency appeared on a website that has articles supporting the Islamic State in Iraq and Syria.
A publisher co-operative such as SMX offers a brand-safe environment, where advertising will only run alongside top-tier premium content.
Meanwhile in the United Kingdom, publisher cooperative 1XL was formed in 2014 when premium local news publishers joined forces to create a viable alternative to the portals and larger new-brand sites.
1XL now represents the UK's largest commercial source of news media audience - generating more unique content than any UK peer.
What to consider
Hatching alliances to counter the Google and Facebook duopoly can be an effective route, but it must be well-considered.
On the one hand, it can help raise or maintain the value of sold publisher advertising inventory and reduce the amount of unsold online inventory. For reference, when a consumer clicks on a web page or opens an app, an impression is created, and CPM is the cost per thousand impressions. When publishers pool their inventory of impressions, they can add additional data layers, sell relevant audience segments to advertisers, and ensure premium advertising space next to quality journalism. This enables advertisers to reach the right type of relevant user in a brand-safe environment while publishers increase their CPMs.
In this way, the publisher co-operative model enables publishers to sell unsold inventory via a central hub for advertisers to find added value. It allows smaller publishers to leverage the power of the wider group, which ultimately provides greater revenue for each publisher than if they operated alone.
On the other hand, some publishers are concerned that collaboration among traditional competitors brings its own complications.
In many ways, selling ad impressions is like operating an airline.
Like air carriers, publishers deal in a product (online impressions) that is limited, perishable and variable in price. These characteristics make it possible to control inventory availability in a way that affects prices and maximises revenue.
But this complexity may also make some publishers uncomfortable with the loss of control associated with delegating the responsibilities around programmatic sales externally. Some publishers may need assurance that they have adequate oversight over pricing strategy or yield.
One circumstance in which publisher control over their inventory sales strategy is crucial is when websites receive an inordinate amount of traffic - during a major unexpected news event, for example.
Publishers need to take into account traffic spikes and valleys, and have put into place a programmatic advertising strategy, alongside any direct deals they may have, which allows them to sell advertising space based on real-time market demand, or they risk being ill-prepared to adapt to major flows of traffic and maximise their revenue in these situations.
Naturally, there may also be differences of opinion among publishers around the value of their advertising inventory, as well as variations on how pages and ad placements are laid out.
One way to combat this is to offer a tiered pricing structure that more transparently reflects the value of the impression, size of ad unit and placement on the page, and be priced accordingly.
To tie this back to the previous analogy, tiering inventory is like offering different seat options on a plane: some seats are more expensive because they include extra legroom or better-quality food.
Likewise, some ads are placed above the fold of a website and get a greater amount of users seeing it; therefore they are more expensive to buy.
Not only would this help differentiate each type of ad unit and where it's placed, but it could also help combat negative perceptions around monopolisation or price-fixing.
Given the current industry backdrop, it is logical to see an air of solidarity emerging among publishers.
While challenges may emerge when competitors come together, there is still plenty of room for differentiation. More importantly, they share a common challenge: protecting the health of the open Internet from the Google and Facebook duopoly.
•The writer is the managing director and vice-president of AppNexusAsia-Pacific, an Internet technology company that enables and optimises the real-time sale and purchase of digital advertising.