By Phil Parrish on April 22nd, 2020
The Future of Programmatic Advertising: Top Trends & Tech to Watch in 2020
(Photo by John Cameron on Unsplash)
The first calendar quarter of 2020 is behind us as we continue to adjust to the new realities of life and work. There’s a lot to grapple with and a lot to learn from this surreal experience.
From a marketing perspective, brands are quickly adapting their businesses to better serve their customers. At the same time, we’ve been reviewing and revising our recommendations for programmatic advertising tech and trends to keep an eye on in 2020.
The following predictions for 2020 take COVID-19 and the changing economic climate into account. Despite the challenges we all currently face, we’re confident that new opportunities will present themselves to forward-thinking marketers leveraging programmatic adtech to engage with consumers in 2020.
Before we unveil our take on 2020, we’ll review our 2019 predictions:
Facebook & Google duopoly begins to decline
We anticipated a slight decline of U.S. digital ad spending on Facebook and Google in 2019 primarily due to Amazon’s growth in the digital ad market, new media channels like OTT, and a shifting regulatory landscape.
- In fact, Facebook and Google ad spend in the U.S. increased from a 60.1% share of the market in 2018 to 60.8% in 2019, even as Amazon’s share of the market grew.
- However, sources estimate that Facebook and Google could lose over $44 billion in ad revenue in 2020 due to the coronavirus pandemic.
Growth in digital audio advertising
Digital audio advertising through ad-supported streaming audio platforms surpassed growth expectations in 2019.
- Spotify grew its U.S. subscribers by nearly 26% to surpass Pandora as the most popular music streaming service.
- Sirius XM reports that Pandora saw a 10% increase in ad revenue in 2019.
- S. adults spent five more minutes daily streaming digital audio content in 2019 compared to 2018, while traditional AM/FM radio daily average listening rates decreased by 1.3 minutes.
- In 2020, for the first time ever, U.S. adults will spend more time listening to digital audio than to traditional radio.
Growth of connected TV/OTT advertising
In 2019, advertisers spent 127% more on OTT advertising compared to 2018.
- In part, growth was driven by marketers becoming more familiar with OTT advertising capabilities.
- Simultaneously, programmatic OTT technologies improved, and the underlying supply chain of programmatic OTT inventory increased in scale.
- Advertisers using OTT to better reach their local audiences was a key factor in overall growth.
- As local advertisers adopt OTT advertising at a fast pace alongside national brands, we’ll continue to see a surge in connected TV and OTT advertising.
Emergence of programmatic digital-out-of-home (DOOH) ad inventory
Digital OOH placements have skyrocketed over the last few years as media companies like Clear Channel and Lamar have made significant investments to transition placements from static to digital signage.
- With the digital billboard foundation established, both DSPs and SSPs invested heavily in 2019 to make DOOH available through programmatic buying platforms.
- With improvements to the underlying adtech and access to more DOOH inventory, marketers will continue to leverage programmatic DOOH in 2020.
Rise of voice-activated advertising
The smart speaker market had substantial growth in 2019, which provides a pathway for increased voice advertising opportunities in 2020.
- The National Public Media 2019 Smart Audio Report outlines that 60 million people, or 24% of U.S. adults, own at least one smart speaker device.
- The average smart speaker household now owns 2.6 smart devices.
- As consumers become more familiar with voice-command technology and the technology is integrated our everyday lives, voice advertising will continue to become a more influential tactic.
Now, let’s turn our attention to 2020.
Our Top 5 Programmatic Advertising Trends for 2020
Identity resolution in a cookie-free world
Brands that invest heavily in programmatic media are grappling with the idea of a post-cookie ecosystem that could significantly change how audience targeting and campaign tracking works. Should it become more difficult to precisely target interested consumers and measure results, campaign performance could decline.
