AdTech or Advertising Technology did around $800 Billion Worth Of Business In the US alone in 2019, making it one of the fastest-growing industries in the world.
Are you trying to understand ad tech? Just as advertising is the business of making advertisements, ad tech is the business of using technology to make advertisements faster, quicker, and efficient. The business is driven by powerful algorithms and data points. While it is not rocket science, but for the uninitiated, it can be challenging to understand what is ad tech and how its product and services work.
The ad tech industry fuels the global economy with big investments, employment, and ad spend. Digital advertising has reached new heights of complexity, with the rise of programmatic advertising, AI, and automated interactions between computer systems reducing human intervention. Today’s omnichannel ad campaigns reaching to different platforms all at once from publishers’ websites, mobile apps, social media to search engines. Campaigns using tailor-made and highly targeted ads to reach audiences. This process involves many participants- advertisers, publishers to third-party vendors. The technology used in advertising to store, manage, and deploy data is far more sophisticated.
This guide will give you a sneak-peek into the world of technological advertising and understand the growing ad tech industry. As you read further, you will understand the ever-changing ad tech ecosystem.
What is Ad Tech?
Ad Tech also is known as Advertising Technology covers a range of tools and software that can be helpful for brands and agencies to plan, strategize, and manage all digital advertising activities.
The AdTech ecosystem consists of two major entities – the advertiser (Demand-side) and the publisher(Supply-side).
On one hand, advertisers want to run effective campaigns and optimize their budgets to reach the target audience, gain customer insights, and measure ROI.
Whereas, on the other hand, publishers cater to the need of advertisers and generate revenue through ads by displaying ads on their publications like websites, apps, etc, increase ad impressions, bids for ad slots and visitor insights. These are significant factors that publishers need to consider to maintain the platform User Interface (UI).
Adtech helps advertisers and publishers achieve their goals in harmony by providing solutions that meet the demands of both parties. A few examples of AdTech platforms include Pubmatic, Adroll, MediaMath, SmartyAds, and many more.
Programmatic Advertising Explained
After a brief understanding of ad tech, let’s step into the world of programmatic. You will come across concepts like programmatic advertising, Real-time bidding, and programmatic direct. Let’s discuss it:
- Programmatic Advertising Definition:
It is projected to be the game-changer for digital advertising. Programmatic automates the process of buying and selling online advertising space with the help of technology and data. This means, with the introduction of programmatic publishers, advertisers or agencies don’t have to sit across to discuss ad size, rates, et. Ad buying is done through algorithms and data insights.
- Programmatic Direct:
This a type of Programmatic digital advertising, where a publisher bypasses auction and reserves a portion or entire ad inventory for a particular buyer or advertiser at a fixed cost per mile. (CPM). Put simple, here the buyer and seller are known to each other and the ad placement is done programmatically.
- Real-Time Bidding (RTB):
Another type of programmatic digital advertising and also known as an open auction. RTB is when inventory prices are decided through an auction in real-time and open to both advertisers and publishers. This is the most feasible and preferable method of programmatic ad-buying because of scalability and flexibility.
The AdTech EcoSystem
The process of digital media buying is similar to the traditional media value chain except AdTech has multiple components in the ecosystem to keep the management of advertising campaigns easy for demand and supply-side platforms. Here are the key components of the AdTech supply chain:
1.Media agency: Responsible to allocate the advertiser’s expenditure budget across the channel. It is not involved in the creative aspect of ad campaigns.
2.Agency Trading Desk (ATD): Plans, buys, and manages ads across different platforms and is a set of services provided by the media agency.
3.Demand-side Platform (DSP): An essential platform for advertisers to buy, search, display video mobile ads. It enables advertisers to buy ad placements in real-time on the publisher websites made available by ad exchange and networks. Some of the DSP players are Simplifi, Smarty Ads, App Nexus, Double Click, and more.
