ExchangeWireresearch

Thebusinessofmedia,marketingandcommerce

Sustainabilityin

Advertising—JAPAC2023

MatBroughton

ResearchLead,ExchangeWire

Inassociationwith

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Contents

ExecutiveSummary 3

KeyFindings 4

●Section1:Sustainability 5

●Section2:ProgrammaticinJAPAC 27

Acknowledgements 39

Sample&Methodology 39

AboutOpenX 39

AboutExchangeWire 39

Nearlyhalfofallmarketingbudgets

acrosstheJAPACregionareset

tobeallocatedtocarbon-

neutralpartners.

04800,

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Thebshesstnedamistheantomreoe

………

Executivesummary

Theneedforregionalandglobalactiononclimatechangehasneverbeenmoreapparent.Thisyearalone,theJapanandAsia-Pacific(JAPAC)regionhasseenrecordtemperatures,inconjunctionwithsevererainfallandheavyflooding.

ThelatestannualreportfromtheWorldMeteorologicalOrganisationsuggeststhereisastronglikelihoodthatglobaltemperatureswillclimbbeyondtheciticalwarmingthresholdof1.5degreescelsiusabovethoserecordedpre-industrialisation,reinforcingthenecesstyforglobalsupplychains—includingtheprogrammaticadvertisingecosystem-todivedowncarbonemissionsinatimelyfashion.

Whileprogrammaticadvertisingcontinuestogrowglobaly,sotoodoesitsassociatedemissions,withfindingsfromScope3suggestingthatdigitaladvertisingemissionsamountto72milliontonnesannually.

InouranrualexaminationoftheJAPACadvertisingandmarketingindustry,producedincollaborationwithOpenX,weagainreturntoourtestedmarketsofAustralia,Inda,Indonesia,andJapan,withanincreasedfocusonsustainabilitywithinthesectorThreeofthesemarkets,specificallIndia,Indonesia,andJapan,havebeenidentifiedbytheEconomicandSocialCommisionforAsiaandthePacificasbeingamongthoseprojectedtosufferthegreatestabsolutemonetarylossesundertheworst-caseclimatescenario.

CombiningoriginalquantitativedatawithinsightfromJAPACadvertisingandmarketingpractitioners,thisstudyexaminesthefollowing:

→MeasurementofcarbonemissionsacrosstheJAPACadvertisingindustry

→ImplementationofScience-BasedTargetsInitiative(SBTi)goals

→Budgetallocationforcarbon-neutralpartners

→Factorsinhibitingthereductionofcarbonemissions

Theoverridingmajorityofthose

→ThecurrentstateofprogrammaticadvertisinginJAPAC,including,

surveyeddeemedsustainability

metricstobeimportantto

theirbusiness

→Changeinprogrammaticspendandassociatedpublisherrevenue→CombatingfraudandMFA(made-for-advertising)sites

→Reciprocitytoworkingdirectlywithdemand-sideandsupply-sideplatforms(DSPsandSSPs),withoutintermediaries

Asdetailedwithinthisreport,sustainabilityisakeyfocusforprofessionalswithinJAPAC,withtheoverridingmajorityofthosesurveyeddeemingsustainabilitymetricstobeimportanttotheirbusiness.Promisingly,advertisingand

marketingprofessionalsareconvertingthesetheoreticalapplicationsintotangiblebusinessoutcomes,withnearyhalf(47%)ofll

marketingbudgetsacrosstheJAPACregionsettobeallocatedtocarbon-neutralpartners(correspondingcloselywiththeproportionobservedinourprewiousstudyassessingtheEuropeanmarket).Moreover,thoughconcernsregardingfraudandMFAsitesremainhighwithintheregion,thesearedeclining,indicatingthatactionisbeingtakentoreducethissourceofbothwastedadspendandneedesscarbonemissions.

Whilethefindingsreflectpositivelyoneffortstoreducecarbonemissionsandpromotesustainabityacrosstheregion,furthercros-industryworkneedstotakepacetodrivedownoperationalcostsassociatedwithreducingcarbonemissions,sothatsmallerbusinessesndevelopingmarketscancontinuetobuildupontheirprogrammaticadvertisingcapabilitiesinasustainablemanner.

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Keyfindings

SUSTAINABILITY

→TheoverridingmajorityofrespondentswithintheJAPACmarketdeemsustainabilitymetricstobeimportanttotheirbusinesseswithinthenext24months.

→RespondentsacrosstheadvertisingecosysteminJAPACindicatedthatnearlyhalfofallbudget(47%)issettobeallocatedtocarbon-neutralpartnersinthenext12months.

