I've been trying to figure out the German display market for some time. It's ridiculously confusing. If you were to draw up a Kawaja eco-system map for Germany everyone would occupy the same two or three squares because it appears - to me anyway - that key players in the eco-system encroach on each other's primary functions. My recent trip to Berlin and conversations with industry people have helped me better understand some of the complexities in the display space there - and how programmatic buying and data-driven display is going to evolve in Germany.

Ich Bin Ein Sales House

If there is one thing the Germans love, it's the good old fashioned sales house model. They are everywhere in this market - from large operations to one man bands. As far as I can understand the typical German sales house is selling unsold inventory to agencies on behalf of publishers - mostly blind and transparent inventory. The majority of these sales houses are doing little optimisation or targeting. These sales houses trade massively on relationships. Relationships with both the publisher and advertiser. It's essentially an antiquated ad network model that's prospered in Germany for so long - due mainly to a lack of sophistication in how display is bought and sold. Will they continue to do well as the market inches its way towards automation? Possibly. But publishers and advertisers will be demanding more than just a basic arbitrage offering. We want more audience targeting. Where is it?

Agencies Operate Ad Networks

This was an interesting revelation over the past couple of days - as it answered a major question around why more German agencies weren't jumping into automated trading. They own ad networks. Yes. They aggregate supply. They make good margin. And they arb their clients. You know what? Their clients don't mind. These agencies network still work out cheaper than the typical Germany ad net. Everyone seems to be perplexed with the GroupM Marketplace in the UK. Surely, you can't be an ad net and agency at the same time? Should you be making margin on media sold to a client? Well, the reality is that WPP operate TWO ad nets in Germany - and they remain the biggest player in the display space there. This changes the dynamic of the market for automated trading. I have to caveat all this by saying that one - maybe two - major agencies will be rolling out their ATDs and running test campaigns in Germany over the next six months.

All The Real-Time Demand Is Coming From Ecommerce Clients

This is a no-brainer as the Germans love retargeting. They couldn't stop talking about the value of retargeting at this week's Next Data Love conference. This is why the majority of demand on the German RTB exchanges is coming from e-commerce advertisers. If you are DEM/ DSN this could be a good place to look for budget. While there might be some opportunity for exchange traders to get on media plans for German brand advertisers, the impression I got from agencies at the Next 2011 event that they will be a mass of ATDs coming anytime soon. Everyone is working hard to educate the market but agencies won't be rushing into anything. It's all very deliberate with lots of due diligence. In the meantime e-commerce advertisers will remain kings of the RTB space. But also look to big daily deals advertisers piling in at some juncture.

Lots Of Yield Optimisers. Lots.

It's hardly surprising, given that everyone is an ad network/sales house here, that publishers are turning to SSPs/ Yield Optimisers to manage yield across unsold inventory. The market is still at an early stage. I think there will be a big move towards RTB once the agency demand arrives. Admeld, AdX et al are already helping some publishers put inventory through RTB. There are some in the German market, including Thomas Promny, who are of the opinion that it's way way too early for RTB-enabled inventory. He could be right. But the e-commerce demand and an ATD like Vivaki's Audience On Demand could make it worthwhile for publishers to trade through RTB. Outside of those progressive publishers I think we'll see most work directly with local, European and US yield optimisers. It would be nice to see as much action on the demand side. The demand will come once the exchange traders emerge - driving the uptake of RTB.

So there you go: a few high-level observations from an "outsider" on the exchange marketplace in Germany. This is all going to make for interesting conversation at the upcoming Ad Trader Conference in Hamburg on June 28 - where I'll be moderating a panel on some of the very issues discussed above. Looking forward to it. I'm also happy to take soundings from informed German ExchangeWire readers - if my overview is way off.