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THE BOTTOM LINE

CFOs should leverage adtech to support bottomline growth

CHIEF financial officers (CFOs) at some of Singapore and South-east Asia's biggest companies and high-growth startups are too often unaware of adtech as a possible revenue stream - yet they cannot afford to be when the financial health and long-term viability of the business is their primary concern.

Advertising continues to be a huge and growing industry. Ad spend in the Asia-Pacific is expected to grow 7.1 per cent this year to reach US$177 billion, according to a forecast by MAGNA. The region is the second largest global ad market behind North America, currently commanding 30 per cent share of total global advertising revenue. This presents a substantial untapped revenue stream for CFOs to grab a slice of by allowing outside brands and agencies to buy ad inventory on their platforms.

Due to a variety of reasons - a lack of knowledge, a refusal to get involved in the marketing functions of the company, or even a lack of technology - CFOs have, in many cases, refused to get involved in the adtech side of their business to date.

New advertising technology, or "adtech", is providing the opportunity for mobile-app businesses, with large audiences sometimes numbering in the millions, to grow revenues by monetising existing user bases. These businesses have to date been largely unable, due to technological limitations and know-how, to serve programmatic ads within their apps. But now, thanks to new adtech solutions, that is starting to change, giving CFOs access to a new revenue stream that could be worth millions a year to their bottom lines.

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This has come at a time when pressures on CFOs are growing. A recent survey by Deloitte found that CFOs in South-east Asia are increasingly expected to take on more challenging and diverse roles to steer their companies towards achieving the organisation's strategy. They are also charged with instilling a consistent and effective financial approach and mindset to enhance performance and grow the business. According to the survey, chief executive officers (CEOs) are demanding more of their CFOs, who ideally should be more than the "numbers" people - they must also be effective strategic business partners.

Take, for instance, one of Indonesia's leading mobile apps, Tokopedia. If Tokopedia introduced programmatic advertising on its platform, opening it up to regional and global brands and agencies, it could add tens of millions of dollars a year to its revenues. This is based on capturing 5 per cent of Indonesia's mobile advertising market - not impossible considering the company already has 10 million daily shoppers, four million merchants, and is valued at US$7 billion.

For a business model such as this, the CFO can leverage programmatic within the mobile app to great effect in three key ways. Let's look at each of them in turn. First, internal placement auctions would allow for real-time bidding (RTB) to determine pricing and sequence of listings displayed by merchants - those who bid higher amounts would be more likely to show up in search results.

REAL-TIME BIDDING

For example, if you are a fashion outlet selling scarves on the platform, you could set the amount you're willing to pay for clicks or impressions associated with specific search terms, thereby determining how visible you will be to people searching in the relevant fashion categories. Pay more, and you will shoot to the top of the "scarf" listings - pay less, and you will still be visible but it will take users longer to scroll through your competitor's offerings before they find you.

Second, promotions of listings within the app could be programmatically advertised in external apps, to audiences outside of the app it was originally listed on, in order to widen the reach and appeal of a given product or service. So, if someone on another app or website was searching for a scarf like the one being sold by the merchant on Tokopedia, clicking on the ad will take them into the app where they have the option to buy it - instantly and seamlessly.

Lastly, audience data gathered by the app on its buyers and sellers could be used to sell ad inventory to external brands and agencies who want to reach the kind of audience that the app commands.

In all these cases, CFOs must be aware of the advertising value to third parties currently locked up in the data being recorded and stored anonymously on what people are searching for, buying, and selling in their apps. The data indicates demand and supply in a given market (that is, Indonesia) and can be sold for targeted advertising campaigns to brands and agencies in South-east Asia or around the world.

For the modern CFO, ignorance of technology and the new opportunities it is creating to support the financial viability of their business is no longer an acceptable excuse. They must seek out and constantly be on the lookout for ever-changing ways of growing their bottom line through technology.

Yes, this might be through adtech, but it could equally be through a dozen other new opportunities being created by innovative technological breakthroughs in advertising and other areas.

  • The writer is CEO of Pocketmath.