Trends Shaping Programmatic’s Future
February 6, 2017
By Tom Schmidt
It's official: the advertising industry has entered the era of programmatic. U.S. programmatic digital display ad spending was predicted to reach $22.10 billion by December 2016 — that's a 39.7% increase from 2015, and 67% of the total digital display ad spend in the U.S. And it doesn't stop there. Programmatic now makes up over 50% of all video ad spend, and native ads, which were introduced into the programmatic playing field in 2015, have already reached 36%.
This impressive growth makes one thing clear: while the past few years were a time of industry change, we've now entered the next chapter of programmatic. So what defines this new era, and how can marketers ensure they're staying ahead of the game? Here's my take on the key trends shaping the programmatic landscape of 2017 and beyond.
All you need is data — unique data. In programmatic advertising, data is the fuel that powers performance, and as programmatic continues to grow, an increasing number of marketers will implement data-driven tactics, resulting in an increased demand for more unique and specialized data sets.
In this next chapter of programmatic, data-driven targeting will result in increased precision and more informed media buying, which in turn, will encourage advertisers to develop more personalized content that speaks directly to their most valuable consumers. To ensure they're making the most out of the data available to them, marketers should look for ad tech partners that are "data-agnostic," allowing them to easily leverage first-party CRM data with any number of third-party data sets in whatever combination best suits their advertising goals.
Going direct will be key. When programmatic first emerged, many associated the term with remnant inventory. However, programmatic direct is shattering these preconceived notions. In fact, eMarketer predicted programmatic direct would reach $8.57 billion in spending by December 2016, representing 42% of all programmatic ad expenditure in the US — up from 8% in 2014.
Both marketers and publishers should weigh the importance of a direct relationship with one another. If this is a priority, programmatic direct may be something to consider, as it offers many advantages for both parties.
First, advertisers no longer need to separate their programmatic and premium initiatives. Programmatic direct provides more control over ad buys and guarantees those buys will deliver on agreed-upon premium inventory.
For publishers, going direct allows them to retain their relationships with advertisers by offering the same premium supply via programmatic. It's no longer direct vs. programmatic. Not to mention, with advertisers bidding on premium inventory and effectively increasing demand, publishers will in turn see an increase in yield. When you couple this with the benefits that come with any programmatic platform — targeting, reach, control and transparency — it's a win-win on both sides.
Native programmatic will play a starring role in every modern ad strategy. In general, native ads are driving more engagement and actions than traditional ads. Specifically for brand engagement metrics, like completed-view rates and time spent, there has been about 3x better performance against traditional display and search formats. And on the publisher side, when you think about the growth opportunity behind native programmatic buying, it becomes a no-brainer. Simply put, native ads create a more engaging user experience, which drives higher CPMs and generates revenue.
And while it's still early days for native advertising, we anticipate that programmatic will bring tremendous growth to the format. If you look at the growth trajectory of video and display, it makes sense. In 2013, programmatic started at a lowly 24% of display advertising spend; today, it's 67%. In 2014, video emerged as the next format, making up 12% of total video ad spend. Today, it's just above 50%.
So what does this mean for brands? As native programmatic continues to grow and drive great results for both advertisers and publishers, the new ad format will be increasingly important in defining the trends we see in this next era of programmatic.
"Trends Shaping Programmatic's Future." MediaPost, 2/6/17.
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