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Analysis: Why are Latin Online Ad Networks Red Hot? (Premium Article)

Online Ad-networks are set to capture a substantial piece of the rapidly growing Latin digital advertising market. Why is this so? Who are the main players? What proportion of the overall online advertising business is captured by online ad networks? The recent acquisition of Consorte Media by AudienceScience and more…


Below are some questions Portada’s editorial team tried to answer:

Why are Latin Online Advertising Networks so hot?

The Latin digital media market (U.S. Hispanic, Spain and Latin America) is growing at a very high rate. Online ad networks reduce the complexity of the buy for clients by spreading media buys in tens, often hundreds of different websites. They mostly buy online display advertising, as opposed to search, and that is precisely the part of the advertising market that is growing the most.

Most of the fast growing U.S. Hispanic digital advertising market (approximately $150 million) is online display advertising and for Latin America, Magna Global, expects online display to grow by an annual compounded growth rate of 14.2%, versus 12.7% for paid search, to $1.36 billion by 2015. So obviously, the pie available for intermediation by ad-networks in both the U.S Hispanic and Latin American markets is growing.

What proportion of the overall online advertising business do online ad networks capture?

In last years’ IAB Conecta Conference in Mexico City, panelists emphasized the relatively low participation of online ad networks in Latin American online advertising compared to the U.S and Europe. In the U.S. online advertising market, transactions done through online ad networks amounted to only 5% in 2006, this ratio grew to 30% in 2007 and to approximately 50% in 2008 and 2009. There is no public data for the U.S. Hispanic market, but Portada estimates that approximately $30 million of the overall $180 million U.S. Hispanic online advertising market are intermediated through online ad networks.

To some extent, the presence of online ad-networks is a sign of the maturity of the market and as Latin online markets grow, so will the business of online ad networks.

What was the rationale behind the recent purchase of AudiensceScience of Hispanic focused Consorte Media?

AudienceScience is one of the major global online ad-networks. (Yesterday AudienceScience announced that it bought the German Ad-Targeter Wunderloop. AudienceScience wanted to have a foot in the fast growing U.S. Hispanic market, a competitive advantage over some of its main competitors.

For how much was Consorte bought?

The figure was not disclosed. However, Portada calculates that Consorte, which like AudienceScience, is venture capital backed, was bought for not more than $5 million. We estimate that Consorte’s share of the $30 million of Hispanic online advertising intermediated by online ad networks lied at approximately 15%.  So Consorte’s billings must have been close to $5 million, and accounting for  the standard 20% commission, its revenues close to $1 million. Applying a “rich” 5 times revenue multiple, we get a valuation for Consorte of $5 million.

July 21: Part 2:

– The internationalization of Latin Online Audiences

– Who are the most important online ad-networks in the U.S. Hispanic and Latin American markets

– Technology as an opportunity and a challenge for Online Ad-networks

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