Where Programmatic Advertising is Headed towards in the Next Five Years

The Ad Tech Ecosystem

Programmatic Adverting refers to the of automated process of buying and selling digital media. Advertisers and Publishers are the main stakeholders in this ecosystem. The Demand Side Platform (DSP) and Supply Side Platform (SSP) mediated by an Ad Network in the middle constitute the building blocks of this ecosystem. In addition to these, there are various other platforms that facilitate the functioning of this ecosystem. A brief about some of these lesser-known ones:

• Digital Asset Management (DAM) - Large companies and agencies typically have thousands or even millions of digital assets in various forms. DAM platorms help in storing all company's digital assets in one place.
• Marketing Attribution platforms are used to track and evaluate all the touchpoints a customer encounters on their path to conversion. They help reveal which marketing channels, campaigns and tactics contributed the most to conversions.
• Creative Management platforms (CMP) allow advertisers to create tailored ads for different audience segments in the most efficient way. Advertisers can produce rich media creatives at scale and publish them in no time. CMPs allow better ad creative organization and lead to improved brand consistency.
• Dynamic Creative Optimization platforms (DCO) help advertisers of large e-commerce websites to prepare a catalog of Ads that change automatically to adapt their content specifically to each user.
• Agency Trading Desk (ATD) is used by media agencies to provide clients with services related to planning, buying, managing and optimizing programmatic advertising campaigns. These can be seen as self-serve DSPs with value-added services.
• Ad Fraud Detection and Protection platforms- It is estimated that 50% of internet users are bots generating 60% of traffic. These platforms help programmatic advertisers to block fraudsters and save a lot of marketing money dramatically improving campaign performance.
• Viewability Verification platforms help advertisers pay only for viewable adverts as per the standards of viewability for Display and Video Ads set by Interactive Advertising Bureau (IAB) and Media Rating Council (MRC)
• Brand Safety Solution platforms help keep a brand's reputation safe when it is advertised online. They use a set of measures that aim to protect the image of advertised brands from negative or inappropriate publisher content that exists in the online world.
• Data Management Platforms (DMP) use 3rd party data that is collected by data suppliers and data aggregators to understand their audience better and improve campaign targeting.
• Web Analytics platforms help Advertisers generated insights about which audience segments matter the most. Publishers also use analytics platforms to analyze their web site, visitors’ characteristics, behavior and preferences to produce more relevant content.
• Order management system (OMS) platforms help publishers and media companies to manage their entire online and offline ad inventory through a single platform. They help operations and finance processes of direct media buying more efficiently.
• Tag management systems (TMS) allow advertisers and publishers to collect various data types from websites and mobile apps, more specifically, they can add tracking codes to their websites without modifying the current website code or involving any developer.

Advertisers and Publishers based on their cost-benefit analysis of these Ad Tech platforms would decide which services to opt for and which vendors to partner with.

Challenges in the system

1. The “Ad Tech Tax”

The biggest challenge in this ecosystem as per Advertisers is that most of the media spend goes to technology providers instead of publishers. Ad tech vendors all take a cut from the advertiser’s media buying budget. Because of this situation, publishers end up receiving somewhere between 20% to 40% of the original media spend. [1]

Advertisers and publishers have been complaining about this Ad Tech tax for some years. However, since Ad Tech vendors provide the necessary infrastructure and technology to efficiently run this system, their costs seem justified.

Recently some startups have started developing products using Blockchain technology to directly connect advertisers and publishers and save on fees, combat Ad Fraud, and increase transparency on the Ad placements.

A similar conflict about revenue sharing, though unrelated to programmatic advertising is brewing down under. The Australian Competition and Consumer Commission drafted a code of conduct that would make Google and Facebook pay publishers for news content. The commission stated that there was an imbalance in power between the platforms and the media companies that threatened the viability of the news businesses. Media companies had argued that Google and Facebook make money from news and analysis provided by them, and users would find the sites much less helpful if no news appeared on their feeds or in their search results.

It is estimated that for every $100 of online advertising spend, $53 goes to Google, $28 to Facebook, and $19 to everyone else. [2]

Google in response has since signed deals with dozens of news publishers in Australia as part of its News Showcase feature being rolled out.

Facebook's view is that since they cannot control the news content people share on its platform they can't control how much to pay to the news corporations. Consequently, Australians woke up on 18th Feb to empty feeds from news publishers, government channels, and even some NGO and non-media sites. As per this writing news content is still blacked out by Facebook in Australia while discussions are being held by FB executives and the government regarding the news media code.

The developments in Australia should be closely watched that can become a precedent on how governments in other countries may regulate the revenue sharing between platforms, and publishers.

2. App Tracking Transparency, iOS 14.5

How do Advertisers track my actions?

Device identifiers like the Identifier for Advertisers (IDFA) used by Apple and the Google Advertising ID (GAID) for Android are analogous to an advertising cookie on the web, they enable an advertiser to get notified when a user of a phone has taken an action like clicking a banner, playing a video, or installing an app.

Advertisers can also track user interactions through 'Fingerprinting' the process of collecting seemingly innocuous characteristics that are generally shared by default to make apps and websites work properly. For example, your browser will automatically give websites some information about your hardware like the resolution of your screen so it can load a page in the correct window size. Similarly, when you install a mobile app, the operating system shares some information to know what type of phone you use so it can adapt to the processor speed and screen size. This information can be triangulated to pinpoint and follow you as you browse the web and use apps. Once enough device characteristics are known, the data can be assembled into a profile that helps identify you the way a fingerprint would.

