Home Agencies GroupM State Of Digital: CPMs Rise, The Duopoly Reigns And Ecommerce Soars

GroupM State Of Digital: CPMs Rise, The Duopoly Reigns And Ecommerce Soars

SHARE:

GroupM’s State of Digital report, released Thursday, predicts a year of CPM inflation and ecommerce growth as the duopoly maintains its stronghold over the digital economy.

Marketers in 2017 spent 44% of their digital budgets programmatically, according to the report. That’s up from 31% in 2016, and GroupM predicts it will rise to 47% in 2018.

GroupM defines “programmatic” as any digital investment transacted automatically.

The report – which breaks down 2017 trends across data and tech, video, investment and viewability and verification – also found that the ad tech tax has risen to roughly 20% in the US, with buy- and sell-side taxes averaging at 10% each.

Inventory Inflation

GroupM predicts that programmatic display and video CPMs are both set to rise in 2018.

Video CPMs are inflating as marketers look for quality inventory and struggle to measure effectiveness. GroupM calls out North America as an “inflation hot spot,” for video, where CPMs were up 5% to 13% in 2017 depending on supplier, weight of investment and whether or not the buy was guaranteed.

Programmatic display CPMs are also rising as viewability gets better across the web and low-quality supply drops with the rise of programmatic direct deals.

Header bidding is also driving up CPMs on digital inventory by allowing publishers to manage yield better and get more for their premium inventory. And an uptick in first-price auctions is pushing clearing prices higher and leading to inflation, said Adam Smith, futures director at GroupM.

“Price inflation isn’t always about supply and demand,” he said. “It’s about the structure of the market, and header bidding and first price auctions are part of that structure.”

Subscribe

AdExchanger Daily

Get our editors’ roundup delivered to your inbox every weekday.

GDPR could cause inflation to rise even higher in 2018, Smith predicts, if the number of users who consent to receive targeted digital advertising drops dramatically.

“If sustained demand for digital ad audiences meet what could be a restrained supply, that is inherently inflationary,” he said. “The other side of the coin is that advertisers may hesitate to increase investment until this plays out.”

Duopoly Still Dominates

Despite brand safety mishaps, fake news scandals and privacy issues, both Google and Facebook still dominate.

YouTube is the “platform of choice” for marketers who want to reach light TV viewers, the report said, and more marketers are choosing DoubleClick Bid Manager as their DSP, although the report didn’t break out numbers.

Marketers spent 22% of their budgets on online video in 2017, up from 17% in 2016. And Google’s six-second video ad unit has become advertisers’ preferred format, garnering 90% view through rates in the UK, Smith said.

“There’s a beginning of a consensus now around the six-second time length,” he said. “Shorter time lengths are more versatile.”

Within the Facebook ecosystem, investment on Instagram is on the rise as marketers look to reach young audiences. But Smith predicts that as direct response marketers create smarter attribution models that move away from last-click, Facebook’s dominance could start to slip.

“Attribution intelligence will improve, and that may be a reason to moderate Facebook investment,” he said.

Blockchain knockdown

Despite the hype, blockchain is “slow, clunky and expensive … peddled by self-interested suppliers and advisers and, in its present state, could not keep up with the demands of real-time media,” GroupM said.

When it comes to blockchain as an application for marketing, “Hardly anybody really knows what they’re talking about,” Smith said.

“Blockchain is an intriguing technology if you’re trying to solve a really difficult problem,” he said. “A large amount of digital is programmatic now. Blockchain can’t run fast enough to keep up.”

Ecommerce boom

For Smith, the biggest story was in the growth of ecommerce, which grew 17% year over year to $1.8 trillion. The average basket size for an ecommerce shopper also grew 10% to almost $1,000 per year, and GroupM predicts it will grow the same amount this year.

“Ecommerce growth is really eating into the retail space now,” Smith said. “Basket size increasing wasn’t just a function of more people getting online. Now, people are spending more.”

This year, GroupM predicts, the global ecommerce market will grow 15% to top $2.4 trillion – and represent 10% of all retail sales.

“The progress of ecommerce bears a striking resemblance to that of digital ad expenditure,” the report said.

Western ecommerce markets can take a hint from China, however, whose marketers are doing a better job of branding on ecommerce platforms, Smith said.

“What stands out in China’s ecommerce market are aspirational brands at an affordable price supported with advertising,” he said. “I don’t think there is quite this attrition of lower-level, new-entry products. There’s something there for western marketers to look at.”

Must Read

Albert Thompson, Managing Director, Digital at Walton Isaacson

To Cure What Ails Digital Advertising, Marketers And Publishers Must Get Back To Basics

Albert Thompson, a buy-side veteran with 20+ years of experience, weighs in on attention metrics, the value of MFA sites, brand safety backlash and how publishers can improve their inventory.

A comic depiction of Google's ad machine sucking money out of a publisher.

DOJ vs. Google, Day Five Rewind: Prebid Reality Check, Unfair Rev Share And Jedi Blue (Sorta)

Someone will eventually need to make a Netflix-style documentary about the Google ad tech antitrust trial happening in Virginia. (And can we call it “You’ve Been Ad Served?”)

Comic: Alphabet Soup

Buried DOJ Evidence Reveals How Google Dealt With The Trade Desk

In the process of the investigation into Google, the Department of Justice unearthed a vast trove of separate evidence. Some of these findings paint a whole new picture of how Google interacts and competes with its main DSP rival, The Trade Desk.

Privacy! Commerce! Connected TV! Read all about it. Subscribe to AdExchanger Newsletters
Comic: The Unified Auction

DOJ vs. Google, Day Four: Behind The Scenes On The Fraught Rollout Of Unified Pricing Rules

On Thursday, the US district court in Alexandria, Virginia boarded a time machine back to April 18, 2019 – the day of a tense meeting between Google and publishers.

Google Ads Will Now Use A Trusted Execution Environment By Default

Confidential matching – which uses a TEE built on Google Cloud infrastructure – will now be the default setting for all uses of advertiser first-party data in Customer Match.

In 2019, Google moved to a first-price auction and also ceded its last look advantage in AdX, in part because it had to. Most exchanges had already moved to first price.

Unraveling The Mystery Of PubMatic’s $5 Million Loss From A “First-Price Auction Switch”

PubMatic’s $5 million loss from DV360’s bidding algorithm fix earlier this year suggests second-price auctions aren’t completely a thing of the past.