“Get comfortable with being uncomfortable”.
This is the mantra Charles Manning, Founder and CEO of mobile attribution analytics platform, Kochava, uses to encourage his team. And he believes they hold extra pertinence today given the “enormous shifts” impacting the adtech ecosystem.
With global ad spend down and the economy showing signs of precarity, the industry is bracing itself to ride out a period of significant change. And as ad budgets decline thanks to rising inflation, the general feeling across marketing departments is one of measured caution.
“Advertisers are much more cost-conscious, and the focus is on ROI - tracking, measurement, and actual proof of the impact of their investments”, says Dr. Jochen Schlosser, Chief Technology Officer at Adform.
Programmatic ad sales are increasingly vulnerable. Turning these off is typically one of the first things that buyers will do to save money. And that’s because, when businesses start to lose revenue, they will often seek out ways to reduce expenses internally first. And since programmatic buying and direct response campaigns form part of their work, this affects agencies too.
But it's not all bad news. Ad agencies are already proving that they can weather the ad spend slowdown through investment diversification. When Philippe Karakowsky, CEO of Interpublic Group (IPG) was questioned about staff cuts, he made it clear that the company is still hiring. And diversification is the reason why: “the skill sets we’re bringing in may not necessarily be the ones that we would have been bringing in had we been talking about this three years ago”, comments Karakowsky.
The current climate has caused a demand shift. Marketers want greater levels of transparency, quality, and efficiency. Digital advertising companies must address these needs head on by demonstrating added value in their product offerings and by helping brands get more out of their ad spend.
The ad ecosystem has been challenged with a new set of expectations.
From tackling buying and selling inefficiencies to ad fraud prevention and embracing new advertising technologies, it’s safe to say that amidst great uncertainty lies even greater opportunity for widespread innovation in the digital advertising industry.
Here are my thoughts on the changing expectations within the digital advertising ecosystem.
“Advertisers are much more cost-conscious, and the focus is on ROI - tracking, measurement, and actual proof of the impact of their investments.”
Businesses are trying to cut unnecessary costs. But instead of slashing ad spend down to nothing, brands fare better by seeking ways to spend more efficiently. And that’s a huge opportunity for programmatic advertisers. By eliminating inefficiencies in the buying and selling process, publishers are in a great position to solve this critical pain-point.
Supply chain redundancy is one of the biggest causes of inefficiency in digital advertising. It’s caused primarily by auction duplication (multiple companies running auctions for the same impression simultaneously), reselling, and multi-integrations (which occur when partners integrate with a publisher through multiple connection points).
Research suggests that 59% of publishers operate at least one direct supply path that consistently fails to effectively qualify demand side platform (DSP) bids.
Bidtellect is an example of a demand side platform actively working towards a solution. The platform enables users to create an efficient supply path by adjusting the number of auctions they participate in, blocking specific domains, and targeting sellers. In turn, performance is boosted and fewer ad dollars wasted.
Given the economic climate, it’s going to be harder to get businesses to part with their money. So, to weather the storm, publishers must prioritize the quality of their offerings - from the level of inventory all the way through to user experience and ad fraud prevention.
If there’s one thing that industry leaders agree on, it’s that maintaining transparency in the system is key. Data privacy forms an integral part of that mission. With third-party cookies in depreciation after mounting concerns over user privacy and ad fraud, privacy-first data practices have become a fundamental imperative. And that means digital advertising companies will need to start transitioning to third-party cookie alternatives sooner rather than later.
Alternatives like first-party data. According to Exchange Wire “first-party data and granular reporting will be vital to influencing ad spend”. Today’s digital advertising companies are, therefore, looking for innovative and scalable advertising technologies with targeting options. Technologies that will generate rapid and accessible insights and continue to support growth in a post-cookie world.
Quality data pays it forward. A 2023 study into programmatic supply chains observed a fivefold increase in match rates from 2020 to 2023. A result of improved impression matching from demand side platform to sell side platform data fuelled by higher quality log level data and essential data fields. The study goes on to conclude that, moving forward, adtech vendors should “continue to invest in their ability to filter, retain, and share log-level data”.