4.Data Management Platform (DMP): DMP’s collect data from sources like websites, apps, social networks, campaigns, CRM’s, and more. Using AI and big data analytics to gather first and third-party data, advertisers, and marketers rely on them. DMP players are Lotame, Oracle Blue Kai, SAS data management and more
5.Ad Networks: The unsold inventory will be bought by ad networks from publishers and try to sell to advertisers using their technology. The popular programmatic advertising platforms for the ad networks are Taboola, Google Double Click Ad Exchange, Rocket Fuel, and more.
6.Ad Exchange: A dynamic platform to buy and sell ad impressions between advertisers and publishers without any intermediaries. Open X, App Nexus, Rubicon Project Exchange are examples of programmatic advertising platforms.
7.Supply Side Platform (SSP): The platform allows publishers to sell display, mobile ad impressions to potential buyers in real-time. Some of the key SSP players are MoPub, AerServ, App Nexus Publisher SSP, and more.
8.Ad Server: This platform is used by advertisers, publishers, ad networks, and ad agencies to run their campaigns. It determines which ad will be displayed on a website and also collect ad performances data such as clicks and impressions Double click for publishers, OPen X Ad server, Ad butler, and more are the examples.
Is Programmatic advertising worth it?
The programmatic advertising statistics say it all. According to Zenith’s Programmatic Marketing Forecasts 2019, 69% of digital media will be programmatic in 2020.
- The total amount spent programmatically will exceed US$100bn for the first time in 2019, reaching US$106bn by the end of the year, and will rise to US$127bn in 2020 and US$147bn in 2021.
- 72% of digital media will be programmatic in 2021
- Ad spends growth is slowing down to 22% in 2019 due to industry challenges of privacy and supply-chain.
- Brands need to develop new targeting techniques using first-party data and customer data platforms in response to the ongoing death of the cookie.
Programmatic Display Advertising fastest-growing segment.
- The ascent of programmatic display advertising has been rapid. In 2012, only 10.4 % of global digital display spend was programmatic. However, it ballooned to 65.3% in 2019 and it is estimated that the share of programmatic display advertising will grow 69.2 5 and 72% in 2020 and 2021 respectively.
- How does it translate in dollars? In 2012, total digital ad spend was $37.8 billion and the programmatic display market was $3.9 million. Fast forward to today, digital display ad spend is $162.3 billion, out of which $106 billion is invested in programmatic display advertising. In 2021, global digital display ad spend is estimated to reach $204 billion, with $147.1 billion going to be programmatic share.
Programmatic marketing by country
One of the benefits of programmatic technology is it shows real-time data that helps companies take swift actions to adjust their strategy as per customer requirements. Digital marketers are considering buying programmatic media in-house due to its transparency. Programmatic has undergone massive growth in the following 6 countries out of which the UK and the US are the most advanced programmatic markets in the share of digital media.
As per eMarketer forecast, Programmatic ad spending will reach $59.45 billion in 2019, accounting for 84.9% of the US digital display ad market. It is estimated that 87.5%, or $81 billion, of all US digital display advertisements, will be bought via automated channels in 2021.
The above programmatic advertising statistics prove that the investment has increased Y-o-Y and marketers prefer programmatic advertising to buy digital display ads. Marketers are increasingly allocating their advertising budgets to digital advertising channels as it provides precise data that helps to reach customers effectively.
Artificial Intelligence can be leveraged in AdTech Industry
Artificial Intelligence(AI) and Machine Learning (ML) are two buzzwords in recent times. And why not, as it brings efficiency in whatever we do.
However, AdTech is a messy market now. Ironically, the good and bad part of AdTech is the abundance of data. True, we certainly have all the information to better understand the customers but most marketers aren’t aware of how to leverage the data and use it forward.
The way you advertise-is going to change extremely right before your eyes- thanks to Artificial Intelligence. Not all in the AdTech world have the analytical skills to evaluate the big data as not many are trained to use it and are misinterpreting them.
