With 65% of all money spent on advertising in digital media being already traded progammatically, the investment growth in ad spaces through this kind of automated digital markets is slowing as programmatic cements its position as the most important channel for digital ad trading. This is one of the outcomes from Zenith’s Programmatic Marketing Forecasts published today.
The report also estimates that programmatic adspend will grow 24% in 2018, down from 32% growth in 2017, and foretells a 19% growth in 2019, followed by 17%
increase in 2020.
China, 2nd market for programatic by money invested, but still not on the heels of USA
In dollar terms, the biggest programmatic market is the US, where Zenith expects $40.6Bn to be spent programmatically in 2018 (58% of the total). China, in a distant, but rising second place, is forecasted to spend $7.9Bn on programmatic advertising this year, followed by the UK, with 5.6Bn.
By 2020 advertisers will spend $98Bn on programmatic advertising, representing 68% of their expenditure on digital media advertising. By digital media Zenith means all forms of paid-for advertising within online content, including online video and social media, but excluding paid search and classified advertising.
“Technology is making programmatic advertising work harder for brands,” said Jonathan Barnard, Zenith’s Head of Forecasting and Director of Global Intelligence. “Artificial intelligence promises to unlock new understanding of customers as people, as well as improving the optimisation of the trading process.”
Canada 2nd by market share of digital advertising traded this way
The US is also the market that has most embraced programmatic advertising, trading 83% of all digital media programmatically this year. Canada is in second place, trading 82% of digital media programmatically, followed by the UK, with 76%, and Denmark, with 75%. By 2020, programmatic advertising will account for more than 80% of digital media in all four markets.
Canada will have almost completed the transition to pure programmatic trading, spending 99% of digital media programmatically that year.
Zenith foresees all markets are to follow Canada and use programmatic trading for all digital media transactions eventually. “Indeed, it’s only a matter of time before programmatic trading becomes the default method of trading for all media”, says the media agency belonging to Publicis Groupe.
Privacy legislation, not the main cause for adspend growth slowdown
However, the transition is taking slightly longer than expected. Last year the forecast was that a 64% of digital media would be programmatic in 2018, and 67% would be programmatic in 2019, so Zenith has pulled back both forecasts by two percentage points.
The introduction of privacy legislation such as the EU’s GDPR has had some chilling effect by making certain data previously used in programmatic transactions unavailable, and making other data more costly to process. But we think the main reason for the slowdown in spending on programmatic media is that advertisers are investing more in infrastructure and data to make their programmatic activity more effective.
“Programmatic trading improves efficiency and effectiveness, and is gaining a dominant share of digital media transactions,” said Benoit Cacheux, Zenith’s Global Head of Digital and Innovation. “The scale of operational restructuring to make the most of it is both extensive and expensive, though, and advertisers are spending more carefully while they invest in infrastructure and data and review the quality of media. All programmatic advertisers need a strategy for acquiring the best and most comprehensive data available, and to treat this data as a vital corporate asset.”
First party data and AI make the competitive difference
To make the most of their programmatic campaigns, advertisers have to reorganise
internally to give programmatic trading the high-level support and understanding it needs, says Zenith’s report.
Agencies can only extract maximum effectiveness from their programmatic strategy in a proper partnership with their clients. And a programmatic strategy can only be as effective as the data used to execute it.
The most valuable data are first-party data, either explicitly provided by consumers or gained by tracking their activity on owned websites. It is also becoming more common to use second-party data, by forming data sharing partnerships, between, for example, brands and online retailers.
Third-party data is widely available but does not give advertisers a competitive advantage, since all stakeholders can use it in their ads to target the same segments.
Advertisers should continually vet and interrogate third-party data to ensure they are truly adding incremental reach, Zenith advises. By combining all this data with their own CRM systems, advertisers can model consumer behaviour, and the more advanced are using machine learning to predict it. Data and new technology is enabling brands to move from tracking cookies to communicating with individuals.
Image over the headline.- © Zenith
