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Advertising Technology (adtech) is defined as a range of software and tools that brands and agencies use to strategize, set up, and manage their digital advertising activities.”

In this primer, we look at the concept of advertising technology, the world of programmatic (including ad buying, direct, and real-time bidding), the adtech ecosystem, and future trends in adtech to watch out for.

In Digital Advertising, we briefly looked at the beginning of the digital advertising industry, and how a 468*60 px banner marked a revolution in advertising in 1994. Rapid developments in e-commerce eventually led to agencies helping their clients place ads on websites that would yield clients the maximum Return on Investments (ROI).

The growth of online advertising was guaranteed when, in 1995 the Interactive Advertising Bureau (IAB) was established to regulate the industry. And now, almost twenty years after the dot-com boom, this democratization of digital advertising has never been more stable. All thanks to adtech.

As brands are increasingly relying on adtech to create a stir, capture audiences and boost brand presence, it’s time we take you through what adtech is, the adtech ecosystem, programmatic, and the advertising technology trends to look forward to.

What Is Advertising Technology (Adtech)?

Adtech is a portmanteau of Advertising Technology. It covers a range of software and tools that brands and agencies use to strategize, set up and manage all digital advertising activities.

The adtech ecosystem has two major entities, viz. the advertiser (the demand-side) and the publisher (the supply-side).

Advertisers want to get the most out of their invested budget by running effective ad campaigns to reach their target audience, optimizing these campaigns, measuring ROI, and gathering customer insights.

Publishers cater to the requirements of advertisers and generate revenue through ads by displaying these ads on their publication/s (website, app, etc.), increasing ad impressions, maximizing bids for the ad slots, and gathering visitor insights. Publishers need to take care of all these things in keeping with the platform User Interface (UI).

Adtech helps advertisers and publishers achieve their goals by offering applications that meet the specific demands of both parties.

Popular adtech platforms include SmartyAds, TubeMogul, Simpli.fi, MediaMath, and PubMatic. Features such as transparency, interface, flexibility, and real-time analytics, are what you need to look for in an ideal platform.

Learn More: What Is Display Advertising? Definition, Targeting Process, Management, Network, Types, and Examples

The World of Programmatic

When reading about adtech and its peripheral concepts, you’ll often come across terms such as programmatic buying, programmatic direct or RTB. So, before we dive into the adtech ecosystem, let’s discuss all things programmatic.

Representation of Programmatic Buying, Programmatic Direct, and RTB

1. What Is Programmatic Ad Buying?

Programmatic pertains to the use of technology and data to automate and streamline online media’s transaction process. Which means, with the introduction of programmatic, publishers and advertisers or agencies don’t have to sit across the table to discuss and negotiate the contract. Ad buying is done through algorithms.

2. What Is Programmatic Direct?

Programmatic direct is a method of programmatic media buying. Programmatic direct is a digital replication of the traditional media buying process where advertisers strike a one-to-one deal with publishers to display their ads. The negotiation involves both parties agreeing on a fixed Cost per Mille (CPM) pricing.

This method is viable for high-end ad inventories or publishers. Advertisers go for programmatic direct with publishers who have the most potent user bases. Publishers choose this method because they can display ads while maintaining the user experience.

Although the initial process may not sound too “programmatic” due to human participation, the rest of the process, including ad placement is done programmatically.

3. What Is Real-Time Bidding (RTB)?

Real-time bidding (RTB) is the second type of programmatic ad buying. RTB is perhaps the most commonly used method of media buying because of its scalability and flexibility.

RTB involves advertisers bidding on ad inventory in real-time through an ad exchange. It’s a feasible method for publishers as they can now sell unsold inventory without actively getting involved in the process. Although publishers may not get premium value from RTB, they still get a fair deal as the bids are determined based on demand for the ad inventory.

Learn More: What Is Programmatic Advertising? Definition, Types, Channel, and Advantages

The Adtech Ecosystem

The traditional media value chain is straightforward. An advertiser looking to get their ad printed in a newspaper or a magazine would get in touch with an ad agency, inquire about suitable publications, their reach, ad rates, and so on. Upon negotiation and shortlisting the publications, the advertiser would place an order and wait for their ad to be published in various publications.

1. What Is Programmatic Ad Buying?

Programmatic pertains to the use of technology and data to automate and streamline online media’s transaction process. Which means, with the introduction of programmatic, publishers and advertisers or agencies don’t have to sit across the table to discuss and negotiate the contract. Ad buying is done through algorithms.

2. What Is Programmatic Direct?

Programmatic direct is a method of programmatic media buying. Programmatic direct is a digital replication of the traditional media buying process where advertisers strike a one-to-one deal with publishers to display their ads. The negotiation involves both parties agreeing on a fixed Cost per Mille (CPM) pricing.

This method is viable for high-end ad inventories or publishers. Advertisers go for programmatic direct with publishers who have the most potent user bases. Publishers choose this method because they can display ads while maintaining the user experience.

Although the initial process may not sound too “programmatic” due to human participation, the rest of the process, including ad placement is done programmatically.

3. What Is Real-Time Bidding (RTB)?

Real-time bidding (RTB) is the second type of programmatic ad buying. RTB is perhaps the most commonly used method of media buying because of its scalability and flexibility.

RTB involves advertisers bidding on ad inventory in real-time through an ad exchange. It’s a feasible method for publishers as they can now sell unsold inventory without actively getting involved in the process. Although publishers may not get premium value from RTB, they still get a fair deal as the bids are determined based on demand for the ad inventory.

