While much of the world is understandably focused on the current crisis, the issues with which the advertising industry was grappling before Covid-19 are – and will continue to be – major influences in how the sector shapes itself.
For example, January 2020 may seem a lifetime away, but it’s worth remembering how many discussions centred round Google’s cookie cull, scheduled to take place in 2022. This isn’t going to go away (or even be delayed as requested) and, as we settle into what is being referred to as ‘the new normal’, solutions still need to be found.
Programmatic Insights, a study recently undertaken by BidSwitch potentially sheds some light on how the sector will continue to progress.
Closing the gap between the buy and sell side
Issues such as supply chain optimisation (SPO), brand safety and transparency are still major concerns for both brands and publishers and our research showed that media sold direct using ads.txt, the IAB’s programmatic advertising transparency initiative, increased 45% in the last quarter of 2019. At the same time, there was a pronounced decrease in spend via less trusted sources, such as reseller and unauthorised supply.
The focus on transparency, along with the need to comply with increased privacy regulation also saw media buyers willing to pay a premium for direct transactions with publishers, demonstrated by higher revenue figures for media trading undertaken via marketplaces. Deals in private marketplaces saw eCPMs that were 3.2 times higher than inventory sold across the open exchange; public deals were 1.7 higher.
This has implications for the supply chain; while it won’t necessarily contract, it will become smaller and more transparent as the buy and sell side move closer together. Advertisers will need to know where the value lies in their adtech ecosystem so that they can make informed SPO decisions.
First price auctions and header bidding
The drive for transparency is also illustrated by Programmatic Insights data on first price auctions. In the year that Google moved to this model, we saw a 181% increase in first price auctions, with these accounting for almost half (48.25%) of media spend in 2019, compared to second price, providing buyers with insights that help to inform future buying strategies and publishers with more visibility into who is bidding for their inventory.
This update in first price activity could also be influenced by the increased use of heading bidding, which grew 54% globally in Q4 2019, with eCPMs up 18%. Publishers use header bidding to optimise revenues by making inventory available to multiple demand sources at the same time (in contrast to the more traditional ‘waterfall’ method in which an impression is first offered to the highest performing ad network and then passed down a network ‘ladder’ until it is sold).
Going head to head simultaneously creates a more competitive environment for supply side platforms (SSPs) – which drives the move to first price auctions as these pass higher bids on to the publisher.
Cookie cut may reduce cost of premium inventory
Moreover, we also found that eCPMs (effective cost per thousand) for ad impressions that aren’t ‘matched’ to relevant anonymous users through cookies were only a third of those that use cookie matching, or syncing. This data may also indicate future publisher CPMs if workable alternatives to the third-party cookie are not found quickly.
While unmatched impressions could be a cost-effective route to buying premium inventory – and is therefore positive for brands – the knock-on effect to publishers, already suffering from slashed advertising budgets as a result of the coronavirus, could prove critical.
An industry snapshot
Programmatic Insights compared aggregated data from 2018 and 2019 (with a focus on the final quarter for each year). The aim is to understand how the industry is evolving and highlight key trends such as ‘traditional’ media channels increasingly adopting programmatic ad trading; bid requests for digital out-of-home (DOOH) inventory grew 107% between 2018 and 2019, connected TV was up 39% and audio increased 16%.
The data is based on BidSwitch’s visibility of the macro trends impacting programmatic advertising across display, mobile, native, video, TV and DOOH, thanks to our platform-neutral infrastructure ‘pipes’ that connect supply and demand technology partners around the world and enable us to analyse almost 50 trillion anonymous user ad requests every quarter.
In 2019, $106 billion was spent through programmatic channels (Zenith Media), representing 19% growth over 2018. Much has changed since those figures were calculated, but March data from ad analytics company Adomik shows that, while CPMs have decreased, return on advertising spend (ROAS) on programmatic auctions is still healthy.
This corroborates our own findings; while a lot of advertisers initially stopped spend, a significant number resumed campaigns in April, in part to make the most of relatively cost-effective media, but also because sales were dropping without digital ads.
While the market will continue to shift rapidly, making long term predictions unrealistic, what does seem highly likely is that greater transparency, supply path optimisation and brand safety will remain high on the ad tech industry agenda.