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Roman Vrublivskyi, chief commercial officer at Smart-Hub.io, dwells upon challenges of the ad tech business in MENA and shares his vision on how the white-label model can solve them.
While global economies were shattered by COVID-19, additional challenges, like tightening digital privacy regulations and the walled gardens, were reshaping the ad tech market in MENA.
In the new reality, many business owners have had to reinvent their business practices and processes in an attempt to adapt. In such circumstances, new business models, like “white-label” quickly surfaced and gave businesses yet another chance to establish a brand and accelerate operations. What is this white-label model, and why are more and more entrepreneurs in ad tech preferring to start their own businesses based on it?
Independence as an imperative need for ad tech in MENA
Google, Facebook and Amazon together account for more than 70% of ad business; in the MENA, these giants also represent the top ad networks. Last year’s lawsuit also stated that Google might have entered into an agreement with Facebook, according to which the advertising market was unofficially distributed among these giants. Allegedly, with this agreement, Facebook received priority to sell ads on mobile apps easier and faster, while Google, for its part, maintained its leading position in the market. The deal was jokingly called Blue Jedi, (a reference to the Star Wars franchise), as NY times reported.
History remembers a lot of scandals with tech giants that also systematically violated the fundamental rights of users for privacy and data security (Cambridge Analytica case, China ‘spy chip’ scandal, etc.). Because these issues were becoming even more intense during the last couple of years, the world started to massively shift towards stricter privacy regulations and data processing standards.
GDPR, CCPA, COPPA - countries and regions now develop their own privacy regulation frameworks (which, in many cases, restrict advertising identifiers so targeting becomes even more difficult). For example, on September 9, 2021, UAE introduced a new federal data law that, in essence, had many similarities with GDPR. UAE is fueling the growth in programmatic advertising in the MENA; however, in the rest of the Middle East region, it struggles to evolve because of skills shortage, poor attribution and lack of robust technology partners.
In these circumstances, the problem with so-called “walled gardens” only tightens up. Ad tech giants dictate the advertising prices, while smaller ad tech companies struggle to offer clients strong and privacy-compliant targeting mechanisms. On other hand are advertisers and publishers; for them, it becomes impossible to find out which fraction of commission ad chains consume. For this reason, they seek independent advertising technologies that guarantee them transparency over impression cost, inventory quality and commissions.
Why white-label is a win-win business model for ad tech
White-label is a business model that has been known and used by tech companies for a while. The essence of it is that it enables a company to “borrow” already tested and tried technology from an established company-developer (manufacturer), label it as their own and capitalize on it by reselling to their own clients. This way, a company with a humble starting capital can create and put to business a new solution in less than a month (or even a week). The company provider, meanwhile, oftentimes provides guidance and additional support to the company that enters the ad tech business for the first time.
This way, the new company enters the market effortlessly - without coding, testing or licensing the platform. Plus, deploying a pre-built tech core is always more affordable than building something from scratch. Other advertising businesses use white-label platforms as a way to reinforce their existing capacities (i.e., by joining RTB, by tapping into universal trading connections VAST-to-VAST, VAST-to-RTB, VAST-to-ALL, by extending ad format capacities and so on).
During the pandemic, when every ad dollar should be accounted for, ad tech businesses strived for better accountability over advertising money distribution along supply chains. To cut the media budgets and get rid of third-party commissions, brands, like Procter & Gamble, Kellogg and Unilever, took their programmatic in-house. Apparently, it also became a trend, since it was expected that, by 2022, two out of three marketers would bring programmatic in-house.
“The market requests for supply chain transparency and accountability are driving the wave of business transformations. Companies no longer want to depend on ever-changing conditions that tech giants dictate; this, in turn, created a favorable environment for independent ad tech to evolve. Lockdown has also changed where and how people consume content, and, as a result, we now have audio and CTV as booming channels. Brands that want to stay flexible and timely invest budgets into those trending channels. Having technology that you can manage and adjust can make this all easy and doable,” says Roman Vrublivskyi, chief commercial officer at Smart-Hub.io.
Building a proprietary ad tech platform is something that could save big brands a lot of money in the long run; however, it also requires a lot of investments and time. In this case, purchasing and renaming an already existing ad tech solution doesn’t appear advantageous, since tailoring such a product and scaling in the future will require additional investments and labor.
With white-label solution companies aptly avoiding substantial risks, they can diversify and launch new ad tech business branches without compromising tech quality. They receive a fully hosted and maintained solution that is regularly updated, scaled and, in many cases, adjusted specifically to the client’s needs (including very specific integrations and functionalities).
Where do we go now?
Like never before, advertisers, publishers and entrepreneurs are struggling because they almost entirely rely on walled gardens. The white-label model presents a unique chance to grow an entire independent ad tech sector, because independent ad tech solutions of the new generation can differentiate themselves with transparency, accountability and data ownership. Right now is a turbulent time, but it can be the turning point when small advertising businesses finally get a chance to compete with giants through innovation and better service conditions.
If previously it was a big challenge to raise and maintain an independent ad tech platform (or take programmatic in-house), today, new business models - like white-label - make the process easy, affordable and risk-free. Most likely, the white label model will become the next big thing in ad tech, as it paves the way to independence and ultimate media-buying control.
