Since its inception, programmatic display advertising has grown year over year. It’s now the primary method of buying digital display ads in the U.S., far surpassing manual ad placement. eMarketer estimates that 87.5% (approx. $81 billion) of US digital display advertising will be purchased programmatically by 2021.

Facebook and Google still dominate programmatic advertising in the U.S. and account for more than half of all total dollars allocated to programmatic display. However, their position is being challenged by Amazon, who is investing heavily in its advertising business. Connected TV, over-the-top (OTT) video, and social video advertising are also major contenders that promise to disrupt the programmatic advertising world.

In 2020, advertisers will seek new ways to reach potential customers on connected devices, like voice-activated speakers, connected TVs, and wearables. There is a huge opportunity to maximize ad spend and increase revenue through smart technologies and connected devices.

The introduction of sophisticated AI technologies, new channels, and evolving privacy regulations continue to shape the digital advertising world. Below are a few key points to help you understand where programmatic advertising is headed:

  • PwC’s Global Entertainment & Media Outlook report predicts that more than 50% of advertising budgets will be digital by 2022.
  • Demand-side-platforms (DSPs) are responding to consumer’s privacy concerns and new regulations, which will present new challenges for advertisers.
  • Programmatic spend on connected TV, OTT, video, and social video advertising will account for 49.7% of total digital ad spend in 2020.
  • The emergence of new streaming services and selective licensing agreements is disrupting video advertising. But buyers have shown they’re eager to purchase inventory on new channels.
  • Programmatic audio is still working out its kinks but is a channel to watch.


What is Programmatic Advertising?

Before I dive into the trends, let’s review what exactly is programmatic advertising. Put simply, it is the practice of using intelligent software to automatically buy digital advertising space on different channels and platforms.

This illustration explains programmatic advertising well:

Programmatic algorithms do not completely eliminate humans from the mix, but they allow marketers to spend their time more wisely. With mundane and repetitive tasks eliminated, they can concentrate on ad optimization and fine-tuning their audience targeting.

If you’re new to programmatic advertising, read our blog article, Beginner’s Guide to Programmatic Display Advertising. It shares everything you need to know to get started.

That being said, let’s review some of the biggest programmatic advertising trends for 2020:

 

1. Voice Advertising Continues to Grow and Programmatic is The Future 

Since their introduction, voice-controlled devices have rapidly gained adoption. According to the NPR and Edison Research Smart Audio Report, which was conducted in June 2019, 21% of the population now owns at least one smart speaker. A study by Voicebot.ai indicates that an estimated 66.4 million people in the U.S. own a smart speaker, that’s roughly 1 in 4 adults.

By 2022, Strategy Analytics predicts that 50% of U.S. households will have a smart speaker.

While smart speakers have primarily been used to play music, they’re increasingly being used for new activities. The NPR and Edison Research Smart Audio Report revealed that 57% of smart speaker owners have shopped via their devices. Consumers are making high-value purchases with their smart speakers, with 25% of purchases totaling more than $150.

statistics on shopping via smart speakers

The proliferation of these devices has opened up new avenues for advertisers. Digital audio advertising is growing and now totals $935 million in revenue, which is an increase of 31% from 2018, according to the Interactive Advertising Bureau. These ads were primarily sold directly or traded through ad networks.

While digital audio advertising is increasing as a whole, programmatic advertising hasn’t become mainstream—yet.

Google, SoundCloud, Rubicon Project, Pandora, and many others are making substantial investments in programmatic advertising. Way back in 2016, Spotify launched its programmatic advertising platform; since then, they’ve reported 94% growth year over year. In 2018, Google gave users of their DoubleClick Bid Manager the ability to purchase programmatic audio ads on Spotify, SoundCloud, Tune In, and Google Play Music.

Voice-activated advertising company Instreamatic.ai has also been conducting tests in US and Russian markets and has seen positive results.

Programmatic audio advertisements have lacked a standardized ad format, which has slowed its adoption. There are two primary templates for delivering programmatic audio ads: DAAST (Digital Audio Ad Serving Template), and VAST (Video Ad Serving Template). In 2018, The IAB Technology Laboratory (Tech Lab) launched the standard VAST 4.1, which is being pushed as the primary audio format. In 2018, the Media Rating Council announced its Digital Audio Measurement Standards, which aligned audio measurement with other media types.

