It’s not long until 2020 and I felt it was time for some adtech predictions. The predictions are quite long so this article is only part one in a series.
After personally interviewing over 100 adtech companies some trends have emerged. Just a couple of caveats; (a) this is only the adtech companies and companies from martech have been omitted (b) this is only companies that have a local office in our market. We have a policy which is “no eye contact means no I/O contact” (c) these are my personal views only.
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Where are the industry pressures?
There are three pressures in the industry at the moment which will force adtech vendors to continue to evolve. These pressures are;
- More Transparency. Ten years ago advertisers just wanted to know that they got the impressions they purchased got delivered. Now advertisers want to know more about adtech features, tech fees, the programmatic strategies, data sources, attribution etc… The trend for wanting to “know more” will continue unabated for several years to come. It will probably plateau out when advertisers feel that they are spending too much time under the hood of the technology and need to divert their attention back to their core business of selling their products.
- More Efficiency. As seen with from previous tests there is much wastage in the ad-tech industry. Wastage from low viewabilty, wastage from poor demographic targeting, ad-fraud, crawlers. On average only 16 per cent of the media spend is programmatic targeted towards a Viewable, In-Target human that may purchase your product. Advertisers will start bench-marking agencies on their data effectiveness/efficiency.
- More Performance. On average only one in 20,000 people click on a creative. This is a sad but true fact. Advertisers will continue to push for more and better results. Advertisers will continue to push for better results and in an ever competitive landscape adtech will need to continue to evolve.
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The Darwinian Theory of Ad-Tech: Survival of the most transparent, most efficient and best performance advertising technology. The pressures mentioned above are applied differently to each of the areas of the digital ecosystem.
3rd Party Data Vendors (3PD)
Providers of 3rd party data will find it tough moving into 2020. The top three pressures on 3PD are:
- Shrinking Data Margins – There is more programmatic data available now than ever before. The amount of data available by 2020 will be unfathomable. The price for storing and processing this data will decrease but not at the rate that the data collection will increase. Therefore, there will continue to be downward pressure on margins.
- Deterministic Data Sets – There are so many discrepancies between data sets. Advertisers will want simpler, more trustworthy, deterministic datasets.
- Data Trading Deals – Data will become such a core commodity to agencies and 3PD companies will need to think about setting up large data trading deals. “All you can eat” data deals, or exclusive data deals for specific clients based on usage commitments will be in vogue by 2020.
3rd Party Data Vendors should embrace the “all you can eat” deal.
The pressures on the Third Party Ad-Server space (Sizmek, AdForm, DoubleClick, Flashtalking) will actually ease between now and 2020. They are already running on slim margins, they are already well integrated with other adtech companies. Plus, advertisers are now seeing the need for Tag Management and the Cookie Level Data that is collected by ad-servers. The most significant changes to this tech would be;
- Enterprise Advertiser Deployment – Tier 1 advertisers will want to have their own deployment of the ad-server running behind the firewall. There are many benefits of this solution however the benefit that I like the most is that this solution bypasses AdBlocking! This is a very elegant solution to this sticky problem.
- Integration with Verification Tech – Ad-Server technology will need to either (a) integrate or (b) purchase verification (IAS, Moat, ComScore etc…) technology. I predict a much stronger alignment ad-server tech and verification tech moving forwards.
- X-Device and Conversation Attribution – Similar to the point above: I see what Atlas has done with the X-Device solution as setting the bar for the rest of the market. I foresee that Ad-Server solutions will have X-Device technology (AdTruth, TapAd, Drawbridge, AdBrain etc…) “baked in” on the back end. By 2020 X-Device will hopefully just be a report in an ad-server. Not a technology that we need to have a specific relationship with.
Enterprise deployments of technology will become the new gold standard in Ad-Serving.
It’s is very possible that these technologies will become some of the most important pieces of tech in the adtech industry. This includes companies like (Moat, IAS, ComScore, Double Verify, Alenty etc…). However, these technologies will have a number of things to focus on between now and 2020. These include;
- Methodological Counting Discrepancies – There are massive discrepancies between the counting methodologies behind these tech vendors. Even though there are governing bodies that have reviewed and approved these technologies I’ve still seen specific instances whereby there are 60 per cent discrepancy with some browsers. Within the next few years the methodologies that each of the vendors have will start to become closer together.
- Long Integration List – The next challenge for the BAV space will be integrating with everybody! Brands are already talking about using multiple DSPs at the same time. Brands will want the flexibility to testing different programmatic buying tools but they will want the consolidation of data into a single BAV provider. This means that each Brand Safety, Ad-Fraud or Validation provider will need to integrate their technology with dozens of different programmatic buying tools. The prediction here is that we will start to see checklists emerge which show which BAV technologies are integrated seamlessly with (a) social media channels like: Facebook, YouTube, Twitter (b) open programmatic buying technology like AppNexus, Videology, Trade Desk etc… and (c) other demographic verification technology like Nielsen, ComScore etc…
- Conversion Attribution Integration – It makes sense for Ad-Tech companies that specialise in measurement of BAV to combine their log level data with companies that specialise in Conversion Attribution. For instance; companies like Moat, IAS, ComScore are aware of which impressions were Viewable and Human, why wouldn’t this data be connected to companies like Abakus, Convertro, Adometry which calculates if these impressions assisted in an acquisition. It makes sense for these two data sets to combine.
Validation vendors will be in overdrive integrating with every open programmatic technology and social platform.
Brand Side Platforms (BSP)
I consider a brand side platform a programmatic buying unit where the brand takes ownership as the party ultimately responsible for the results of the campaigns. In other words an “in-house” programmatic buying unit.