→Increasedoperationalcostswerecitedastheleadingfactorimpedingcarbonreductiongoals

acrosstheJAPACadvertisingindustry,withoverhalfofrespondentscitingthisasadriver.

→However,allsurveyedfactorswerecitedbyaminimumof30%ofrespondents,indicatingthatthereisnoonesinglesilverbulletforreducingcarbonacrosstheregion.

→NearlyhalfofrespondentsacrossJAPACstatedthattheyhavesetScience-BasedTargetinitiative(SBTi)goalstoreducetheircarbonemissions.

→PositivelyforeffortstomitigatetheenvironmentalimpactofthedigitaladvertisingindustryintheJAPACregion,nearlyhalfofrespondentsarenowmandatingthattheiradvertising

partnersreporttheircarbonemissions.

PROGRAMMATIC

→Despiteglobaleconomicturbulence,programmaticrevenueandspendingcontinuestoclimbinJAPAC,with64%ofrespondentsreportinganincrease.

→Concernoverfraudandquality-relatedissues,suchastheuseofMFAsiteswithinadvertisingremainshighacrosstheJAPACregion,encouraginglyhoweverthishasfallensincelastyear.

→DespitethemarketweatheringthechangesimplementedbyAppleonitsmobileplatform,themajority(62%)oftheJAPACprogrammaticindustryisatleastsomewhatconcernedabouttheupcomingprivacychangesthatGoogleismakingacrossdisplayandmobile.

47%

ofallbudgetissettobeallocatedtocarbon-neutralpartners

64%

ofrespondentsreportedan

increaseprogrammaticrevenueandspending

62%

oftheJAPACprogrammaticindustryisatleastsomewhatconcerned

abouttheupcomingprivacychangesthatGoogleismaking

→AcrossJAPAC,theoverridingmajorityoftheregionareopentoworkingdirectlywithDSPsorSSPs,withouttheuseofanintermediarypartner.Thismajorityisremarkablyconsistent,withthisbeingthecaseacrossallsurveyedmarkets,companytypes,andcompanysizes.

OpenX

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Thebshesstndamistheansomreo

ExchangeWireresearch

Section1:

Sustainability

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ExchangeWireresearch

Thebashesstnedsmiethendomreooe

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Importanceofsustainabilitymetrics

Theimportanceofeffortstomitigateclimatechangeonagloballevelcannot

beoverstated.TheIntergovernmentalPanelonClimateChange(IPCC)has

deemedthateveryregionfacesmoresevereand/orfrequentcompoundclimaterisks,includingcoastalflooding,drought,sealevelrises,andsocialimpacts.

Tothatend,itisextremelyencouragingthattheoverridingmajority(85%)ofrespondentswithintheJAPACmarketdeemsustanabitymetricstobeimportanttotheirbusinesseswithinthenext24months,cboselycorespondingtotheproportionoftheEuropeanmarket(92%)whichdeemedsustainablitymetricstobeimportanttobusinesseswhentestedinH22022.

Figure1:Importanceofsustainabilitymetricsoverfollowing24months-JAPAC2023

50%

43%

42%

40%

Percentageofrespondents

30%

20%

15%

10%

0%

Toppriority

toppriority

NotimportantImportant,butnot

ofrespondentswithintheJAPACmarketdeemsustainabiitymetricstobeimportanttotheirbusinesseswithinthenext24months

oftheEuropeanmarketdeemedsustainabilitymetricstobeimportanttobusinesseswhentestedinH22022

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RespondentsinJapanassignamuchlowerimportancetosustainabitymetricsinthecoming24monthscomparedtotheothersurveyedmarkets,with52%deemingthemnotimportant(comparedtojust2%inIndonesia),andonly14%denotingthemasatoppriority

(comparedwith61%inIndia).Thiscoinddeswiththemarketbeingsignificantlylessconcernedregardingpreviousandupcmingidentifierdeprecation,aswellasdemonstratingtheleastconcernwithcostsassocatedandscarcityofexpertiseintemsofachievingcarbon

reductiongoals.Whiethiswouldotherwsesuggestahigherthresholdforbusiness-relatedconcernhere,thereareworryingimplicationsforsustainablityeffortswithintheJapanesemarketwiththelowimportanceofsustainabiltymetrics,asewidencedbythefindingthatlessthan10%ofthosesurveyedinJapanareactivelymeasuringtheircarbonemissions(seeMeasurementofcarbonemissions).

