The Exchange Lab co-founder James Aitken in the Toronto office.Peter Power/The Globe and Mail
A series looking at the unique challenges facing Canada's midmarket companies and how they innovate, stay competitive and grow. In this piece: With North American growth in the digital advertising sector, the Exchange Lab's James Aitken sees opportunities for agile mid-size companies.
James Aitken didn't want to leave Canada, but when he launched his career in digital media in the 1990s, there was no industry to speak of.
Things couldn't be more different today.
In 2011, Mr. Aitken returned to Toronto to establish the Exchange Lab Canada Inc., the North American headquarters for his current venture, the Exchange Lab, a private company based in London, which helps marketers plan and execute their digital advertising campaigns through proprietary technologies.
"The Canadian digital media market is growing up in a big way," Mr. Aitken says. "There's an opportunity to do technology development in Canada, and we're taking the bull by the horns on that."
And Toronto is a good location for mid-market companies in this sector, according to Mr. Aitken and others in the field.
As co-founder and chief executive officer, Mr. Aitken now oversees 60 North American employees from his downtown Toronto office, and 150 globally. Mr. Aitken won't disclose revenue, but says about half of it is now generated in North America. The Canadian operation makes more than $5-million, according to the company.
The early 2000s has seen a monumental shift in the way Canadians consume media. Print and television – once so dominant – have been edged aside by the Internet, which offers ever more ways to connect and consume.
Advertisers have caught on, and are now pouring money into online approaches – banner and pop-up ads, YouTube commercials and promotional e-mails, for example. Last year, Internet advertising surpassed television to take the largest share of ad spend in Canada at just more than $3.5-billion, according to the Internet Advertising Bureau (IAB) of Canada.
That number is expected to grow to nearly $4-billion by 2015.
The move to digital is being fuelled by a new economic reality – marketing budgets have stayed flat the last few years, and advertisers are increasingly looking to do more with less.
Online marketing allows advertisers to track their ROI using powerful tools that help them zero in on the most productive segments. These tools leverage reams of data that reflect buying patterns of potential customers.
"Now, we don't buy audiences based on content," Mr. Aitken says, "we buy audiences based on behaviour."
"This space is still moving like it's just getting started," says Joe Strolz, chairman and CEO for IAB Canada. "There are major changes occurring every 12 to 18 months."
Much of the change is being driven by programmatic marketing – the industry's catch-all term for automation – which is transforming the buying and selling of online ad space. Advertisers and publishers can now avoid the high costs of in-person meetings, for example.
Instead, they can use virtual marketplaces, such as the ones the Exchange Lab connects with, to bid on and auction ad space in real time.
"Every mature industry goes through some period of automation," Mr. Strolz says. "Advertising is going through that transformation now."
Automation is all about technology and, as recently happened in the financial industry, the trend is creating thousands of high-tech jobs.
Canada's deep talent pool, therefore, has made it an attractive venue for entrepreneurs. "It's creating an opportunity for us to be more creative," Mr. Strolz says.
Such creativity is essential in digital media, where intense global competition constantly keeps business owners such as Mr. Aitken on edge.
New York has been the traditional hot spot, but that may be changing. "[New York] is incredibly competitive, people don't stay around long," says Andrew Casale, vice-president of strategy at Toronto-based Casale Media Inc. "It's almost a revolving door."
Despite rapid development in digital media, though, Canada still lags behind other developed nations, chiefly England and the United States. "Canada always adopts a little bit slowly when it comes to new technology," Mr. Casale says.
However, Toronto remains an attractive option.
"What's nice about Toronto is we have all the talent we need to build and scale the business," Mr. Casale says. "It's a competitive market, but it's not as cutthroat."
The lower costs of operating in Toronto compared to New York are attractive to mid-market players such as the Exchange Lab and Casale Media, which don't have the resources of a Google or a Facebook.
Toronto is also well located – Mr. Aitken says he can hop on a plane to Boston or New York, cut a deal, and still be back for dinner.
He contends that mid-market companies such as his are more agile than the big players in this market. "Bigger companies have a lot of process and approval," he says.
"We can come up with ideas, we can experiment with trends, and we can throw resources at them very quickly. That's the key advantage to being mid-size."
Agility will likely be a key factor as the future becomes less predictable – the digital advertising space is still evolving rapidly, making the future uncertain.
"The distinction between digital media versus newsprint, versus broadcast is temporary," Mr. Strolz says.
As the lines between online and traditional broadcasters blur, advertising will target ever more precise segments. "At the end of the day, people want to have relevant advertising that affects them personally," Mr. Aitken says. "They want to have one to one, rather than one to many, like it used to be."
Programmatic will play a key role in this evolution, and will become more dominant as a result. Mr. Aitken estimates it will make up 25 per cent of global ad spend by 2017.
He also sees the return of Canadians such as himself, who were once forced to go abroad to find work. "It's really great to be back in Canada running a profitable, strong business," he says. "That brain-drain in the 90s south of the border, I think it might be going the other way."
THE MID-SIZE ADVANTAGE
Mid-market online advertising companies such as The Exchange Lab and Casale Media play a unique role in Canada's digital media landscape. Experts say they can:
React quickly to new trends
Mid-size companies tend to be more agile than their larger counterparts, but still have the resources many small businesses lack to fund innovation.
Attract top talent
Young workers prefer the flexible work environment that a small organization can provide, but still expect state-of-the-art training, career advancement, and competitive salaries. Many mid-size companies can deliver all of these.
Form strong, stable relationships
In smaller organizations, it's easier for the CEO to stay personally involved in relationships with major clients and business partners.