Over a century ago, the retail pioneer, John Wanamaker, said, “ Half my advertising space is wasted; the trouble is, I don’t know which half.” Times have definitely changed since then. Advertisers have responded quickly and can now reach millions of potential customers with targeted ads.
But what does the future of programmatic ads look like? We’ll talk about growth projections for 2023 and beyond, identifying those vectors that are leading to further growth. But first, let’s make sure we’re all on the same page.
What Is Programmatic Advertising?
Programmatic advertising is an efficient means of buying ad space on websites. It uses highly complicated algorithms to display relevant ads to potential customers in real-time. It has radically changed the way that advertisers buy ad space.
The reason why John Wanamaker wasn’t sure which half of his advertising budget he was wasting was that his advertising plan was too broad. Of course, given the options he had, that was inevitable. The only way that he could “target” his advertising would have been by handing out flyers to individual customers. Print and television advertising can reach a segmented market if they concentrate on special interest programming and magazines. Even so, that kind of advertising is expensive.
Nowadays, both print and television advertising are losing market share to digital advertising. And in turn, digital advertising is shifting its focus to programmatic advertising.
Traditional Advertising vs. Programmatic Advertising
Nowadays, nearly 90% of digital display ad spending goes on programmatic ads. Spending on programmatic ads is highly cost-efficient. The pricing structure is such that a company can stretch its advertising budget between ten and twenty times further than it could through traditional advertising.
Programmatic advertising has experienced rapid growth since its introduction in the early years of this century. The industry is now worth more than $150 billion annually and is positioned to continue growing. While companies are turning to programmatic advertising, there is still considerable room for growth.
Security Scares in Online Advertising
Programmatic advertising is facing a challenge in the immediate future. People have worried about online security for many years – a worry that has only increased after well-publicized security breaches involving some of the web’s big players.
Google Responds
Responding to concerns about online privacy, Google has said:
“New web and app technologies are needed to improve people’s privacy online. In recent years, some browsers and platforms have taken steps to restrict or remove existing mechanisms, such as third-party cookies, without effective alternatives in place. This can negatively impact critical ecosystem functionality and put user privacy at greater risk by leading to the adoption of covert tracking.
We believe that developers and businesses should be able to make money from their sites and apps, as well as reach customers with relevant ads. The Privacy Sandbox initiative is developing new solutions that support key ecosystem needs — without reliance on online tracking identifiers — so that publishers and developers can provide free content and grow their business in a privacy-preserving way.”
Saying Goodbye to Third-Party Cookies
Google intends to have the Privacy Sandbox initiative up and running by the end of 2023. This should give advertisers sufficient time to develop new strategies. Certainly, this change doesn’t mean an end to programmatic advertising.
But it does mean a shift away from third-party cookies. ( Basically, a third-party cookie is a tracker that a website you visit places in your browser.) Google isn’t leading this change – Apple and Mozilla did away with third-party cookies in 2019.
But the writing was already on the wall before Apple and Mozilla made the change. Web-users never trusted these trackers, seeing them as spies that could gather all sorts of personal data. Data that the user had no control over and no idea what the gatherers were doing with it. Users were employing ad blockers and regularly cleaning out cookie caches. By doing this, the users rendered ads that relied on third-party cookies less effective.
6 Elements of Future Growth for Programmatic Ads
So, as websites retire third-party cookies, where will future growth in the industry come from? That programmatic advertising will continue to grow is beyond doubt. Some analysts believe that it will continue its current 12% annual growth trend. This may be a little optimistic in the long term, but it understates growth over the next three to four years.
Growth could be around 15% annually until 2027, then drop a little as more companies develop mature strategies. This is what generally happens in any new field. A slowdown in the growth rate doesn’t imply that programmatic advertising will have passed its peak. It will remain dominant and only strengthen its grip on future advertising strategies.
We can expect to see significant growth in the following six areas:
1. Contextual Advertising
Contextual advertising doesn’t depend on third-party cookies to find its target web user. This form of advertising matches ads to the website’s content. Rapid advances in artificial intelligence (AI) now allow AI to read and understand website content accurately (or fairly accurately, it still needs fine-tuning). This form of programmatic advertising doesn’t need a user’s personal data. It makes assumptions based on what the user is looking at.
Someone who enjoys hiking would look at websites that suggest new hiking routes. Contextual advertising would track their interest and target relevant ads in real-time. That person might expect to see an ad for hiking boots or a restaurant in the town where the hiking trail ends.
Contextual advertising is ideal for the larger business that sells global products and the small restaurant owner. Much growth here will come from smaller businesses that are new to online advertising.
Contextual advertising also allows advertisers to track the effectiveness of their advertising by measuring customer response.
2. Website Whitelists
In a way, this is a broader form of contextual advertising. Here a company places an ad on all websites that belong to a certain category. These categories can be pretty broad – all news websites, or more restricted – all websites that cover ‘hiking in Vermont.’
Whitelists allow an advertiser to reach a large number of potential customers in a chosen category. A slightly wider field than pure contextual advertising, but still focused.
3. Mobile Advertising
Statistics suggest that 75% of internet usage is on mobile devices. People are spending less time on their desktops and more on their mobile devices. A glance around a subway car would seem to bear this out, but it’s also backed by statistics. The amount of time people spend looking at ads on desktops is dropping while that same statistic is rising on mobile devices.
The implication for advertisers? They should think about how their ads appear on smaller screens. More impact and less clutter are the buzzwords. People spend less time on one single site on their mobile devices; they tend to jump quickly from one site to the next. Make your mobile advertising as captivating as possible.
4. Video
As the success of apps such as Instagram and TikTok suggests, people enjoy watching videos. People, especially younger people, don’t want to see static ads. Videos attract seven times more viewers. In the future, advertisers will have to concentrate on producing entertaining videos that grab the viewer’s attention and effectively market content.
Forbes, suggests that videos are shared 1,200% more than text and links together. If an advertiser can produce compelling video content, it will reach a wider audience.
5. First-Party Data
Third-party cookies aren’t the only way to gather information about potential customers. A company can collect intelligence through its own website and general customer base. Using this information, the company can target existing customers through programmatic advertising.
The areas of growth mentioned above will prove effective in reaching current and potential customers. At the same time, none of these channels violate customer privacy.
6. Content
You can use any or all of the above channels to reach your target audience. But, to have the desired effect, your advertising must have an impact. People have short attention spans. They aren’t willing to give you the benefit of the doubt. Pay close attention to the design and appearance of all your programmatic advertising.
Make sure your advertising demands the attention of your potential customer and says what it wants forcefully and immediately. This applies to both video content and text. Videos should be engaging and short.
The Verdict on Programmatic Ad Growth
Every advertiser wants to ensure that it’s spending its money effectively. This means reaching those people who may have a genuine interest in the product. Programmatic advertising offers this possibility and can prove to be enormously effective. It’s difficult to think of any product or service that wouldn’t benefit from programmatic advertising.
But it’s important to stress that content is still king, and he’s holding on to his kingdom.
Programmatic advertising is certainly the way forward. If you don’t feel you have the necessary skills in-house to design an effective campaign, there are agencies that will help you to produce content that can deliver results.