All this is set to change with the rollout of iOS 14.5 next month. Any user or device level identifier that is used to join data from the app with data from third parties for purposes of advertising or ad measurement or sharing with a data broker must use the 'App Tracking Transparency' framework to obtain user consent. This includes the device’s advertising identifier, session ID, fingerprint IDs, device graph identifiers, and even functionalities provided by third parties of the app including SDKs and SSO. [3]

Facebook’s full-page newspaper Ad in response to Apple's upcoming ATT for iOS14

Although the impact would be minimal for India with iOS penetration less than 10% compared to countries like the USA and Japan with about 60% penetration [4].

Following the announcement, Google is also considering developing an Android alternative to Apple’s upcoming ATT; But with more than $100 billion in annual digital ad sales, Google has a vested interest in helping partners to continue generating revenue by targeting ads to Android device users and measuring the performance of those marketing spots. A Google solution is likely to be less strict. [5]

Users are widely expected to refuse “tracking” upon seeing the prompt. As such, they can no longer be shown personalized advertising. It is to be noted that personalized or not, Ads on these platforms are not going anywhere. What would be really interesting to see in my opinion is how many of those initially opting out of tracking, reenabling those tracking permissions over time.

After a decade of seeing personalized Ads on their devices, using them as reminders for abandoned shopping carts or as a directory of local stores, would some consumers want to opt back in to tracking after experiencing ads of possibly little relevance to them? 

Would this translate to a bad user experience for the publisher and a loss of impression spend by the advertiser? 

Another interesting thing to see would be if Apple would use the same strict standards on user data when it comes to its development of their self-driving car. Competitors like Tesla record data such as the vehicle's location and the car's personal settings, such as contacts synced from the driver’s phone, addresses plugged into the navigation system, favorite radio stations. Sensors invariably also capture images of pedestrians who don't have any ability to opt-out, which presents potential privacy concerns. The tradeoff would result in Apple having fewer data points for their ML algorithms to process compared to the competition.

The future

Programmatic Advertisement today is not just limited to Ads on webpages and on Apps.

• Programmatic TV – Consumers’ new stay-at-home lifestyles have caught the attention and budgets of advertisers. With notable growth in Connected TV (CTV) viewership along with an increased choice of ad-supported CTV content options, advertisers have already started following the eyeballs by shifting linear TV budgets to CTV. Marketers will embrace CTV advertising to connect with their respective audiences. What’s more, almost 60% of CTV inventory will be bought programmatically by 2021 according to eMarketer reports. [6]
• Programmatic Audio – The recent buzz around the invite-only, audio streaming platform Clubhouse which allows people to have informal voice chats while others listen in has demonstrated an increase in the adoption of audio-only platforms. Digital radio, Music streaming, and podcast listeners have exploded in recent years. All these points towards the growth of Audio only personalized Ads being adopted by brands for advertising.
• Programmatic OOH – although in its nascent stage, digital out-of-home offers similar flexibility to change targeting and creatives in real-time as digital. Due to their nature, it is difficult to track impressions for OOH advertising but hopefully, there might be some standards and guidelines for viewability soon. The targeting functionalities for OOH available are Location targeting, Weather targeting (a billboard with a coke spot on a sunny day vs umbrellas for rainy days), Dayparting (a restaurant advertising their lunch menu at noon followed by the local PVR promoting its listings for the evening shows) and limited behavior targeting based on the aggregated info that might be passed on from mobile devices.
• Programmatic VR – The pandemic has given us a glimpse of how concerts and sports events may be experienced in the future. Many VR companies have started development in the creation of such virtual, 360-degree experiences. VR native Ads for users on billboards within games or in-between game levels could be used in the future to monetize these products. Billboards in virtual stadiums or Ads between overs in a VR live experience for the world cup isn’t far away I believe.

Conclusion-

With the increase in concerns on data privacy and governments stepping in with regulations for the same, many rules and best practices for programmatic advertising would have to be rewritten in the coming months. The advertising industry has existed far before marketers could measure the incremental impact per unit spend. There should be a re-emphasis on creative storytelling to create maximum appeal for every Ad served. The focus would shift from quantity (no of impressions/clicks) to quality (view-through rates)

Technological innovations and marketing creativity guided by the principles of data ethics would keep evolving the face of the industry for the next decade.

PS: The article is based on an academic understanding with personal research and observations about the evolution of the space. Please feel free to correct me in case there are any gaps in my understanding. I would also love to know about your predictions for Ad Tech for 2021 and beyond. 

Sources:

[1] Udemy: The Complete Programmatic Advertising Course - 2021

[2] https://www.theguardian.com/technology/2021/feb/16/google-and-facebook-the-landmark-australian-law-that-will-make-them-pay-for-news-content

[3] https://developer.apple.com/app-store/user-privacy-and-data-use/

[4] https://www.statista.com/chart/22702/andoid-ios-market-share-selected-countries/

[5] https://www.bloomberg.com/news/articles/2021-02-04/google-explores-alternative-to-apple-s-new-anti-tracking-feature

[6] https://brandequity.economictimes.indiatimes.com/news/marketing/three-cs-set-to-define-ad-tech-in-2021/79970435