On the heels of Safari and Firefox blocking third-party cookies, Google announced in January that it will block third-party cookies in its Chrome browser through a phased approach over the next two years. Considering the implementation of GDPR and CCPA compliance, Google’s announcement wasn’t surprising.
So, what does this mean for programmatic advertisers moving forward, and how can we better prepare for tomorrow’s cookie-free world?
To clear the air, relevant and data-driven advertising isn’t going anywhere. Yes, there will come a time when advertising will not be built on cookies, but progress is already being made on a better ecosystem that entails authentication in exchange for valuable content and paid ads.
Industry-leading adtech companies like LiveRamp are ahead of the curve by investing heavily in identity resolution technology. This tech allows individuals to engage with trusted first parties to authenticate ad targeting that’s relevant to them. Already, this helps brands eliminate dependency on cookies to target ads and measure results.
Another key component of our tech stack, The Trade Desk, has developed a unified ID solution comprised of pseudonymous data that does not hold directly identifiable personal information. This solution works without diminishing ad relevance or campaign measurement capabilities. The Trade Desk also integrates with LiveRamp to collectively expand their identity graph.
With a better understanding of what a cookie-free ecosystem entails, below are four takeaways we recommend applying to your programmatic media planning:
- While third-party cookies can still be utilized, work to decrease your dependency through contextual keyword targeting on premium, brand-safe content
- If you aren’t leveraging identity graph solutions from firms like LiveRamp or The Trade Desk, put time on your calendar to research your options and test their capabilities
- For advanced programmatic media buyers, invest more time in developing relationships with endemic publishers and private marketplaces—first-party value exchanges will become more critical
- Network with thought leaders in the programmatic industry at the adtech and agency levels to stay on top of new trends as they emerge
Programmatic advertising on wearable devices
Nearly a quarter of U.S. adults—57 million people—used a wearable device at least once a month in 2019. Though smartwatches are the most common wearable device type, more fitness trackers, hearables, and smart glasses are being produced to attract new consumers.
While advertising on wearable devices is in its infancy, this channel has huge potential for several reasons:
- A smartwatch’s digital interface enables the delivery of content and digital ads in a variety of formats
- Sensor technology integrated in wearable devices can capture indicators of a user’s emotions (e.g. heart-rate variability), providing a pathway for highly personalized ads based on sensual segmentation and targeting
- For brands looking to engage with a younger audience, advertising through wearables helps penetrate the 25–34 segment, which represents 38% of the wearable device market
Wearables regularly collect data on location, lifestyle, health metrics, and real-time moods, making this a compelling channel for forward-thinking marketers. Already, specialty providers like FitAd help brands target automated promotions to health and wellness consumers on their Samsung or Sony smartwatches.
Unsurprisingly, data and privacy concerns are one of the primary obstacles to growth in this medium, but we expect to see it continue to emerge throughout 2020 and well into the new decade.
Accelerated growth for voice-activated advertising
An estimated eight billion digital voice assistants, from Amazon’s Alexa to Google’s Assistant and Apple’s Siri, will be in use by 2023. This represents substantial growth over the 2.5 billion assistants that were in use in 2018.
The reality is that voice ads, along with placements through DOOH and streaming content, will grow rapidly as innovation evolves the underlying adtech supply chains, increases inventory, and improves audience targeting and measurability.
As more consumers familiarize themselves with smart assistants, brands will strive to create more interactive voice-commanded ad content. Pandora and Spotify are testing voice-activated ad formats for iconic brands like Doritos, Unilever, and Nestle.
These voice ads turn on between songs and ask questions to the listener: Brands have only a few seconds to gain a listener’s interest in order for them to hear more of the ad. If the listener replies with a “no” or fails to respond, the music will resume.
From a conversion and revenue generation standpoint, automated technologies will enable listeners to perform a variety of voice commands to initiate an instant response. Think of ad delivery between songs or podcast content that a listener can engage with commands like “buy it,” “download the app,” or “I want to learn more.”