As digital advertising companies become more cautious with their spends, demands for a hard-line approach against ad fraud, and improvements in ad fraud prevention are rising. And with ad fraud becoming increasingly sophisticated, the issue is a pressing one.
In January 2023, Human Security Inc. was tasked with taking down a highly sophisticated and widespread attack on the digital advertising ecosystem. The Vastflux attack injected malicious JavaScript code into digital ads and impacted 11 million phones across 1700 apps and 120 publishers. For businesses to invest their trust and money into ad publishers, deterministic ad fraud prevention strategies need to be taken against events like these.
Some are already setting a precedent. AlogoriX, a global media and technology company, recently partnered with cybersecurity company GeoEdge to work towards achieving a fraud-free marketplace. Likewise, IAB Tech Lab has upped its ad fraud prevention efforts by developing a video watermark framework which, according to CEO Anthony Katsur, will “enable the industry to attain universal reconciliation, audience interoperability, improve measurement, and combat CTV fraud”.
Digital advertising companies may need to diversify their offerings in order to ride out this period of economic precarity. And one way of doing this is through hybridization, by combining direct and programmatic selling. One survey found that 88% of publishers believe direct selling will become more important amidst cookie depreciation.
The other main driver behind this shift is the boom in ‘in-housing’ (brands taking advertising in-house), which has now reached 80% adoption amongst advertisers. In light of economic uncertainty and mounting GDPR considerations, it makes sense. In-housing allows brands to reduce spend, mitigate supply chain waste, and secure greater control over their campaigns.
But this doesn’t render intermediaries obsolete. Many brands won’t go 100% in-house but will look instead to hybrid models. To satisfy demand, adtech intermediaries should be looking to forge stronger relationships with brands and agencies and work towards facilitating more direct deals between the buy and sell side.
And the time to start is now. As direct approaches to advertising become cemented, it’s likely that we’ll experience increased market consolidation with the most trusted vendors dominating market share.
To meet these mounting expectations, digital advertising companies will need to continue improving the quality of their offerings with innovative advertising technologies. And with new advertising technologies and processes emerging by the day, the possibilities are vast.
The rise of connected TV (CTV) campaigns, a type of digital advertising that appears within streaming content, is one to watch and we’re expecting that more agencies will start funding this type of advertising in the near future. As well as CTV, it will be important for publishers to embrace all manner of new and emerging advertising technologies.
The rise of audio advertising is a big opportunity for players both on the demand and sell side, as is the emergence of in-game advertising which promises skyrocketing engagement rates alongside opportunities for contextual and attention-based marketing.
From CTV to AI, advertising technologies will be the industry’s biggest asset. “With the help of advertising technologies, advertisers are able to collect a huge amount of data related to their target audience which helps to reach the right audience effectively”, says Amit Relan, founder and CEO of mFilterIt.
A case in point, AiAdvertising recently announced their deployment of ChatGPT from OpenAI. The adtech company will use ChatGPT (Chat Generative Pre-Trained Transformer) as a tool to enhance persona-driven campaigns and has already started incorporating the technology into its ad campaigns.
“Everyone has to take care of the revolution themselves.”
Staying top of mind with consumers can be challenging for digital advertising companies - especially during times of economic instability. Marketers become more cautious with their ad spend and priorities change. In the interest of future-proofing, adtechs need to respond to these changing expectations and embrace the demand shift.
That could mean designing offerings that use first-party over third-party data, embracing direct selling, incorporating new advertising technologies, or putting in place measures for enhanced ad fraud prevention.
Most likely it will mean a combination of all of the above.
What is clear, however, is that it is possible to ride out this demand shift. And the shifting landscape is just as much an opportunity as it is a challenge. Some platforms are already thriving, and the key seems to be diversification. Media buying platform, The Trade Desk, has continued to achieve great financial results off the back of highly effective AI, bid factors, numerous partnerships with content creators, and a commitment to transparency.
It’s all for the taking and, to borrow the words of Dr. Jochen Schlosser, CTO at Adform, “everyone has to take care of the revolution themselves”.
In an industry defined by constant innovation, Adtech specialist Bradley helps customers realise their strategies with reliable, scalable infrastructure.
He’s a Reading FC and F1 fan, and father of two.
