Consolidation, CTV and AI: Looking into the near and far future of digital advertising
Jeremy Steinberg, CRO and GM, Exchange
The digital advertising industry is nothing if not resilient. As we all retreated into pandemic isolation, the acceleration of digitization handed the industry a dazzling silver lining that allowed it to go from strength to strength. And it’s a good thing that we are resilient, because 2022 did not give us a break, with a combination of factors - including supply chain issues and the war in Ukraine - throwing us from the pandemic frying pan into the cost-of-living fire. Next year’s gloomy economic forecasts tell us we will be tested further, but we have plenty of reason to believe that digital advertising will not buckle under the pressure.
Yes, there is hope, and it comes in the form of a supply chain cleanup, a maturing CTV ecosystem, and the acceleration of AI-powered advertising tools. By the end of next year, we should see an industry that is leaner, smarter, and making the most of new frontiers. Here are my predictions for how digital advertising will evolve in 2023 and beyond.
Consolidation will sweep out the inefficiencies of programmatic
As the global economy slows and GDPR-like privacy regulations sweep through markets, extracting value from digital advertising will be both more urgent and more difficult next year. The current ecosystem — which is weighed down by complexity and fragmentation, while also lacking the transparency necessary for marketers to understand where performance can be improved — is long overdue for some heavy pruning.
This will come to a head in 2023 as marketers run out of patience for programmatic’s shortcomings, as they won’t have spare budget for ineffective media buying and low-quality inventory. Expect to see marketers work with fewer partners and for programmatic supply chains to be trimmed to their bare essentials. Buy-side and sell-side will seek closer relationships through direct deals, while marketers will be drawn to the quality of curated marketplaces over the quantity of open programmatic.
By the end of the year, we should see both ends of the supply chain enjoying greater control and transparency over spending, revenue, and performance. Technology partners that can’t fit in with these objectives will fall to the wayside, and Meta’s lagging earnings suggest it won’t just be the small fish in the digital advertising pond that will struggle to survive.
Long term, the line between buy- and sell-side will blur as SSPs add buying platforms that allow buyers to bypass the DSP, while DSPs seek direct integrations with publishers. Historically, publishers have lost the power struggle between buy- and sell-side, but these trends may swing the pendulum in publishers’ favor as they gain greater control over data and measurement, and companies invest heavily in ways to increase publisher yield.
Streaming giants going all-in on ads will usher in TV’s second age
Behind the soaring CTV spend – driven by advertisers seeking fresh new audiences as growth slows elsewhere in the industry – are advertising platforms that aren’t fit for purpose. Measurement and attribution lack a consistent standard, advertising often plays when screens aren’t even turned on, and the market is flooded with low-quality inventory, fragmented across hundreds of streaming services (with perhaps still more to come, as new platforms seem to launch every day). 2022 put the spotlight on CTV.
Next year, CTV will secure its leading role. Netflix has launched its ad-supported tier and we’ll see the results of Disney+’s recent expansion into the AVOD space. These media giants have the resources and talent to set a benchmark for CTV advertising that others can imitate, and their sheer gravity will attract even more attention and innovation to this rapidly growing – but so far stale – ad ecosystem. Meanwhile, measurement and currency solutions such as OpenAP and iSpot.tv will finally elevate CTV to its full digital-esque transacting potential.
Beyond 2023, the inevitable transition from broadcast to streaming will continue as aging infrastructure is retired in favor of internet delivery. When simply porting creative made for linear broadcast over to CTV is no longer the path of least resistance, there will be a surge in the innovative use of interactive ad formats. Dynamically generated QR codes, personalized advertising, and formats not yet invented will create an engaging and exciting ad experience that takes full advantage of CTV’s generational leap over traditional TV.
The AI revolution will become routine as priorities shift from surveillance
Hand-in-hand with the trend towards optimized supply chains will be a focus on effectiveness, after years of scraping the bottom of the pricing and efficiency barrel. This will be curation’s time to shine as marketers seek to optimize programmatic trading and refine their creative delivery without having to divert their already strained resources. Priorities will shift away from the surveillance model of targeting towards predictive solutions that provide immediate, real-time uplift for addressable and non-addressable audiences alike, with full compatibility with privacy regulations and consumer preferences.
None of this would be possible without the machine learning (ML) that powers real-time decisioning engines. The sheer volume of behavioral signals that need to be processed to develop high-accuracy predictive models couldn’t be achieved any other way, and the cyclic improvement of ML means outcomes can only improve over time, while remaining adaptive to changes in audience behavior.
AI and ML may have been buzzwords in ad tech for years now, but in 2023 the competitive advantage enjoyed by those who know how to implement it properly will spur routine adoption and weed out companies that use the terms for not much more than marketing clout.
Looking ahead, the AI revolution will accelerate and automate various aspects of marketing, from expanding panel data to generating statistically representative cohorts, and matching audiences across publisher and advertiser first-party data. Techniques such as embeddings and deep learning will leapfrog the “brute force” approaches that have defined ad tech in the past, and build a privacy-first ecosystem so effective that third-party cookies will be a distant memory. Which is good, because Google’s probably never going to actually get rid of them, and will instead let them slowly fade into obsolescence as the industry relocates to greener pastures.