As voice-activated assistants and technologies become more prevalent inside and even outside the home, brands will have more opportunities to engage with listeners through automated programmatic advertising. This will be particularly true as consumers stay home more than usual through a good portion of 2020.
Easier access to programmatic DOOH inventory
In 2019, adtech developers laid the necessary groundwork to enable scalable growth within the programmatic digital-out-of-home (“DOOH”) media channel. Clear Channel reports that its programmatic solutions for DOOH are now reaching over 100 million adults per month.
These real-world screens drive reach, immersive experiences, and impact via viewable, fraud-free, and brand-safe display and video formats. Throw in 100% SOV, and you can see why brands are intrigued by this emerging channel.
In 2019, DOOH media spend increased by approximately 10%, but programmatic executions were not yet fully automated. We are already experiencing more automated and scalable programmatic DOOH capabilities in 2020. Some mainstream DSPs now allow brands to access programmatic DOOH inventory across roadside digital billboards, fitness clubs, airports, elevators, shopping malls, and more.
Audience targeting and measurement capabilities are also improving as adtech providers help brands leverage location-based data to optimize DOOH campaigns in-flight. A great example is brands implementing day parting during high-traffic intervals to deepen brand engagement. This is particularly powerful when optimizing toward the DOOH placement—high-traffic day parts at the mall may be different than the airport or roadside during peak commuting hours.
On average, American spend about 70% of their time outside the home—but right now, fewer cars are on the road, fewer people are traveling, and retail shopping is constrained. Though programmatic DOOH will grow in 2020, this media channel will likely be impacted by the coronavirus more so than media that can be safely consumed at home.
Expect even more streaming content advertising on OTT and digital audio platforms
An increase in media investments through OTT and digital audio channels may not come as a surprise, but streaming content will be the most interesting programmatic channel to observe in 2020 and beyond.
Viewers are caught in the middle of “streaming wars” as major studios like Disney, Apple, and HBO have launched their own direct-to-consumer streaming services alongside other over-the-top (“OTT”) services like Netflix, Hulu, and Amazon Prime. Listeners also have a variety of streaming radio options, with Spotify touting the largest subscription base ahead of Pandora and SoundCloud.
While national brands have already invested heavily, growth in OTT and digital audio advertising is continuing to increase as local brands begin to optimize their content and targeting to increase brand engagement through video and audio ad formats.
According to research by Borrell Associates, local brands will increase investment at the highest rates for digital audio and OTT respectively in 2020.
As consumers currently comply with stay-at-home orders, OTT content is already being consumed at all-time highs. That said, with businesses scaling back marketing budgets in the face of uncertainty, we think the forecast of $5 billion in ad spend on OTT may be hard to reach in 2020.
Still, we believe that brands could begin to shift a greater proportion of their budgets than expected to video formats on streaming devices as a result of the pandemic. No matter how the numbers shake out in 2020, we predict that both OTT and digital audio programmatic advertising will continue to grow at healthy rates.
Looking Ahead to 2021
Beyond the trends highlighted above, there are other emerging technologies that should not be ignored in 2020 and looking ahead to 2021. Going forward, 5G networks with unprecedented data speeds will drive further growth of streaming content on mobile phones. This presents a golden opportunity for brands to invest in short-form video ads suited for mobile environments and on-the-go mobile audiences. Adtech companies will also continue to improve artificial intelligence and machine learning, which should help brands achieve better performance and overall ROI in the long run.
The programmatic industry continues to face challenges with ever-changing privacy regulations, ad fraud, and transparency, but despite these and the impact of COVID-19, we will continue to see growth across all programmatic media channels in 2020. In fact, the pandemic may speed the adoption of programmatic advertising technology in certain channels.
Along the way, innovative marketers who are ready to test new and emerging channels with a customer-centric approach will be able to build more meaningful connections with their audiences.
Need help navigating the incessant change in this high-growth industry? Reach out to our team of programmatic advertising experts for a free consultation.