Figure2:Importanceofsustainabilitymetricsoverfollowing24months(JAPAC2023)-bymarket

●NOTIMPORTANT●IMPORTANT,BUTNOTTOPPRIORITY●TOPPRIORITY

80%

percentageofrespondents

ofrespondentsinhapandeemed

sustainabiltymetricstobetoppriorityinthecoming24months

ofrespondentsinIndiadeemedsustainability

metricstobetoppriorityinthecoming24months

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ImportanceofsustainabitymetricsforJAPACrespondentsscalesrelativelyconsistentyaccordingtocompanysie,withrespondentsbasedatlargeompaniesassigningthehighestlevelofimportanceforthese.Manypubliccompaniesarenowincorporating

environmental,social,andgovernance(ESG)reportingintotheirpublicfinancialstatementsand/ordedicatedreports,withmanymarketsmovingtowardsmandatingthis.However,itisimportanttosupportsmallercompaniesintrackingtheirownsustainabilityeffortsinordertominimiseemissionsacrosstheindustry.

Figure3:Importanceofsustainabilitymetricsoverfollowing24months(JAPAC2023)—bycompanysize

●TOPPRIORITY●IMPORTANT,BUTNOTTOPPRIORITY●NOTIMPORTANT

100%

32%

41%

75%

58%

ofrespondents

Percentaye

50%

45%

45%

25%35%

23%

14%8%

0%

LargeMediumSmall

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Promisingy,respondentshavegenerallyassignedasimilarorhigherlevelofimportancetoaddressingimpactonclimatechangeastheydidtosustainabilitymetricsacrossallsurveyedcomparytypesandsizes,indicatingthatfirmsintheJAPACregionarelookingbeyondmerelytrackingemissionstowardsactivelyreducingtheircarbonfootprint.

Figure4:Importanceofaddressingimpactonclimatechange—JAPAC2023

Percentageofrespondents

NotimportantImportant,butnotToppriority

toppriority

ThoughrespondentsinJapanhaveassignedasignificantylowerimportancetoaddressingtheirimpactuponclimatechange,the

majority(56%)areatleastfactoringthisinasapriority.Therefore,solutionsfortheJapanesemarkethavetomovebeyondtrackingemissions,andincorporategoalsaroundefficienciesandreductions.ThefindingsforJapancontrastwiththoseforbothIndonesiaandIndia,whereoverhalfofrespondents,56%and58%respectively,deemedaddressingtheirbusinessesimpactonclimatechangetobecriticallyimportant.

Meanwhile,only2%ofrespondentswithinAustraliadeemedaddressingtheirimpactonclimatechangetobeunimportant.Thoughalowerproportionofrespondentsassignedthisasatoppriority,thisisahighlypromisingfindingforsustainabilityeffortswithintheJAPACregion,asitdemonstratesthatthosewithinbothdevelopinganddevelopedmarketsareactivelylookingintohowtoaddressissuesaroundclimatechange,bolsteringglobaleffortstodrivedownemissions.Moreover,emerginganddevelopingnations,which

includeIndiaandlndonesiaasperthecountrycompositionofWorldEconomicOutlookgroups(Apri2022),wilbedisproportionately

affectedbytheimpactsofclimatechange(PCC),thusdevelopedmarketswillneedtoactivelyreduceemissionstoavoidglobalharms.

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Leadingsustainabilitygoals

AsperourEuropeanstudyofH22022,respondentsacrosstheJAPAC

regioncitedawidearrayoftopsustainabilitygoalsfortheirbusinesses.Thesetypicallyrevolvedaroundfivekeythemes.

Fourofthese,specificalybrandreputation;businesspreservationandenhancingsales;reductionofcarbonemissions;andwaste

reduction,featuredacrossJAPACaswellasEurope.Thefifth,socialsustainability,wasuniquetoJAPAC,indicatingthepotentialneedfortechnologysolutionsfocusing

towardssustainabilitywithintheregiontobemultifaceted,addressingfactorssuchaspovertyandgenderequalityalongsidethereductionofcarbonemissions.

Overal,reductionofcarbonemissionswas

citedastheleadingsustainabilitygoalacrosstheJAPACregionat29%ofrespondents,closely

followedbypromotingbusinesspreservationandincreasingsalesviasustainabilitypracticesat28%ofthosesurveyed.