As standardization improves, programmatic audio advertising will continue to grow in 2020. People are listening and it’s a ripe audience for advertisers.

 

2. Connected TV Experiences Tremendous Growth

Connected televisions are fast becoming the norm and they’re redefining digital advertising as we know it. There’s a huge opportunity to reach new audiences while they Netflix and chill.

Currently, there are 190 million connected TV users according to eMarketer. This number is projected to reach 204.1 million viewers by 2022.

graph of US connected TV users, 2018-2022

Streaming platforms like Hulu, Netflix, and Amazon Prime go hand in hand with connected TV and have also experienced a surge in use.

Emerging streaming services will continue to accelerate investments in over-the-top (OTT) advertising. In November 2019, the long-awaited Disney Plus streaming service will debut. Consumers will have even more options when other video-on-demand services launch, like NBCU’s Peacock and Warner Media’s HBO Max.

OTT ad spend is experiencing tremendous growth as subscribers to these services increase. Extreme Reach’s 2019 Video Benchmark Report demonstrates the impact of connected television (CTV) platforms. Instead of investing in mobile, advertisers are going where the people are and investing in OTT. Extreme Reach states that “CTV impressions, are now 49 percent of the total, or nearly double those of mobile. Because these ads are generally unskippable, they have an unprecedented 97 percent completion rate.”

Magna predicts that OTT ad spend will increase to $5B in 2020. Advertisers are seeing strong results from OTT because precise targeting allows them to create personalized ads that match the viewer’s interests. These short ads can’t be skipped and there aren’t ad-blockers on connected TVs; this means that if consumers want to watch the content, they have to see the ad. Seamless call-to-actions and other interactive elements allow advertisers to realize high ROI through programmatic ad campaigns.

People are consuming digital content at an unprecedented level; advertisers who want to connect with their target audiences in new and engaging ways, need to invest in a programmatic video advertisement strategy.

 

3. Greater Awareness of Online Privacy

A big trend that has been disrupting the programmatic advertising world is online privacy concerns. In 2020 and beyond, advertisers will need to adapt and become strategic with how they acquire and use data due to these privacy concerns.

For a long time, consumers didn’t know how websites collected and used their data. Many people didn’t even consider what Google, Facebook, and other platforms were doing with their user data. All of that changed when Cambridge Analytica released its data from 87 million Facebook profiles. They harvested data through a popular Facebook quiz app. Many people felt betrayed by Facebook and believed that instead of selling their information, Facebook should have protected its users’ data.

This caused a lot of online users to lose trust in big brands like Facebook, Google, and the like.

The ad tech industry has faced and survived a lot of challenges. However, privacy concerns may be the biggest yet. Governments are responding with strict data regulations, like the General Data Protection Regulation (GDPR), which was enacted in 2018. Stateside, California passed the California Consumer Privacy Act (CCPA) to give consumers more control over their data and how it’s used. The CCPA goes into effect on January 1, 2020. Advertisers should be aware of the policies and processes necessary for CCPA compliance.

Programmatic advertising platforms have their limitations, due to the cookie tracking mechanism they were built on. Many of these platforms still rely on third-party data, which will be challenging for programmatic advertisers to collect. Given the increasingly strict regulations governing cookie and other third-party data, it’ll become more difficult to reach the target audience on certain platforms.

But it’s not all doom and gloom, there are still ways to reach your target audience. One of the best approaches that advertisers and brands can use is to focus on developing genuine relationships with consumers through their digital channels. This survey demonstrates that brands can build trust through their website and social media channels.

As publishers develop strong relationships with their audience, they will be in a better position to collect data directly from them. It could be through surveys, polls, user-generated content, online support, discussion boards, etc. Apart from getting data directly from consumers, publishers and advertisers can gain permission to deliver targeted and helpful ads as well. In the future, there will be a shift from third-party cookies to publisher data.

