Is the open internet in trouble?
Open programmatic ad spend has only grown 3% since 2021, according to equity research firm Wolfe Research. Walled gardens have grown 10% in the same time frame.
This is nothing new, said Shweta Khajuria, an internet analyst and Wolfe’s managing director, speaking at AdExchanger’s Programmatic I/O conference in New York City on Tuesday.
For years, “the open internet has lagged the overall digital advertising market,” said Khajuria, adding that part of the reason for this lag is consolidation in the ad marketplace, a natural result of industry maturation.
But the open internet “will likely lose less share over time,” she said, “in part because brand and performance advertising are merging.”
CTV advertising, for instance, has exploded because buyers use it to combine mass reach with digital-style targeting. Companies like The Trade Desk have been big beneficiaries.
A more open internet
Still, she noted, programmatic platforms must do a better job of differentiating themselves if they want a bigger slice of the (slowly) growing open-internet pie.
Which would explain why programmatic platforms – DSPs and SSPs alike – keep trying to disintermediate each other. (See: The Trade Desk’s OpenPath, Magnite’s ClearLine and PubMatic’s Activate.)
Nevertheless, consolidation is still happening. Which would explain why programmatic platforms keep trying to disintermediate each other.
Right now, the demand side is more consolidated than the still rather crowded sell side, Khajuria said, pointing to The Trade Desk, Amazon and Google as the three dominant ad buying platforms.
“There are far more SSPs than DSPs today,” Khajuria said, citing Wolfe Research data suggesting the average online publisher has between 21 and 30 SSP partners.
But SSPs are under increasing pressure to create value and differentiate. To stand out, programmatic platforms must offer competitive prices and prove that their inventory is both premium and brand safe.
Wall Street investors, meanwhile, have their own demands of public ad tech companies. For example, most investors are bullish on public ad tech companies with their own first-party data, scale and direct relationships with agencies.
When it comes to SSPs, “platforms with the largest omnichannel scale that use first-party data to maximize revenue generation for publishers will likely emerge as leaders,” Khajuria said.
Yet it’s difficult to predict the future of the open internet with certainty until the current Google ad tech antitrust trial produces a ruling.
Google’s trial and tribulations
The trial against Google has several weeks – or maybe even less – to go, and a decision won’t come for months at least.
But Google will most likely have to spin off at least part of its ad business, Khajuria said. According to Wolfe Research, the probability of a spinoff of GAM (or another piece of its ad tech business) is somewhere between 45% and 55%. Far less likely, based on Wolfe’s data, would be regulatory action, such as a fine (10% to 15%) or Google actually winning the trial (5% to 10%).
If Google spins off even one part of its ad biz, Khajuria said, it could be good for the overall ad industry, because it “would level the playing field for SSPs.” Today, Google is the clear dominant player on the sell side, she said.
If Google were to lose some of its ad tech dominance, it would create more room for competition, which could spur more competitive pricing.
For now, though, it’s all a big question mark.
