In a mere matter of years, automation has come to dominate how media buyers access display ad inventory.
Programmatic advertising, that is, the use of automation in the buying, selling or fulfillment of ads, is no longer merely synonymous with real-time bidding (RTB), an auction-based, impression-level method of buying ad inventory that first put the term on the digital advertising map. Automated tools and technologies now power the vast majority of social advertising. They power direct transactions and guarantees that use automation to enhance audience targeting. They grant buyers access to premium video and in-app inventory. They make it possible to secure quality inventory and audiences from the walled gardens. Programmatic is, in a word, powerful.
We released our first estimates of programmatic display ad spending for the US in 2014. In 2015, we released our first estimate for the UK and in 2016, we released additional estimates for Canada, China, France and Germany. Over the years, we’ve watched these markets adopt, optimize and advance their programmatic advertising practices to the point where today, programmatic accounts for the majority of display ad spending for all of them.
In the US, UK, Canada, France and Germany, more than four in five digital display ad dollars transact programmatically, a portion that is still rising as social networks like Facebook suck up programmatic investment and publishers increasingly release premium audio, video and in-app ad formats into automated channels.
In China, Facebook’s influence may be absent, but Baidu, Alibaba and Tencent, or the “BAT” companies, account for a significant share of the programmatic display market. Advertisers gravitate to BAT properties—like they do to Facebook and Google in other regions—for scale, rich audience insights and targeting capabilities. Programmatic uptick across these three platforms, along with the arrival of newcomers ByteDance (owner of music-based short-video app Douyin, known as TikTok outside China, and AI-based news aggregator Toutiao) and shopping platform Xiaohongshu (also known as RED or Little Red Book) will help move programmatic to 77.8% of all digital display ad spending by 2021.
While there are many differences across countries as to how buyers and sellers view and use programmatic, there are also global similarities. Privacy is one common theme.
We’ve discussed privacy and its effects on digital advertising across Europe and the US throughout our coverage this year, but it’s fair to say these implications are global, and they’re affecting programmatic practices similarly. With all six countries facing, or about to face, new privacy regulations in the next 24 months, concerns regarding data usage, particularly for programmatic advertising, are sky high.
As regulation rolls out, the story will likely be similar to that of the EU’s General Data Protection Regulation (GDPR): Open market spending will first stall as buyers and sellers navigate the uncertainties of who is—and who is not—complying with the law. Longer term, those uncertainties—and fear of fines—will drive greater interest in more direct, private setups like private marketplaces (PMPs) and programmatic direct so buyers and sellers can be sure their counterparts are using data that’s legitimate, consented to and safe.
This is one major factor driving greater ad dollars into PMPs and programmatic direct transactions through 2021. During the forecast window, PMP ad spending growth will outpace open marketplace growth by double or more across the six countries.
The open markets could see further backslide if RTB is deemed in violation of GDPR, as per a decree from a June 2019 report issued by the UK’s Information Commissioner’s Office. That report stated that RTB may be in violation of GDPR, given the inability for advertisers, publishers and even ad tech providers to properly police the passing of consent flags and identify all parties that are using and sharing consumer data. If parties cannot track this, they cannot entirely validate consumer consent. The report stated the industry must review RTB infrastructure and come up with a solution for this problem or else it may face regulatory fines. Should the window close for addressing this issue, it could have significant effects on the use of cookies, device-level identifiers and other sources to which anonymized personal information are often appended.
PMP investment is on the rise, as is programmatic direct spending. For each country, programmatic direct will gain market share between 2019 and 2021:
- In the US and Canada, programmatic direct as a portion of total programmatic display ad spending will continue its upward march, thanks to strong performance among the social networks and in the US, anticipated gains in OTT and connected TV over the next 24 months. US programmatic direct will rise from 61.9% to 67.2% between 2019 and 2021; Canada’s programmatic direct as a portion of total programmatic will jump from 62.6% to 68.0%.
- In the UK, France and Germany, factors similar to those in the US will drive programmatic direct investment during the forecast window, though connected TV and OTT will be less of a factor in markets like France and Germany where legacy systems for buying these ads prevail. In all three countries, Facebook is a significant recipient of programmatic direct investment; its effects on the markets—and programmatic direct—are greatest on smaller markets like France and Germany. By 2021, programmatic direct’s portion of total programmatic display for the UK, France and Germany will be 68.6%, 75.0% and 79.0%, respectively.
- In China, programmatic direct will rise from 68.6% to 71.0% between 2019 and 2021, largely due to continued growth of BAT and other up-and-coming properties that prefer guarantees and other preferred setups over RTB. In China, OTT and connected TV are growing, but their influence on programmatic direct will be neutral or negative. In fact, continued consumer preference for subscription vs. ad-supported services may actually constrict available ad supply during the forecast period.
Mobile also plays an important role in programmatic display advertising. Individuals continue to devote their time and attention to consuming content and browsing the internet on their mobile devices, and advertisers are doing the same.
For the Western countries, programmatic first took hold across the desktop and mobile web. It’s taken time for mobile app developers (apart from the social networks) to embrace programmatic, and it’s the same for ad buyers used to transacting largely on cookie-based identifiers. While in-app programmatic still has its challenges, it is continuing to mature. Today, the vast majority of mobile display ad dollars are programmatic. And it’s also true that for all five countries, mobile now accounts for the majority share of programmatic display.
In the US and the UK, north of 80% of all programmatic display will go to mobile. In the US, mobile’s share of programmatic display will peak in 2020; it will fall slightly in 2021 as connected TV claims a more prominent share of programmatic ad spending.
For Germany, France and Canada, mobile’s share is slightly lower, but still substantial. This year, mobile will claim 70.8% of all programmatic display ad dollars in Germany, 59.6% in France and 66.4% in Canada.
Of all the countries, China is the most mobile-dominant, and its programmatic landscape reflects that. In 2019, 87.3% of all programmatic ad dollars will go to display ads on mobile devices. By 2021, that share will reach 89.0%.
All the above is just a taste of the data and trends that we forecast and share across these six markets. For an in-depth look at programmatic ad spending in each country, including estimates for programmatic video ad spending in select countries, explore the report collection.
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