Digital advertising: Where we are now and where we’re headed

Credit: Pixabay

With less than a month before we ring in the New Year, it’s time to review the biggest developments in digital advertising over the past year and the emerging trends for 2017. Let’s begin with a look back at 2016.

2016: A Changing Ad Tech Landscape

There’s one theme that unifies much of what happened in ad tech over the past year: change. Header Bidding was, without a doubt, the top trend of the year. It’s been one of the most disruptive technologies to come along in ad tech, and has been talked about extensively over the last 12 months, but there have been other changes, too.

Video

Video has clearly overtaken mobile as the top growth vector for digital advertising. Consumers are migrating rapidly from traditional media platforms (like linear television) to new media platforms (like OTT and mobile video). This bodes well for programmatic advertising, as the new media platforms are more amenable to using the latest technology. However, despite the promise of a bright future, the reality of video advertising in 2016 showed growing pains. Lack of quality inventory was a huge issue causing lousy user experiences to emerge (video adhesion units, anyone?). This phase will need to be cycled through before the industry starts truly delivering the value of the video advertising market.

Consolidation

Earlier this year, we explored some of the forces behind an ad tech consolidation trend in detail. And 2016 did not disappoint – there were several major acquisitions including Adobe-TubeMogul ($540M), Salesforce-Krux ($700M), and AT&T -Time Warner ($85B). The year even welcomed a successful $84M IPO by the Trade Desk. Maybe the catalyst for all of this was the wave of acquisitions by Chinese companies in the early part of the year. Deals like Media.net ($900M), Opera Software ($1.2B/$600M), Smaato (148M), NativeX ($25M) etc. forced U.S. investors off the sidelines.

Facebook’s scope creep

During 2016, we saw Facebook shut down both of its acquired ad platforms – LiveRail and Atlas. We also saw Facebook evolve into a true Internet portal - in the bad sense of that word. You’ve read about their editorially stifling walled garden publishing policies, their inflated measurement issues with video and, most recently, the fake news articles in their ecosystem. But, did you happen to notice all the new business lines they launched this year? Marketplace, Food Delivery, Game Room, Jobs Ads, Workplace, Professional Services, Features, Events, Music, Stories and more. For all Yahoo! and AOL alums out there – we’ve seen this movie before and it doesn't end well.

2017: The Promise of New Formats and Platforms

Moving on, if 2016 brought us changes to the existing ad landscape, 2017 may be one of the most transformative years for ad tech. Many trends align to make 2017 a seminal year for engaging, new ad formats and alternative platforms.

AR before VR

Earlier in the year, I spoke with thought leaders in the space, including VC’s, consultants from top strategy firms, investment bankers, and ad tech executives about their vision for AR and VR. The consensus was that it would be at least three years before scalable ad experiences in AR/VR surface. That was before headlines like “Man catches Pidgey on Pokémon Go as his wife gives birth” appeared.

Pokémon Go took consumers by storm and went viral with one of the best AR gaming experiences to date, creating an entirely new market segment. Needless to say, what's to follow in 2017 is a proliferation of AR gaming and entertainment experiences that will potentially look to advertising as a monetization model.

Video ads re-imagined

One of the biggest challenges marketers will face in 2017 will be declining consumer attention spans that render traditional 30 second spots ineffective. The response will be a shift to user-friendly video ad formats for the mobile context. Most relevant formats in this space, and the ones to look forward to, will be short form and optimized to maximize consumer connection by machine learning technology. These short form ads will be a combination of new video and audio ad units. A good example is the 6-second video ad unit or the vertical ad unit by Snapchat. There will need to be several enabling companies launched to scale this technology, most of which will be acquired by agencies in 2018.

Further on the topic of video, as consumer time spending habits shift more towards mobile and OTT devices, linear TV as we know it will continue to decline in 2017. OTT devices will cannibalize Linear TV, and the shift will expand from studio content to the live events. With Facebook Live Video, Apple TV Apps, twitter/NFL partnership and YouTube red, live video will be watched more than ever on OTT devices, including mobile, Internet enabled TVs, and tablets.

Snap Inc. recently launched spectacles, allowing Snapchat to curate exciting interactive experiences using consumer views. Imagine if there were even 50 spectacles wearers at a live event? Snapchat could create 3D/augmented reality view of a concert from different angles.

Chatbots

Chatbots have been around for more than two decades, but their best use today can be traced to China with an app called WeChat. WeChat seamlessly combines all features of Facebook, Watsapp, Skype, Amazon, Instagram, Venmo, Tinder, investment services, heat maps for crowded areas, and the list goes on.

The app took advantage of the Chinese mobile first generation that was different than the majority of the U.S. population that grew up using desktop computers. U.S. messaging players are now fast followers trying to cater to the mobile first generations the same say WeChat did in China. With the launch of messaging bots in Apple iMessage and Facebook Messenger, the messaging bot market will be poised for a growth spurt in 2017. Through bots, ad experiences are more personalized, allowing users to follow brands, which in turn allows brands to target users directly. The primary deterrent to adoption has been bot awareness and discovery that we think will be a focus for Apple, Facebook and similar companies.

Machine Learning/Artificial Intelligence

Finally, all of these trends will be empowered by backend systems running complex machine learning algorithms to enable premium experiences to consumers. Machine learning will improve speed and user targeting while increasing ad effectiveness and consumer connection through personalization. Further, it stands to bring costs down for publishers, demand players and adtech providers. True potential will be realized in 2017 as more and more publishers and ad tech providers effectively utilize their first- and third-party data to further optimize consumer experience and connection.

Overall, the advertising industry will be as exciting as ever in the years to come. Most, if not all, of the emerging technologies mentioned above will scale with the power of programmatic, empowering publishers, app developers and marketers to expand their reach and influence while leveraging the most efficient, effective and engaging advertising formats.

Roger Corn is VP-corporate development at OpenX

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Roger Corn

Roger Corn is VP-corporate development at OpenX

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