Adtech partnering with AI can help lower CPC prices, higher click-through rates (CTR), conversions, and better ROI. Let’s check out how AI can help the Adtech industry find better solutions in the following areas.
- AI in Ads Positioning
Developers don’t need to sit and determine which ad position will drive maximum revenue for the website. With the help of AI, employing machine learning algorithms study historical data to find relevant ads for the targeted user group.
Adtech has not used heatmaps previously but AI algorithms use them to learn where the visitors on the website are going and present them with the relevant ads. AI will help marketers to find the best ad positions by studying the maps in detail.
- AI in Ad Network Selection
There are many Ad Networks that provide different kinds of ads to websites owners and required to sort ads according to the websites. This is called Ad mediation and apt to earn high revenue for the websites.
By employing AI for ad optimization it reduces human effort by using a data-oriented approach that includes data, facts, and intelligence to make sure only relevant ads reach the end-user. Data will be user or website’s past history and facts will be website content, geo, and timing. Machine learning algorithms are employed to enhance the best ad-user match.
In the Adtech world, data analytics is not ‘taken seriously’ and publishers.are not happy about it. The AI-based approach will drive reporting and analytics to new levels.
Analytics will help publishers understand the content that drives the audience, placement of the CTA button to turn one time users into loyal users, and increase traffic. It will be a win-win situation for AdTech and parties- publishers, platforms, and users.
AI is the Future of Advertising
Today, digital advertising cannot exist without AI. Behind most online ads are the sophisticated delivery systems in place powered by AI. These systems place the ads before users, the coordination process happens in real-time and generally is automatic. It’s called programmatic advertising.’
According to eMarketer, 86.2% of all digital display ads will be bought via automated channels and nearly $19 billion in additional spending will enter programmatic display platforms between 2018-2020.
Also, 90% of mobile display ads are bought programmatically. On the other hand, AI also powers advertising products offered by Facebook and Google. In 2017, 90% of the new advertising business was captured by these firms.
In recent times, brands are under more pressure to deliver relevant, personalized, and contextual ads to individual customer preferences.
How AI makes Programmatic Advertising better
More companies are turning to AI for creating advertising relevance at scale.
For instance, if you want to advertise on Facebook,-an AI-powered algorithm determines the relevance of the score of your ad. This means that the score impacts the ad delivery directly and influenced by the experience of the ad delivery to Facebook users. Expect a low score if the ad is not liked or is irrelevant.
This decision is made by machine and is beyond your brand’s control independent of strategic or creative decisions
A marketing company like Phrasee launched an AI tool that writes Facebook and Instagram ads. The AI tool assesses a brand’s voice and copy, then the machine writes the ad that performs better than human-written ads. Recently, it helped reduce one client’s cost per lead by 31%. Another AI-powered tool is Albert that helps automate media buying, testing, and optimization. It enhances ad performance and delivers relevant ads to the right person. This shows that relevance at scale is possible in advertising.
Emerging Programmatic AdTech Trends 2020
1. AI in Programmatic Advertising:
Technologies such as artificial intelligence(AI) and machine learning (ML)have involved programmatic ad buying or bid optimization. Programmatic campaigns are used by companies for more targeted net across platforms. By 2020, it is expected that there will be a shift towards automating technologies like AI and ML to get the most from data.
2. First Part Data Move Made Important by GDPR:
After the announcement of the General Data Protection Regulation (GDPR) in Europe, last year on cookie crumble or removal of third party cookies is gradually turning out to be beneficial. The regulations protecting the privacy of user data initially looked limiting to ad tech experts but is resulting in cleaner and more reliable data over time.
3. Digital Out Of Home (DOOH) and Mobile Location:
Digital DOOH combined with mobile location data has the potential to help marketers to drive conversions in the offline world. Integrated ‘home-to-out-of-home’ programmatic advertising approach provides a smooth experience to the customers.
