Back in the late ’90s, real-time bidding was synonymous with remnant inventory.
It took a long time for the worm to turn, and roughly five or six years ago, advertisers started asking to transact more premium placements programmatically – “a clear sign that programmatic had potential to be more than an inventory waste bin,” said Adam Schenkel, SVP of global commercial development at GumGum.
Private marketplaces, programmatic guaranteed, progress in the fight against fraud and the rise of header bidding all helped contribute to the mindshift, said Dennis Buchheim, EVP and GM of the IAB Tech Lab.
But although trust issues continue to cast some doubt on the quality of programmatic, the association with remnant inventory is mainly a thing of the past.
Fall of the ad nets
This more premium ecosystem created far less room for traditional ad networks, which had been in decline since the emergence of the ad exchange.
“The commodity ones went out of business or turned into DSPs or SSPs,” said Chris Kane, founder and CEO of programmatic consultancy Jounce Media.
But the ad network model of buying and repackaging ad space, marking it up and then flipping it for a profit with a nontransparent margin is still alive and well – just look at the walled gardens.
“We think more than half of programmatic advertising is from ad networks, mostly the Google Display Network,” Kane said.
And ad networks are doing just fine in the app world too, where real-time auctions are only just starting to gain traction.
It was “the year of mobile” so many times over the past decade that the prediction became a punchline. Today, mobile is the dominant and driving force in digital advertising.
But the transition didn’t take as long as it seemed, said Andrew Frank, a research VP at Gartner.
“Hype always makes things seem to take longer to reach maturity than tech fans initially think they will,” he said.
But mobile ad revenue did take its sweet time catching up with user growth. It finally started to happen in 2018, when desktop and mobile ad spend drew nearly even with time spent in those channels, compared with the wide gulf that previously existed between the two – a chasm repeatedly pointed out by Mary Meeker in her annual trend reports.
Rise of the walled gardens
If there’s any one trend that characterizes the 2010s, it’s the walled gardens reigning supreme. But it wasn’t inevitable that Facebook and Google would play such a domineering role.
“It was really clear that they would have massive ad businesses – but not at all clear that they would close off third-party demand, third-party targeting data and third-party measurement,” Jounce’s Kane said.
Some of the largest advertisers on the planet, including P&G and Unilever, rail against walled garden dominance, but the weight that big buyers throw around has nothing on the scale that Facebook and Google garner from small and medium-sized businesses. SMBs are an enormous source of ad revenue for the walled gardens, attracted by easy-to-use self-service tools that help the little guys achieve digital scale.
“There are millions of advertisers who only buy on Facebook and Google,” Kane said. “The long tail has been totally neglected by the DSPs.”
Privacy gets real … and cookies face an uncertain future
There’s no doubt that privacy is getting real for the advertising industry as regulations come into effect around the world, and the browsers crack down on cross-site tracking.
But the cookie didn’t just decide to crumble. There were numerous watershed moments that contributed to consumer wariness of online advertising and the data collection that supports it, said Omer Tene, VP and chief knowledge officer at the International Association of Privacy Professionals.
Agency-client trust hasn’t been anything to write home about for some time, and brands brought their digital marketing efforts in house and demanded greater transparency from their agency partners.
But the scale of in-housing activity by large advertisers is actually limited, said Brian Wieser, global president of business intelligence at GroupM.
“It’s worth considering whether or not an in-housing initiative is mostly about taking ownership of contracts or working with a managed service, which, for lack of better characterization, may be an agency by a different name,” said Wieser.
The switch to first-price auctions
The lack of transparency was a factor in the shift away from second-price auctions.
Second-price was the name of the game in programmatic for so long because of how effective it is for search, and we all know who dominates the search market. But Google’s first-price advantage, thanks to the favorable relationship it had set up between DoubleClick for Publishers and AdX, began to rankle, and by 2015, header bidding was in full swing.
The rise of header bidding was a major factor driving the industry’s embrace of first price, as were “complicated and unclear auction dynamics,” like bid shading, which caused buyers to demand more transparency, said Kyle Dozeman, VP of advertiser solutions at PubMatic.
The switch from second-price to first happened fairly quickly once it started.
“If one exchange was on first price, that exchange benefited more than other exchanges,” Dozeman said. “Once one moved, all had to move and had to move quickly if they didn’t want to lose share of wallet.”
Ad tech consolidates
With a few noteworthy exceptions like The Trade Desk, the public markets have not been kind to ad tech companies.
So consolidation became inevitable, although not all of the exits were enviable.
“If you look at the LUMAscape, the vast majority of consolidation has come through bankruptcy,” said Dan MacKeigan, a founding partner of Spring Lake Equity Partners.
The main factors driving consolidation in the ad tech industry over the past 10 years actually had more to do with desperation than enthusiasm about the sector.
“Net consolidation in ad tech is underway as far fewer companies are being founded and funded,” said Elgin Thompson, managing director of technology investment banking at JMP Securities.
TTD takes over
The Trade Desk, which went public in 2016, separated itself from the pack partially because it was a little late to the DSP space, but not late enough that it missed the boat.
“They could see how the landscape was developing with fresh eyes,” said Joanna O’Connell, a VP and principal analyst at Forrester. “To that point, they started out smart by going hard after agencies with an easy-to-use tool – a way to get scale quickly.”
And The Trade Desk’s post-IPO success “has been great for the industry,” MacKeigan said. TTD’s finance department has done an “miraculous job of creating predictability and forecasting in an industry that is notoriously bad at it,” he said. “That’s why The Trade Desk gets rewarded with the multiples that they do.”
TTD is also good at reading the tea leaves in another area: digital video, particularly OTT and CTV, where the company has made a big, concerted and “very smart” investment, O’Connell said.
Enter data-driven TV
If it’s been the year of mobile since what feels like the dawn of time, the same could be said for the slow and (sort of) steady march toward using digital techniques to transact and evaluate TV advertising.
Progress in this area has been … less than rapid. But the legacy linear TV business is finally showing signs of shifting. And it’s about time. Consumer behavior is moving to digital viewing at a rapid clip.
But although the industry is taking notice, it’s still too optimistic to say that data-driven TV is here. Better keep an eye on the next 10 years as the tectonic plates of TV buying continue to shift.
“Don’t expect the whole world to look different overnight,” O’Connell said.