- Programmatic advertising investments continue to rise, but growth is slowing down. The industry is facing a number of challenges in terms of data protection and the supply chain that need to be overcome in order to achieve faster growth again.
- Brands need to develop new targeting techniques that use first-party data and proprietary customer data platforms, as cookies are increasingly no longer an option.
In 2020, 69% of all digital media will be traded programmatically. Digital media is defined here as all forms of paid advertising within online content, including banners, online video and social media, but excluding paid search and classified ads.
According to the forecast, the figure for the current year is around 65%. The total amount invested programmatically will exceed USD 100 billion for the first time in 2019, at around USD 106 billion. Zenith expects this figure to rise to USD 127 billion in 2020 and to USD 147 billion in 2021, with 72% of digital media being traded programmatically.
However, growth in programmatic advertising is slowing, falling from 35% in 2018 to 22% in 2019. Growth is estimated at 19% in 2020 and 16% in 2021. The programmatic industry is facing challenges that need to be solved so that all market players can realize their full potential.
Balance between privacy and personalization
The first challenge is to develop new technologies and processes that better reconcile consumers' need for privacy with the benefits of targeting and personalization. The EU's GDPR has severely restricted the commercial use of personal data.
The California Consumer Privacy Act, which comes into force in January, will further drive this trend. In addition, some browsers are blocking the third-party cookies that programmatic advertising previously relied on for measurement, insights, targeting and retargeting.
"The progressive disappearance of the cookie means that the industry must rethink the implementation of targeting and personalization to respect consumers' privacy rights," said Matt James, Zenith's Global Brand President. "High-quality first-party data is more important than ever to the success of programmatic marketing."
Streamlining the supply chain
There are too many ad tech entities standing in the way between publishers and brands, charging fees whose value is unclear due to a lack of transparency. "Brands and buyers should review all platforms they contract with to ensure they are transparent and effectively contributing to campaign objectives," said Benoit Cacheux, Global Chief Digital Officer at Zenith. "They should end their relationship with platforms that don't."
Potential of first-party data and customer data platforms
As third-party data becomes increasingly commoditized and less effective, brands are stepping up the collection of first-party data, which consumers provide directly and voluntarily or is generated indirectly through activity on websites, CRM programs and other sources. As each brand does this individually, first-party data can offer a real competitive advantage.
Customer Data Platforms (CDPs) organize a brand's first-party data and can be enabled with appropriate links into the programmatic trading system so that advertising can be targeted to individual consumer preferences. However, it is important to connect CDPs with other data sources to get a complete view of each customer and continuously measure performance to enable true person-based marketing.
The increased use of first-party data and CDPs in combination with other assets will make programmatic marketing more effective and result in greater investment from brands.
Use of programmatic media
Suitable high-engagement formats are now more readily available online. In addition, the opening up of digital out-of-home and TV for programmatic advertising is gradually creating additional added value for advertisers.
Programmatic marketing in international comparison
The United Kingdom and the USA are the most developed programmatic markets. In 2019, 87% and 82% of digital media here will be traded programmatically in 2019. By 2021, Denmark, France and Germany will also be above the 80 percent mark.
In terms of advertising volume, the USA is by far the largest programmatic market with USD 67 billion this year. China is in second place with USD 10 billion in 2019, followed by the UK with USD 7 billion. Programmatic trading will only account for 30 percent of digital media advertising in China this year, but Zenith predicts that the share will rise to 41 percent by 2021.
"Although programmatic advertising continues to grow at double-digit rates, it is currently being held back by the industry's struggles with privacy and supply chain challenges," said Jonathan Barnard, Zenith's Head of Forecasting. "Once these challenges are overcome, programmatic marketing can return to stronger growth over the next decade."