I have been reading about Affle (DRHP, Nomura Report etc.) and have following questions about the business.
The first thing I am most interested in is Affle’s relationship with Google/Facebook - as publisher & as competitor & as OS provider for the device.
With Google, Facebook as publisher - only 5-10% of the ads are provided by third party tech platforms & rest are provided by in-house ad tech teams of these giants. How does one see this space evolving?
Can share of third party vendors go from 5-10% to 20%? Why would this happen?
The Nomura report claims that time spent on Google/Facebook is likely to reduce in favor of third party apps. This is the trend seen in the US. This trend needs to be tracked.
With these giants as competitors, why would a publisher or advertiser go to Affle vs. say Google or Facebook? May be Affle is small and can provide more customized services? But quality of data/insights might be far better for for Google for instance. Why choose Affle over Google or Facebook remains an important question for me.
To take this competition aspect forward, does someone know if Google/Facebook work on performance based model (CPCU) or they still work on impression based models (CPM). Nomura report claims that only 10-15% of the ad tech market in India is performance based & Affle model is likely to force everyone else to performance based model. Is performance (CPCU) based model really an competitive advantage for Affle & for how long?
Bringing in further points, how do CPCU based pricing gets dictated in the industry? From Shemaroo experience, it looked like CPM rates moved down for YouTube over the years. What happens to CPCU rates if Google/Facebook reduce the rates?
Can Google ask for a cut from players like Affle? Can Google hinder Affle from collecting data?
The second thing that hit me from Nomura report is that Affle might have minimal presence in Video ads. Does Affle have capability to place video ads on platform like Times Group? How about YouTube? Given that video is one of their strategic points & there is gold rush in video viewing, it is important to get split of video vs. non-video revenue.
Finally, the question of Amazon - Amazon has 7% market share & it is third largest ad tech player in the US. Amazon has launched ad tech services in India. What happens to Affle over the long term?
The broader question is - Why would any publisher with large amount of data (Hotstar, Jio, Flipkart, Times Group etc.) will not create its own ad tech platform? Currently publishers seem to get 40% of the ad spend in value chain. Why not take that number to 70-80%?
Another aspect is wide variance in monetization factor in India (6.9%) vs. EM (1.8%) or DM (0.9%). Most people believe that monetization factor in EM or DM will improve to India. My question is - can reverse happen - where India monetization factor goes down? Why is it high in India? Is it simply matter of focus?
I am also interested in numbers & capabilities of InMobi & other players - if someone has done work, kindly do share.
Disc - No investments, not a buy or sell recommendation.