The 2020’s have certainly commenced on a turbulent note for ad tech, with Google starting a countdown to the end of browser support for the third-party cookie, mingling with long-blowing headwinds surrounding transparency. In this exclusive article for ExchangeWire, Barry Adams, General Manager, BidSwitch, discusses what the industry can do to best address these challenges and promote healthy growth for all players.
There’s no shortage of content or opinion about the major themes that will dominate our industry in 2020. Most of it sounds fairly ominous: the tightening of consumer privacy regulations (and the fines that ensue), continued (or accelerated) concentration of spend into walled gardens, ongoing consolidation, and the death of the cookie, just to name a few.
Many of these trends are interrelated and even symbiotic: as privacy regulations tighten, risk-averse advertisers will start to divert even more of their ad spend to walled gardens (who have direct access to user data and consent), which in turn will speed up consolidation among those who don’t.
No matter where you sit in the ecosystem, one or more of these trends will have some impact on your business in 2020. But what will be the cumulative effect of these dynamics when compounded, an especially critical question for independent ad tech players who make up what’s been termed ‘the twenty percenters’?
Included here is an outline of some of the challenges those of us in this category face and some prescriptions for meeting those challenges in 2020 and beyond.
As advertisers and publishers continue their push to get closer together, and as supply chain transparency increases, margin pressure on intermediaries will intensify. Ecosystem participants, ranging from SSPs to DSPs and most vendors in between, will need to operate at scale on lower margins than many have been used to. Moving from a double digit to a single digit fee structure will require a deep reconsideration and re-working of cost and service models.
For years, the death of the cookie was treated much like Y2K among insiders: smoke with no fire. But, with ITP from Apple’s Safari already restricting user tracking and creating a huge blind spot for programmatic trading, Google sparked the flames, following its SameSite enforcement announcement with the news that it would kill off Chrome’s cookie altogether within two years. There is no shortage of commentary on the topic, but general consensus is that ad budgets will shift to more targetable environments, such as in-app, and more privacy-safe targeting instruments, like contextual, with all of these approaches evaluated and pursued aggressively. Most independents are particularly vulnerable to these changes and therefore under additional pressure to adapt.
Barring a major anti-trust event, Google, Facebook and Amazon will continue to gain market share and the telcos and a handful of other scaled players will grow or hold their own. If you haven’t already, secure and bolster your relationships and integrations with these large platforms by clearly differentiating the value you bring to them, and very importantly, to their clients.
We’re seeing a blurring of traditional relationships in the supply chain today: SSPs are bypassing DSPs to cut deals directly with agencies; some DSPs are integrating directly with publishers and bypassing SSPs, and, in general, there is a scramble to avoid disintermediation and secure relationships with principals by any means possible. Consider ways in which your own business can engage with and create value for a new client constituency to protect yourself from being disintermediated and to potentially create new revenue streams and strengthen relations with upstream budget holders.
Trust, long eroded with advertisers, agencies and publishers, must be restored for money to continue flowing to independents, many of whom contribute tremendous value to the ecosystem. Initiatives supported by the IAB including ads.txt, app-ads.txt, sellers.json, and Supply Object, are some of the more prominent initiatives aimed at doing just that by establishing new norms of transparency by which all vendors should abide. Some in the industry are self-enforcing new guidelines and principles for transparent trading, as is the case with the recent Source initiative being spearheaded by MediaMath. The details of fees and how and where they are applied should be fully disclosed wherever possible, and independent ad tech players shouldn’t resist this trend. If you truly create value, there’s a place for you in the supply chain.
Setting ominous predictions for the year to come is nothing new in our industry. We do it quite regularly with varying degrees of accuracy. Weathering change is also nothing new to us. We’re an incredibly nimble and adept sector that thrives on solving increasingly complex challenges.
What we shouldn’t minimise or take for granted, though, is the persistent call for change and increased accountability (even though we hear it every year). In addition to the five prescriptions above for helping the twenty percenters survive another decade, there’s a sixth tactic that’s even more core to who we are and how we’ll grow in the years to come: continue to innovate. Out of chaos comes opportunity, and all of the challenges these end-of-year predictions bemoan also create an environment ripe for innovation and creative problem solving, and lay the groundwork for a new era of growth.
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