Paul Gubbins: things you need to know about adtech today
With so many column inches dedicated to the fast-evolving data-driven advertising economy, I wanted to share some soundbites on the key areas of programmatic that have caught my attention.
It’s not all doom and gloom: growth numbers are on the up
● The IAB Internet Advertising Revenue report said that digital ads in the US accounted for more than $107bn in 2018, the first year digital advertising eclipsed $100bn after totalling $88bn in 2017.
● Emarketer data shows that US marketers will spend $29.24bn on programmatic video this year, which accounts for 49.2% of all US programmatic digital display ad spending.
● The IAB & PWC Digital ad spend study reveals that UK digital advertising market is worth £13.44bn, an increase year-on-year of 15%, the majority of all growth coming from smartphone advertising.
Not only have we finally surpassed the year of mobile, but we find ourselves in a pre-embryonic state where the programmatic ecosystem and its vendors eagerly await the injection of turbo-charged linear TV budgets, that are slowly being drawn away from traditional broadcasts to the addressable arena that is referred to as over the top.
Auction mechanics go from opaque to just confusing
We have bid farewell to second-price auctions. These have underpinned the programmatic ecosystem for the last 10 years, but on 6 March, Google announced it plans to deploy first-price auctions in their exchange, historically known as ADX, by the end of the year.
Before header bidding came along, it made a lot of sense to run a second-price auction. However, these days many buyers and SSPs realised their win rate was being eroded by upstream auctions in publisher wrappers. These wrappers conducted a kind of first-price auction in that they selected the highest of the winning second-priced bids passed up from SSP’s downstream. As a result, many of the tier one SSPs have been communicating to their connected DSPs for some time if the auction was being conducted in either a first or second-price way so they could bid accordingly.
With Google now moving to a first-price standard, it means DSP’s and traders need to learn how to bid strategically again. Step forward ‘bid shading’: a feature being offered by multiple SSP’s and DSP’s that uses smart algorithms to protect a buyer or bidder paying 100% of their bid. Some vendors then make money by taking a percentage of the delta between first-price bid, and a cleared rate post-bid shading treatment. Although many see this feature as extremely useful, some consider SSPs that offer it as conflicted, as their primary role is to extract yield from the buy-side for their publishers and not to reduce the price at which a bid clears. There are others in the market that say bid shading is just another way to make opaque margins in a world that has aggressively protested to remove any type of undisclosed buy-side margin. Whichever side you’re on, bid shading is a tool that is getting strong buy-side adoption and will continue to get traction until a level a maturity has been reached in first-price bidding strategies.
Blockchain: fact or fiction?
Once the butt of all adtech jokes, this week blockchain raised its binary head once again! Mindshare-driven blockchain programmatic alliance ‘Project Proton’ has launched a test campaign with PepsiCo that has driven an increased 28% efficiency by using smart contracts, reported here in The Drum.
Is this the case study that will kickstart adoption by an industry that is often quick to belittle disruptive advancements? After all, programmatic, mobile RTB, header bidding and AI were all referred to as 'vapourware' in their early years.
Going on the record, I admit that at first I was a naysayer, but then I was converted. Right now, I’m on the fence and waiting for a sign. Part of me thinks if you are an agency or brand that has in-housed execution, if you hire smart people and ask the right questions, you should not need to pay a blockchain vendor to extract transparency for you. It should be the default output of any commercial partnership you enter into. I look forward to seeing where the recent PR reporting tangible ROI via blockchain takes the debate.
ITP or not to be?
There has been much written about Safari and ITP so I won’t cover old ground, but all eyes and ears have been on Google to see if there will be a Chrome equivalent. We’ve already seen first-hand the negative impact on both the buy and sell side with Safari. For publishers, it has resulted in lower yield and/or fill. For the buy side, it has reduced the pool of users they can match and re-target. Although this has had a negative impact on mobile web campaigns where Safari share is strong, it has had limited impact on desktop browser activity where Chrome and other browsers dominate. This is why many were worried when reporters started to moot that Chrome may introduce another hard block on all third-party cookies. If this happened it could effectively render many programmatic vendors as much use as a chocolate teapot.
Cookies have been instrumental to the growth and success of programmatic since its inception. It was a great relief to many when Google announced there would be no hard block on third-party cookies, but that it would instead introduce features to give users more control over the type of cookies that exist on their browsers and, more importantly, give them better tools to manage their privacy.
Since the rollout of the GDPR, the IAB introduced the Transparency and Consent Framework (TCF), with all consent management platforms encouraged to become a part of it - if they wanted mainstream adoption. Consent Management Platforms (or CMPs) are tools that let publishers control consent and pass this to adtech vendors.
On the 25 April the IAB announced it was making the policies and tech specifications for TCF v2.0 available for public comment. The first iteration of the TCF was launched one year ago, and there is some debate on how any changes would impact a publisher’s ability to quickly and holistically extract consent. Will we soon be at a point in time when areas such as legitimate interest are challenged and a publisher via a CMP has to collect explicit consent for every single DMP, CDP, DSP, SSP, 3rd party data company, DCO vendor et al? If this does materialise, how will users react to having to give consent to the many unknown vendors that often use their data to target the advertising they receive?
As privacy legislation in Europe and the US continues to be deployed and interpreted, its impact on programmatic will continue to be a discussion point. One thing is for sure, without cookies and identity in programmatic, is some of the luma-scape on borrowed time? Brands and their agencies could just go back to picking up the phone to publisher reps and buy context like in the good old days.
There's lots going on in the world of programmatic, and as we all start to plan for Cannes Lions, my advice is to start thinking about these topics below. They’re going to be the big discussions on the rooftops yachts this year:
● Digital Identity - Who should own this beyond GAFA? What about coalitions?
● What does the intersection of linear and CTV look like and where are the revenue opportunities today, rather than 3-5 years time?
● DTC - If you are on the sell-side how can you capture these growing budgets. If you are buy-side, how do you add value for this new generation of data literate clients?
● Audio - It's growing like a weed yet there is still a lot of buy-side confusion. Why?
● In App, with ITP deployed and Chrome introducing tighter controls, why are many brands and agencies still overlooking the valuable app ecosystem and its persistent identifier?
● OOH is going automated. OOH is free of digitals ills. DOOH will become programmatic. How will the myriad of exchanges and protocols evolve?
● Everybody will be keen to discuss the way they are transparent and how they add value. That said, ask how many would be prepared to work with the blockchain partner you have appointed to validate their logs. See how quickly you get pushed overboard a super yacht!
Without doubt, this is one of the most transformational, challenging, exciting and opportunistic times for smart people to be operating in the digital advertising arena. See you on Le Croisette, I will be the chap profusely sweating and tweeting about SPO.
Paul Gubbins is global programmatic strategy lead at Unruly.