Zenith: Privacy And Regulation Slow Global Programmatic Growth

Regulation and an increased demand for user privacy has slowed the flood of money into programmatic advertising globally.

Sixty-nine percent of all dollars spent on digital advertising will be transacted programmatically by 2020, up from 65% in 2019, Zenith predicts. And programmatic spend will surpass $100 billion globally for the first time this year.

But the strong growth rates of programmatic’s early days are starting to wane. Global programmatic growth will slow to 22% this year from 35% in 2018, and eventually shrink to 16% in 2021.

Softer spending in light of regulation like GDPR and CCPA and browser tracking changes like ITP drove part of that deceleration.

“The industry hasn’t grappled with the privacy and personalization issues,” said Jonathan Barnard, head of forecasting at Zenith. “Growth is being tapped out because there’s a ceiling at the moment because of these issues.”

As advertisers adjust, programmatic spend is slowing across the globe. In mature markets, programmatic isn’t growing beyond 80% to 85% penetration, while growth rates in smaller markets are stalling or shrinking.

“If the market finds a way to address concerns about privacy while offering personalization that provides value, we would expect a further acceleration [in programmatic],” Barnard said.

In advanced markets like the United States, where programmatic spend facilitates 86% of digital transactions, marketers are collecting first-party data and embracing contextual targeting as the industry adapts. Those with significant first-party data are using customer data platforms to integrate it with other data sets for permission-based targeting.

“We do see first-party data as being really, really important,” Barnard said. “It’s one of the core building blocks to a proper solution to these problems.”

But for categories like CPG that don’t have a direct relationship with the consumer, getting first-party data is tough – and programmatic could be taking a hit in the short-term as a result.

Supply path clean-up

Programmatic growth is also slowing as marketers spend more wisely.

Marketers once spent large amounts of money programmatically that didn’t offer verifiable value. “By cutting down on that growth, we’re cutting growth overall,” Barnard said.

As a result of fraud and other nefarious activities in programmatic, many advertisers have embraced private marketplaces to transact safely with trusted publishers. While RTB used to dominate programmatic, it’s actually shrinking in terms of share of programmatic transactions as PMPs become more important.

Programmatic spend should rebound as marketers spend more with entities they know are providing value, Barnard said.

“Programmatic trading is changing,” he said. “If brands know the money they’re spending is providing value, they’re more likely to spend more in the future.”

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1 Comment

  1. Two things:

    1) Programmatic buying offers significant operational and performance efficiencies over direct buying, even without personalization. It’s difficult to imagine agencies foregoing these advantages and switching back to direct buying unless the way publishers sell their inventory dramatically changes.

    2) Customer data management has become very in vogue with the emergence of privacy regulation. See Publicis’ $4B purchase of a Epsilon. Maybe I’m missing something, but I see two problems with banking on customer data:

    A) When someone opts-out of data targeting that means the data that identifies them does not get passed from publisher to SSP to DSP. Without that identification data in the bid request, the CRM list or any data segment is useless.

    B) While the percentage of digital dollars spent on existing customers no doubt varies by category, in my spending against customer segments is dwarfed by other forms of audience buying like retargeting and prospecting. Do we really expect brands to suddenly go all in on their current customers – wouldn’t this limit potential growth?