It would seem that more and more brands want to take ownership of their programmatic spend. This is in alignment with the three principles above (Transparency, Efficiency and Performance). It feels like BSPs will fall into three categories;
- Type 1 – Full Control and Full Risk
This is where the brand either (a) employees staff themselves or (b) asks the agency to create a dedicated trading desk to run the programmatic campaigns. In this model the advertiser can select the technology. They can test any technology they want. The advertiser strikes the inventory and media deal but it also increases the risk. For instance; if something goes wrong then whose neck can you squeeze if you take it fully in-house?
- Type 2 – Partial Control and Partial Risk
This seems to be the flavour of the month and it’s clear that more of these types of trading desks will be created. This is lower risk for the brand than Type 1 (above) because the agency is in control of the trading desk and they do the hiring and firing of the people. The agency and advertiser share responsibility of the programmatic technology, the deals, the inventory but the the agency runs the technology on behalf of the agency.
- Type 3 – Outsources Control and Minimal Risk
This is a typical centralised programmatic trading desk. This model will continue to provide good value for service into 2020. However, I see that some brands will see these trading desks as a “publisher” and they will want to have these trading desks on a plan against other programmatic buying technologies. This will be a waste of money for the brand and something that brands should be very concerned about. If a brand splits their programmatic budget between various technologies then these brands will be bidding against themselves.
Brands shouldn’t split their programmatic buying otherwise they will be bidding against themselves!
Consultancy Service Specialists
For too long agencies have been bamboozled advertisers with jargon, metrics and options. These consultancy services will emerge (they will charge a fortune) and they will offer clarity to some of the world’s largest advertisers. My concerns about these companies are as follows;
- Who’s watching the watchmen – These consultancy companies will make recommendations to advertisers. These recommendations will decide the outcome of pitches and the flow of media dollars. This makes these consultancy services very influential. How do we know if these recommendations are accurate and truly unbiased? Anyone can create a consultancy services company. It doesn’t require any specific qualifications other than previously working in the industry. I feel by 2020 there will be more transparency on consultancy companies processes/training/education and level of objectivity.
- Miss-alignment of Interests – The consultancy service companies are not aligned towards the ongoing success of the business. They are paid a consultancy fee to perform a singular task and extract themselves from the relationship. They are not aligned to the agency, the publisher nor the advertiser. I feel by 2020 they will also need to evolve so that their mandate is aligned with the advertisers long term objectives.
Consultancy Services will continue to grow into 2020.
Conversion Attribution (CA) Specialists
The Conversion Attribution space and the Viewability space have very similar problems and objectives. As mentioned above these spaces may start merging together by the 2020. However, the CA space has a few other challenges which it needs to overcome on top of the other BAV challenges;
- Sharpen the Pencil – The rates for Conversion Attribution are astronomical! It’s over 5 x more expensive to run CA tools than it is to ad-server the same creative. That’s crazy. The rates simply need to come down… a lot!
- No Monthly Minimum – The other thing that CA technologies need to remove is the monthly minimum. It’s totally crazy that advertisers need to pay for a monthly minimum, especially when their campaign spends may be seasonal.
- Case Studies Galore – Lastly, the problem with CA is that it’s different for each advertiser. The CA results for a Finance advertiser can’t be compared to the CA results from a FMCG advertiser. It doesn’t make sense. The CA vendors need to become experts at rolling out a plethora of case studies educating the market.
Conversion Attribution is critical but overpriced. They need to sharpen their pencils and remove the monthly minimum spends.
Demand Side Platforms (DSP)
Demand Side Platforms will continue to evolve at lightning speed. The pace of evolution is frantic and there is a risk that they will have simply “too many” projects running simultaneously. The key to success for these companies are as follows;
- Priorities Business Objectives – We (as an industry) need to move away from measuring Clicks and Clocks. If the client sells credit cards then we need to operate on a “Cost Per Approved Application” model. If the client sells hamburgers then we need to have a “Cost Per Hamburger” model. For far too long we have been focusing on CTR as a metric of success. DSPs will need to integrate their systems with the Martech systems (Salesforce, Adobe, Oracle, Terra Data etc…) in order to start measuring marketing spends against business objectives.
- Full Tech Stack – As seen by the last debate, there is a desire to move to Full Tech/Open Tech stacks as they offer perceived increases in efficiency. Companies like AppNexus, Google’s (DBM & DCM), Adapt.TV (SSP and DSP) and Videology (Network Management Tool) are well placed with their Full Tech stack systems. Companies that don’t have offer similar levels of efficiency that a Full Tech stack offer will struggle.
- Re-targeting DSPs will decline – Demand Side Platforms that specialize on re-targeting will struggle. The reason being is Conversation Attribution. Each CA report that I’ve ever seen has suggested that media dollars should be removed from “last click” activity and reallocated into “upper funnel” activity. Therefore as the adoption of CA technology increases so will Re-targeting technologies decrease.
Re-targeting specialists will find it hard to stay on the plan.
High Impact Ad-Units (HICU)
I define HICU as new ad-formats that are very impactful to the internet user. For instance if you browse a normal website and suddenly an overlay will appear, or if you are on a mobile device and suddenly there is a small ad-unit sliding in from the side of the screen.
In summary: The pressure on the digital advertising industry will continue to increase. There will be more transparency, more efficiency and more performance. These pressures will continue to force the adtech industry to evolve.
The Darwinian Theory of Ad-Tech: Survival of the most transparent, most efficient and best performance advertising technology. This concludes the first part of the summary. In the second part the following technologies will be covered.
Data Management Platforms (DMP)
- Mobile – Location Services
- Mobile – Creative Services
- Mobile – Inventory Services
- Publisher Ad-Servers
- Supply Side Platforms (SSP)
- Search and Social Platforms
- Tag Management Solutions
- Out of Home (Digital)
- Video Ad-Servers (inc Programmatic TV)
- X-Device Specialists