4. Voice-activated Ads:
The adoption of voice-based to in-home smart devices has grown rapidly. Gartner predicted by 2020, 30% of web browsing sessions will be done through voice-first browsing. Amazon sold over 100 million Alexa-enabled devices in 2018 compared to 2017. A recent survey by VoiceBot.AI revealed 25% of respondents orders everyday household items through voice assistants followed by apparel and games and entertainment.
Programmatic advertising helps marketers to optimize these ad spaces across in-home smart devices, to on-app audio ad opportunities, and connect to consumers through in-store ads, ads in elevators and taxis, and more.
5. Wearables will enhance programmatic advertising:
Wearables collect data on location, lifestyle, health metrics, and more. The market penetration of smartwatches has grown multifold over the years and programmatic advertising is already making its way into this medium. For instance, it helps advertisers run banner promos to customers on their Samsung or Sony smartwatches. The wearable ecosystem has a huge potential to grow and programmatic adtech can bring greater opportunities.
6. 5G in programmatic advertising:
The high speed and no buffering will encourage the rise of more users to spend time on videos on mobile devices. It will enhance other technologies such as AR-enabled ad displays, VR without headsets, and innovative new digital outdoor mediums.
This will give programmatic advertising new opportunities to run more interactive ads without any lags across mediums. By 2024, the use of 5G in AdTech is predicted to grow to 1.4 billion.
7. Evolution of Personalization:
With Gen Z and Millennials- the biggest demographics -personalization is a priority as they like all things customized. Personalization in advertising is going to be inevitable as the choices of the new generation are different. Therefore, programmatic customization by advertisers is increasing offering personalized, relevant messaging to their target group.
8. Blockchains and Ads.xt:
Ad frauds are increasing over the past few years. A cybersecurity firm Cheq reports that ad fraud damages will touch $26 billion in 2020, $29 billion by 2021, and $32 billion the year after that.
The only way to handle the frauds is by bringing transparency in programmatic advertising. Blockchain and Ads.txt (an Interactive Advertising Bureau initiative – Authorized Digital Sellers) can help to remove unrequired middleman, domain spoofing, and verification of publishers and allow transactions using cryptocurrencies.
9. Programmatic TV, podcasts and audio Ads set to grow:
The content on TV has changed drastically. There is a paradigm shift in TV viewing from cable TV to over-the-top(OTT) like Amazon Prime or Netflix via an internet connection.
Programmatic advertising has a larger role to play to ensure marketers get the best of both worlds. Programmatic TV is also going to get more important with its data-driven approach for buying and delivering ads.
Programmatic in podcasts and audio advertising is also growing. Apps like Spotify and Soundcloud are seeing more user acceptance and a new advertising landscape is being created for companies to monetize on.
10. Omnichannel Programmatic:
Forrester defines omnichannel marketing as ‘the practice of digitally sequencing advertising across channels, which is connected, relevant, and consistent with the customer’s stage in their life cycle.’ This is how programmatic advertising is going to be in 2020 and beyond.
A single marketing resource or an ad can be customized programmatically suiting various platforms through programmatic AdTech.
11. Agencies to work on outcome-based pay:
Discussions are making rounds to switch to an outcome-based remuneration model. With increasing ad frauds and agencies promise programmatic tech, advertisers fear how their budgets were used and where their ads placed. There was a lot of wastage in the space. Media buying companies started giving outcome-based remuneration more prominence. Gradually, advertisers would like to see the full cost chain of their programmatic buys, pushing agencies to outcome-based pay.
12. In House programmatic advertising v/s agency.
An IAB report suggests that nearly 40% executing programmatic trading via in house and 50% publishers also have an in-house model. This means advertisers are looking for more transparency, control of their ad strategies, and outcome.
It makes more sense to have an in-house team for strategizing programmatic ads and an agency partner for implementing parts of it instead of having a full-stack programmatic AdTech in house.