This is promising because 39% of consumers aren’t comfortable sharing their data, but they appreciate interacting with brands. In fact, 36% of consumers want to see personalized deals and offers from brands they love. Consumers know that not all ads are bad, and they appreciate ads that help them find solutions or products they need. It shows the brands understand them and value their business.

Google is also developing ways to protect user privacy within its programmatic advertising ecosystem. Recently, new tools and integrations were released that will ensure publishers and advertisers meet privacy regulations. Display & Video 360 now complies with IAB Tech Lab guidelines, which give consumers more transparency on how their data is used and the ability to opt-out of data collection. Google’s changes will allow marketers to reach connected TV audiences without privacy concerns.

The ad tech industry and other demand-side platforms (DSP), are responding to these privacy concerns and considering new ways to comply with regulations and work with increasingly opaque technology channels.

If you have any questions or need additional help developing a programmatic advertising strategy, our team at Cardinal Digital Marketing is here for you. Speak with our experts here.

 

4. A Resurgence of Contextual and Native Ads

As consumer concerns about privacy grow and new regulations are proposed, some advertisers are looking at contextual advertising as a better way to reach their target customers.

Native or contextual ads don’t use cookies or rely on audience data, and they are inherently compliant with GDPR. Instead, contextual ads are highly relevant to the content they’re displayed with. For example, if a person is reading an article about activities and things to do in Atlanta, an ad offering discounted admission to the Georgia Aquarium would be well placed.

The IAB defines native ads as:

  • Cohesive with the page or video content,
  • assimilated into the design, and
  • consistent with platform behavior.

Native ads blend into the content, are less intrusive, and actually relate to the topic the viewer is interested in. This improves the user experience and results in higher engagement and click-through-rates.

Based on a prediction made by BI Intelligence, native contextual ads will account for 63% of mobile ad revenue by 2020, up from 53% in 2016. And according to eMarketer, native digital ad spend has increased year over year and is predicted to represent nearly 65% of all digital display ad spend in 2020.

graph of US native digital display ad spending, 2016-2020

If you’re wary of privacy concerns and want to engage with consumers in a more organic manner, you should consider investing in native advertising.

 

5. Digital Outdoor Advertising Attention Grab

Although online advertising is leading the way and siphoning money from traditional advertising, there might be an exception. Outdoor advertising is growing. In 2019, industry revenue from billboards grew by 0.6%, which is more than $8.6 billion in revenue.

LED billboards, in particular, is an advancement of the traditional billboard ad placement—and the growth rate is encouraging as well.

Surprisingly, digital ad placement isn’t the only force to be reckoned with when it comes to programmatic advertising, outdoor advertising including large venues and billboards are growing in popularity as well.

Diversifying your advertising channels and platforms can be one of the best ways to consistently reach your audience. Billboards, in particular, can help you cut through the digital noise and reach people when they’re out in the world. Digital billboards are big, bright, and demand the viewer’s attention.

Companies are seeking ways to integrate billboards and other outdoor ad placements on programmatic advertising software tools.

 

Conclusion

There are clear indicators that programmatic advertising will continue to be the future of advertising. The earlier you get in and start learning about the opportunities offered, the better chances your business will have to reach more prospects with targeted ads.

Savvy marketers are already allocating a sizable portion of their advertising budget on programmatic advertising in the U.S., United Kingdom, China, and India.

Businesses and advertisers that are still on the fence can get in now. It’s never too late. This might be the best time to stand out in the crowd—by targeting new programmatic advertising channels and platforms.

 

If you don’t know how to get started with your first programmatic display campaign or you want a professional team to help you, contact us today.

 

Alex Membrillo Cardinal CEO

 

Alex Membrillo

Founder and CEO

Alex Membrillo is the CEO of Cardinal, a digital marketing agency focused on growing multi location companies. His work as CEO of Cardinal has recently earned him the honor of being selected as a member of the 2018 Top 40 Under 40 list by Georgia State University as well as 2015 and 2016 Top 20 Entrepreneur of metro Atlanta by TiE Atlanta, Atlanta Business Chronicle’s 2016 Small Business Person of the Year,and the Digital Marketer of the Year by Technology Association of Georgia (TAG).