Learn More: What Is Programmatic Advertising? Definition, Types, Channel, and Advantages

The Adtech Ecosystem

The traditional media value chain is straightforward. An advertiser looking to get their ad printed in a newspaper or a magazine would get in touch with an ad agency, inquire about suitable publications, their reach, ad rates, and so on. Upon negotiation and shortlisting the publications, the advertiser would place an order and wait for their ad to be published in various publications.

Representation of Advertising Technology Trends

1. The Industry Is Moving Toward Consolidation

One prominent trend that has commonly been observed among martech and adtech industries is that giant corporations are acquiring promising independent companies in their respective niches to strengthen and scale their offerings. This trend enables bigger companies to aggregate multiple offerings in a single platform through which their users can pick and choose necessary features.

While this poses a threat to relatively smaller players, as the industry will be dominated by 3-4 players, advertisers and publishers need to gain expertise in the leading platforms and identify how these tools can be integrated within their existing martech/adtech stacks.

2. Companies With Niche Offerings Will Be Successful

While the adtech industry is moving towards consolidation, this trend shouldn’t necessarily seal the fate of new entrants or existing startups. Companies that offer niche products, or that support the major companies in the adtech ecosystem, will gain an upper hand.

Here are three reasons that support this:

  1. Native advertising has become an effective way for advertisers to spread their message. Apart from Facebook and Google, advertisers are also experimenting with native ad platforms such as Taboola, Outbrain, Playbuzz, etc.
  2. Publishers and app developers want to break away from the oligopoly of Facebook, Apple, and Google.
  3. Advertisers prefer using third-party attribution tools than relying on Facebook and Google’s native solutions.

3. The Adtech Ecosystem Will Promote More Transparency

Advertisers, publishers, and end-users are expecting the components of the adtech supply chain to be more transparent.

GDPR enforces the privacy and transparency aspect on end-users’ part by making it mandatory for publishers to disclose how their data is used and reinstates the power in the hands of users through the eight rights for individuals.

Advertisers are tracking the placement of their ads and how each ad is contributing toward revenue generation. Similarly, publishers are keen to understand how users navigate through their websites, interact with ads, and how much revenue the website is generating for advertisers.

Companies are working towards building an environment where advertisers and publishers don’t have to deal with high-quantity, low-quality traffic, and advertisers have access to superior ad inventory.

4. Advertisers Will Tell Stories Through Their Ads

Advertisers have had this notion that getting more eyeballs is more important than conveying a compelling story through ads. Over time, users have developed banner blindness, which has made them immune to ads, and although advertisers are getting impressions, the ROI is just not the same.

Marketers now need to tell stories through ads that can lead to meaningful interactions between the consumer and the brand. So, it’s no longer just the aesthetics of the ad, it’s the content, the medium, the message, the story, and the design that will decide whether users connect with your ad emotionally.

To serve this effectively, advertisers will experiment with simulated and immersive experiences, i.e., AR and VR, to better gauge customers’ responses.

5. Mobile Will Grow

Mobile has undeniably become our first source to consume information due to convenience and portability. This shift in consumer behavior has made mobile responsible for generating 63% of digital ad revenue. It is also partly due to the wide advertising opportunities available on mobile devices. You can target a consumer in a short time span through search, email, social media, videos, games and mobile apps, and that’s enough to leave an advertiser’s mark on their minds.

Video is the most commonly used ad format regardless of the medium. To cater to changing habits and attention spans, advertisers are creating vertical and short duration ads. Telling a story in under a minute, indeed in a few seconds, is a challenge worth accepting.

6. Advertisers Will Tap Into New Ad Channels

Smart TVs and over-the-top OTT platforms such as Netflix, Hulu, Amazon Prime, HBO Now, and Roku have amassed an enormous user base. The U.S. alone has over 181 million OTT video service users, and advertisers are ready to bank on this opportunity. As reported by Magna, OTT ad revenue from the U.S. is predicted to grow up to $5 billion by 2020.

While OTT video service is just one of the new channels, advertisers are also evaluating the potential of direct-to-customer (DTC) brands and digital out-of-home (DOOH) to expand their advertising efforts.

7. MAdTech: The Consolidation of Martech and Adtech

David Raab introduced the term MAdTech in 2015 to explain the growing convergence of MarTech and Adtech. These two technologies can feed off of each other by utilizing the common thread between them, that is, customer data.

By tearing down data silos, marketers can analyze customer insights collected from their Martech stack and utilize them during the media buying process and eventually optimize (reduce) their ad expenditure.

David Raab sums this up perfectly by saying:

Martech deals with known individuals. As anonymity becomes increasingly unavailable, marketers will know exactly who is receiving their advertising messages. Martech targeting techniques will, therefore, be used in adtech as well. Conversely, some adtech features will become standard martech practice.

Learn More: What Is Native Advertising? Definition, Components, Benchmarks, & Best Practices with Examples

Adtech: The Road Ahead The ad spend on digital media (exclusively) will reach $329 billion in 2021, according to Zenith Media, but the adtech space is still vexed with plenty of challenges. Ad fraud, transparency, and privacy issues have always been an Achilles’ heel of the industry.

The expertise advertisers and publishers have can certainly tackle these challenges effectively before they are resolved for good.

 

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Next Millennium