Yes, Adtech is complicated but the best part is that it allows integrating the whole toolset into a single system. According to Zenith Media, the ad spends on digital media will reach $329 billion in 2021. However, there are major concerns and challenges -Ad Fraud, transparency, and privacy issues need immediate action.
There have been big changes and improvements over what advertisers and publishers used to have earlier but it still needs more work and their expertise to handle the challenges and resolve for good.
Generally, conventional wisdom says a publisher would sell more ad units at a lower price in a weak market. However, publishers are doing the opposite and pulling their inventory to take a short-term revenue hit and protect their inventory price from falling further. This will help their business in the long run by not falling into the trap of price cuts which would be difficult to win back.
Programmatic advertising market operates under an auction system, lower advertiser demand, and higher web traffic to publishers site has pushed programmatic ad CPM’s down by 10%-20%. Since buyers are now more loyal to price than brands, publishers are preventing prices to tank further to a point of devaluing their inventory over the long term. While some publishers are reducing their inventory in the open market to keep the prices from falling further, others are using ad slots to push internal subscriptions or eliminating ad slots from the pages. For instance, Buzzfeed is getting rid of display ads that receive lower viewability scores.
Unfortunately, the publishers are acting independently and not considering the impact on the broader market. They aim to protect their own inventory prices from falling low as they fear it will take a longer time to return to the previous levels especially if advertisers are buying at a bargain now and unwilling to pay more later when things are back to normal.
As quoted by Digiday, Andy Ellenthal, CEO of the ad sales reporting platform STAQ shares a similar opinion and said, When advertisers return to their normal spending amounts, “they’re going to absolutely remember that a publisher was 25 cents [per thousand impressions] in April of 2020.”
As per the above STAQ graph, the average U.S. display ad CPM in the open auction has fallen from a high of $1.34 on March 1 to $0.91 on May 3.
Even though average CPM has bottomed out on April 8 at $0.83, Andy Ellenthal believes CPM’s will not experience a U-shaped recovery but more of an L-shaped recovery, a slow and steady upward trend. This means publishers whose CPM has fallen least will have to cover the shorter route to return to previous prices.
DigiDay interviewed a few publishing executives and one publishing executive said,
“I’ve got to manage my supply to keep it in balance with demand, and demand has fallen so fast that now we’re trying to get ahead of the game. How much supply can we take off the table to control the CPM without actually truly hurting our business more than it’s hurt now?”
A second publisher executive said that the removal of one ad unit across their sites is equivalent to more than 1 billion monthly impressions. It is a generous number but not significant enough to move the market. Media Math’s DSP sees more than 180 billion impressions each day.
On this Ethenall said,
“These publishers always have to strike a balance between fill and yield. Chances are they are not going to fill 100% of their ad slots right now. If you have a billion impressions that go unsold anyway, what’s the value of them if they’re only pulling down pricing for your better impressions?”
Many publishers have adjusted their floor price to a minimum level at which the inventory can be sold. However, the lower ad demand has made the publishers pull inventory and protect prices as inside programmatic advertising, everything revolves around “Price.”
One of the publishers used to increase floor price by 15% every two weeks since the beginning of Q1. However, in the second half of March, a significant number of impressions went unsold. The publisher could have reduced the price to sell his inventory but he didn’t and said, “in no way do I want to drop my floors to 25 cents because I don’t want crappy ads coming in.”
Lower the ad prices, the higher the chances of giving in to undesirable advertisers who can jeopardize the ability to attract genuine advertisers. Publishers use this opportunity of lower demand to seek out prospective advertisers, but they are wary that lower CPM can alleviate advertiser’s interest in doing programmatic direct or private marketplace deals.
Publishers are also looking at this opportunity to experiment repurposing of impressions that can boost their other businesses and become less reliant on advertisers. For instance, if a publisher can see that house ad proclaiming its subscription product can attract more subscribers and yield than those impressions to advertisers, they would monetize on house campaigns and not take revenue from programmatic advertising.