Figure5:Leadingsustainabilitygoals—JAPAC2023

●REDUCTIONINCARBONEMISSIONS

●BUSINESSPRESERVATION●BRANDREPUTATION

●WASTEREDUCTION

●sOCIALSUSTAINABLITY

11%

29%

13%

18%

28%

10/39

Weshouldconsiderincentivising

publisherswhenconsistently

deliveringoninitiativesto

reducecarbonemissions

29%

ofrespondentscitedreductionofcarbonemisionsastheirleadingsustainabilitygoal

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ietmgirtresearch

However,theimportanceofthesegoalsvariedsignificantlyaccordingtomarket,companytype,andcompanysize.Firstly,across

thesurveyedcompanytypes,reductionofcarbonemissionswasmorecommonlycitedasaleadngsustainabilitygoalforbrand

respondents(39%)thantheiragency(23%)andpublsher(17%)counterparts.Forthese,businesspreservationandbolsteringsalesviasustainabilityeffortswasamoreimportantdriver,at39%and36%ofrespondentsacrossagenciesandpublishersrespectively.

Figure6:Leadingsustainabilitygoals(JAPAC2023)-bycompanytype

●REDUCTIONINCARBONEMISSIONS●BUSINESSPRESERVATION●BRANDREPUTATION

●WASTEREDUCTION●SOCIALSUSTAINABILITY

Percentageofrespondents

Reductionofcarbonemissonswasaconsistentlyimportantgoalacrossthesurveyedmarkets,thoughthiswasaparticularly

prevalentgoalwithinAustrala(36%ofrespondents).Mearwhile,wastereductionwastheleadingsustainabilitygoalforrespondentswithinJapan,whichisapotentialexplanatoryfactorforthelowerimportanceassjgnedtosustainabilitymetricsacrosthemarkets.

Additionally,socialsustainabity,suchaspromotinggenderequalityandqualityeducation,wasassignedamuchgreaterlevelofimportanceinIndia(24%)comparedtoothermarkets.

Supportingpreviousfindingsonsustainabiltymetrics,respondentsatlargecompaniesgeneralyassignedreducingcarbonemissionsastheirleadingsustainabilitygoal.Thiswasasotheleadinggoalforthosesurveyedatmedium-sizedcompanies,thoughrespondentsatsmallerfirmslendedagreaterimportancetowardsworkingtowardssustainabilityforitsspecificbenefitsforbusinesspreservation,increasedsales,andbrandreputation.

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ExchangeWireresearch

Thebeshestnednmstheantoomm

Driversforsustainabilitygoals

AcrosstheJAPACadvertisingandmarketingecosystem,consumerbehaviourwascitedastheleadingdriverforsustainabilitygoals,witharankingscoreof175,closelyfollowedbybrandreputation(174).

However,thisagainvariedmarkedly

accordingtocompanysize,type,and

location.TheseresultsalsodiffermarkedlyfromdriverstowardssustainabilitygoalsrecordedinEuropethroughNovember

2022,withfinancialriskbeingaleadingdriverinEuropebutarelativelyminordriverwithinJAPAC.

DriverRankingRankingScore

Consumerbehaviour

1"(mostimportant)

175

Brandreputation

2m

174

Legalrequirements

3d

153

Financialopportunity

4

150

Community/competitorinterest

5*

145

Employeeinterest

6

144

Financialrisk

7中

132

Investorinterest

8

125

Clientpressuregt122

Figure7:Driversforsustainabilitygoals—JAPAC2023vs.Europe2022

●RANKING(JAPAC2023)●RANKING(EUROPE2022)

Rank(1=mostimportane)

interest

Driver

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ExchangeWireresearch

Thebeshestnednmstheantoomm

Driversforsustainabitygoalsvarieddramaticallyaccordingtocompanytype.Thoughconsumerbehaviourwasanimportantdriverforagencies,brands,andpublishersalke,themostimportantdriverforeachcomparytypetrackscboselywiththeirfundamentalbusinessmodels,especillyonthebuy-side.Specificaly,brandreputationwastheleadingdriverforbrands,firnancialopportunitytheleading

driverforpublishers,andclientpressureforagencies.

Figure8:Driversforsustainabilitygoals(JAPAC2023)-bycompanytype

●AGENCY●BRAND●PUBLISHER

Rank(1=mosimportant)

interest

Driver

SignificantvarationfordriverstowardssustainabilitygoalswasalsoobservedbetweenthedfferentsurveyedmarketswithintheJAPACregion.Whileconsumerbehawiourwastheleadingdriveroveral,thiswastheleastimportantdriverwithintheAustralianmarket,withfinancialriskinsteadcitedasthemostprominentdriverhere.

