Top AdTech trends to watch in 2023

Welcome to the first edition of Xenoss MadTech Digest, where we examine market trends and best practices in MarTech/AdTech software development. Here you can find insights from Xenoss' team, our friends, and partners on how to address the industry's most pressing challenges. Tune in for technology guides, market analytics, and expert roundups.?

Entering 2023, many of us want to know what to expect and what to keep an eye on in the year ahead. A brief AdTech industry overview suggests that programmatic consolidates its positions in maturing media formats while standing its ground with emerging first-party solutions.

Let's look at what AdTech trends will spread over the next year and will be relevant for advertising companies, media, publishers, and agencies in 2023. A more detailed review of?AdTech trends for 2023?you can find in our blog.?

The onset of first-party data infrastructure?

Although Google?has again postponed the termination?of third-party cookies until 2024, the industry is entering the first-party data era.

AdTech solutions based on sustainable universal IDs, first-party infrastructure, and transparent consent mechanisms for data sharing. While first-party data and user intelligence are becoming the new lifeblood of AdTech, SSP/DSP-owned?data clean rooms?and deep integrations with major?cookieless solutions?appear to be a solid offering for ad businesses.

Convergence of SSP and DSP?

Buy- and sell-side AdTech companies are?becoming much more connected?and even alike. SSPs are noticed to forge agreements with media agencies, while some DSPs, like The Trade Desk is, promoting?direct integration with premium publishers.??

It leads to a new market model where programmatic platforms will need to create a holistic ecosystem that connects buyers, sellers, publishers, data platforms, and everything in between. SSPs need to consider introducing buyer functionality through?custom DSP development. At the same time, ad platforms with access to premium inventory would benefit greatly from?developing their own SSPs.

Pivot to contextual advertising

While behavioral targeting is slowly retiring,?contextual targeting?is regaining popularity. However, advertisers now need the new context quality — comprehensive reporting, predictive analytics, and ultra-narrow targeting as they are not ready for a broad categorization of CPM networks.

As a result, the market is?developing new programmatic tools, from AI-based predictive marketing platforms to various contextual solutions. AdTech businesses like?Captify,?Criteo, and?Silverbullet, formerly in the behavioral targeting industry, are now actively?investing in contextual alternatives. In fact, the industry is projected to hit?$335 billion?by 2026.

Rise of CTV measurement?

CTV ad spending is set to?increase?up to $18.29 billion in 2024, and with the launching by?Netflix,?Disney+, and other platforms, ad inventory will continue to grow in volume. However, media buyers have doubts about CTV advertising, worrying that?over $1 billion?in ad budgets is wasted on running ads when the CTV sets are off.

ML-based creative optimization?can significantly reinforce CTV advertising through engines that can recommend the best music, visual material, and messaging tactics to approach a viewer. In 2023, we will also see a swift adoption of the OM SDK standards from the?IAB Tech Lab?among publishers and an onset of attribution platforms that account for CTV audiences.?

Supply chain transparency

Last year, IAB Tech Lab finalized the?OpenRTB 2.6,?offering additional flexibility for the supply and demand sides in CTV and contextual ads. To help reduce fraud, they also launched?Ads.txt 1.1, which adds two new values for publishers to specify within their ads.txt files as well as?ads.cert 2.0.

IAB Tech Lab has also introduced the?Transparency Center, a public database for businesses to contribute information about their audience groups. The full implementation of the Transparency Center in 2023 will provide the ability to put a stop to inventory misrepresentation and supply-chain fraud.?

Programmatic retail media networks?

Retail media networks?are increasingly using a programmatic approach, linking retail media assets with off-site properties and third-party media for omnichannel coverage at retail campaigns. For instance,?Walmart partnered with The Trade Desk?to introduce its own DSP, enabling advertisers to deliver advertisements on programmatic inventory and its retail media placements.?

While some retailers enclose in walled gardens, others have open PMP programs; Target, for instance, has an?exclusive SSP partner?but is open to outside DSPs. To give brands and advertisers a larger reach, other retailers are collaborating with already-existing retail media platforms like?Criteo and CitrusAd.?

DOOH coming of age?

Around?76% of marketers?and agencies in the US anticipate increasing their spending on both digital and programmatic OOH. The ad spending is projected to reach?$367 million?by the end of the year.

This expansion of programmatic DOOH is a key trend to watch in 2023, with RTB opportunities now becoming accessible through popular DSPs like?Google's Display?& Video 360. Advertisers will try to scale beyond private marketplace deals and programmatic guaranteed ad placements in order to execute dynamic, data-rich campaigns in areas where their preferred targets congregate.?

In-game advertising boom?

In-game advertising is a promising new growth area for programmatic, especially with the rise of native in-game advertising. New criteria for intrinsic in-game advertising have been announced by the?Interactive Advertising Bureau (IAB).?Microsoft?is creating a platform where only selected brands can insert ads into games without disrupting the gameplay experience in Xbox F2P games.?Sony's PlayStation?and?Amazon's Twitch?have also announced their plans to create their own ad networks.?

Lately,??WPP?partnered with?Epic Games?to give brands an interactive advertising experience in Metaverse. That is an important step for AdTech and the wider use of in-game advertising in AAA games, highlighting the huge potential of this medium for brands.

In-app consolidation?

In-app advertising is gaining popularity, especially when?Unity's merged with IronSource?and made the decision to build its own ecosystem while rejecting AppLovin's historic $18 billion takeover offer.

Due to Facebook's flawed CPI measurement, it is crucial for app publishers to combine different solutions in their AdTech stack. They have to prioritize their own ad demand, while ad networks occupy a large part of the supply chain.

Additionally,?New walled gardens?have emerged, such as AppLovin, Unity+IronSource, and Liftoff+Vungle. Apple is also developing its?own DSP, which is anticipated to grow to billions of users soon.?

App makers will have to reconsider their ad placement decisions in the future and give priority to ad formats that don't detract from the user experience or obstruct normal app use or gameplay, as we saw in?the recent Android updates. Rewarded advertisements and native banners will rule this market in 2023 as well as certain cutting-edge AdTech businesses.

Podcast ads

Podcast?CPMs rose to $26?in the third quarter of 2022, up from $22 for the same period in 2021, rising above streaming TV ad costs. This rise is simulated by the privacy changes in the AdTech space, which impact mobile device ID and third-party cookies but don't directly impact podcasting.

Over the past few years, the industry's major players have?acquired companies like Megaphone, which focused on one feature: inserting ads into podcasts. Advertisers may now?reach 50% of US weekly listeners?by advertising on just four podcast networks: Sirius XM Media, Spotify, iHeartRadio, and NPR. To match listeners to their specific data set and connect ad exposure to conversion, the collaboration between digital audio companies and programmatic media platforms is projected for 2023.

Sustainability

Media buyers and publishers are seeking ways to reduce their carbon footprint. Reducing emissions requires changes to parts of the business, including the supply chain, product production, and capital investments. For marketers, most of these emissions can be improved by improving energy efficiency – reducing the energy required to run a platform through?more efficient technology.

The AdTech industry is particularly important in reducing?Scope 3 emissions.?Brands and publishers need to work with sustainable companies to meet their goals. Brands work with a variety of technology companies, data providers, and agencies, all leaving their carbon footprint. The entire industry is being tested to become more sustainable.

To wrap up

In 2023, programmatic advertising is going through a transformative period with the shift to privacy-first advertising and the deprecation of ad IDs at the forefront. Adopting industry standards, factoring in contextual signals, and developing transparent data exchange mechanisms will be critical for the industry to adapt and thrive.?

What would you consider the most impactful trend for 2023?