It is well-known that annual digital display programmatic ad spending is in the tens of billions of dollars and makes up more than half of the U.S. industry’s digital display ad spend. What may not be as well recognized or appreciated is just how significant this majority is. According to eMarketer’s Q2 ’17 programmatic ad spending report, nearly 4 out of every 5 digital display ads will be purchased programmatically in 2017. Thus, of the $41.75B spent on digital display ads in 2017, $32.56B will be spent buying ads via automated means.
Additionally, automated digital display ad spending will continue to increase in the years to come: by 2018, almost $40B will be spent buying digital display advertising programmatically, and by 2019, that amount will increase to nearly $46B, an amount that would represent 84% of all U.S. digital display ad spend.
U.S. Programmatic Ad Spending: Real-Time Bidding vs Programmatic Direct
However, within these increases lies an interesting trend: the year-over-year change of Real-Time Bidding (RTB) digital display purchasing is eroding at a much faster rate than that of vendor-direct programmatic purchasing. After an increase of 42.6% from 2016 to 2017, RTB digital display purchasing is due to only increase by 19.6% from 2017 to 2018, a dip of nearly 55%. On the flip side, the growth change in vendor-direct programmatic purchasing is due to erode at a much smaller rate during the same period of time, increasing 48.4% over ’16-’17 and then 35% over ’17-’18, a dip of only 28%. Overall, the Compound Annual Growth Rate (CAGR) of RTB digital display purchasing from ’15-’19 is projected to be 17.52% which is 18% below the overall programmatic ad spend CAGR of 21.29% during the same time span. Additionally, the 5-year CAGR of vendor-direct programmatic purchasing is projected to be 24.39% which is 15% higher than the previously mentioned 21.29% metric.
The Role of Transparency
With digital media having been placed under a high-quality microscope in the past year, this shift in transaction type is surprising only in how fast it has actually occurred. Advertisers have put a significant emphasis on correctly-measured, fraud-free inventory, and they feel most confident in their attempt to purchase such inventory by working with confirmed sources and name-brand vendors.
Private Marketplaces (PMPs), where inventory is aggregated and vetted by agency partners, and vendor-direct buys provide advertisers with the supposed quality control needed to reaffirm the expected value of advertiser purchases. Thus, the comfort level that advertisers have making transactions with PMPs and vendors directly vastly exceeds that of the RTB nature, where inventory is simply sold in an open marketplace via 3rd party exchanges and may or may not be of the quality demanded. Fair or not (and according to a recent report published by ad fraud leader White Ops, PMP buys are actually at a 40% higher fraudulent risk than non-PMP buys as a result of a higher bot presence amongst sourced publisher traffic), advertisers are turning to direct buy types as they spend more money buying ads programmatically.
Mobile Programmatic Ad Spending
Mobile, led by social, is the clear platform leader when it comes to automated buying. Currently, mobile outpaces desktop & laptop automated spend by a 2.85-to-1 ratio and this number is expected to leap to a 3.5+-to-1 ratio by 2019. Within mobile, however, it will be more important than ever for advertisers to understand how their dollars are being transacted. According to eMarketer, the percent spent on programmatic direct buys is decreasing year-over-year across the 5-year period from ’15-’19 (from 63% to 56%), while the percent spent on RTB buys is increasing year-over-year during the same period (from 37% to 44%). If brands are more comfortable purchasing inventory in an automated fashion through direct means, governance – in the form of communication, processes, and education – will help them circumvent any misguided transaction imbalances that could arise.
The Importance of Governance
This is the approach that leading brands must take with programmatic buying in general. Understanding the various transaction types, what value each offers, and what possible pitfalls may be encountered is critical. Similarly, taking a deep-dive into industry trends and understand what shifts are occurring and why is just as important when it comes to determining what offerings various platforms provide and how inventory and buy-types can be affected. Most importantly though, leading brands must decide what factors are crucial to their business: do results – and only results – reign supreme or is a more hands-on approach preferred, potentially guaranteeing a higher degree of quality control despite coming at the expense of time?
Automated buying is ever-complicated, but with information paired with formulated decision-making, brands and their partners will be able to navigate the digital landscape in-tandem, with the highest degree of success and in a manner in which all parties are most content.