JohnHarveyFaurholt,director,advertising&retailmediapartnerships-JAPAC,China,Microsoft,sugeststhatmarketmaturityisthekeyexplaratoryfactorbehindthisfinding,writing,"SustainabilityisanincrediblyimportantinitiativefornotjustthedigitalindustryinAustralia,butforthemarketasawhole.Asaresut,weveseenearleradoptionofsustainabliymeasuresandactionsacrossbothbuy-and-sellsdes,withcearexpectationsandtimeframesforwhenthesearetobeimplemented.Thishasalsobeenreinforcedthroughlegislationandpolicychanges,inadditiontoindustrygroupsliketheIAB,establishingclearguidelines,bestpractices,andframework.Thisholisticresponsehascreatedagreatersenseofurgency(andcolaboration)toaddressanimportantinitativewhileminimisingrevenueimpactordsruption.

Thisdoesn'tmeanthatconsumerbehaviourisntanimportantfactorforAustralianbusinesses-Iactualybeleveit'sbeenattheforefrontofwhat'sdivenanacceleratedresponse,butwe'renowatastageslightlydownstreamofthatparticularconsideration."

Similarly,brandreputationwastheleast-citeddriverforsustainabilitywithintheJapanesemarket,despitethisbeingthesecond-mostimportantdriveroveral,withclientpressurescoringhighlyhere.

Forrespondentsatlargecompanies,communitycompetorinterestandinvestorinterestbothscoredhigheronaveragethanotherdriverstowardssustainabiltyConcurrentlyfinancalfactorsandclientpressureweremoreimportantdriversformediumsizedcompanies.

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smgirtooresearch

…

Factorsimpedingcarbonreductiongoals

IncreasedoperationalcostswerecitedastheleadingfactorimpedingcarbonreductiongoalsacrosstheJAPACadvertisingindustry,withoverhalf(53%)ofrespondentscitingthisasadriver.

However,allsurveyedfactorswerecitedbyaminimumof30%ofrespondents,indicatingthatthereisnoonesinglesiverbulletforreducingcarbonacrosstheregion,with

solutions,training,andlegislativesupportneedingtobemultifaceted.

Notably,theresponsesforJAPAConthis

matterarecloselyalignedwiththeearlier

ExchangeWire/OpenXstudyundertaken

in2022ontheEuropeanmarket.Most

significantly,increasedoperationalcostsaretheleadingfactorimpedingthereductionofcarbonemissionsacrossbothJAPACandEurope.Howeverscarcityofexpertiseisthesecond-mostimportantfactorimpeding

CO?reductionacrossJAPAC,whilethe

directcostofreducingcarbonemissionsoncampaigns,forinstanceviaincreasedCPMs,isamoreprominentfactorinEurope.

Figure9:Factorsimpedingcarbonreductiongoals—JAPAC2023

percentageofrespondent

Figure10:Factorsimpedingcarbonreductiongoals—JAPAC2023vsEurope2022

●PERCENTAGEOFRESPONDENTSJAPAC2023)●PERCENTAGEOFRESPONDENTS(EUROPE2022)

Percentageofrespondent

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IncreasedoperationalcostswereconsistentlythemostprominentfactorimpedingcarbonreductiongoalsacrossJAPACforagencies,brands,andpublishersalike,withallthreecompanytypesalsoconsistentlycitingscarcityofexpertise.However,directcoston

campaigns,lackofexternalpressure,andtheprioritisationofotherindustrytrendssuchasdeprecationofidentifierswereallmorecitedbythebuysidecomparedwithpublishers.

Acrossalthesurveyedmarkets,increasedoperationalcostswereagainthemostprominentfactor,howevertherewassubstantialvariationintheimportanceofotherimpedingfactors.Firsty,lackofexternalpressurewasamuchmoreimportantfactorimpedingcarbonreductiongoaswithinIndia(48%ofrespondents)versustheothermarkets.Prioritisationofotherleadingtrendswithin

theadvertisingindustrywasthejoint-mostprevalentfactorpreventingthereductionofCO?emissionswithinAustraliaat41%ofrespondents,whilethiswastheleastcitedfactorwithintheJapanesemarket.

Figure11:Factorsimpedingcarbonreductiongoals(JAPAC2023)-bymarket

●AUSTRALIA●INDIA●INDONESIA●JAPAN

80%

percentageofrespondents

Forlargecompanies,increasedoperationalcostswerethemostprominentfactorimpedingcarbonreductiongoalsbyasignificant

margin,thoughdirectcampaigncosts,prioritisationofotherindustrytrends,andscarcityofexpertisewereallheavilycited.Theprofileofcarbonreduction