Ad Tech & Ad Ops

5 Ad Tech Predictions for 2019

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2018 was a mixed year for publishers, advertisers, and ad tech in general.

Ads.txt helped introduce some much needed transparency into the ad tech supply chain, GDPR and consent management caused some to adapt and many others to throw in the towel, Index Exchange raised a storm with its bid caching debacle, and Amazon aggressively grew its ad tech business, while global ad spend rose to $557.9 billion.

So, what’s in store this year? Here are some ad tech predictions for the current year based on research, industry trends, and expert opinions.

1. More publishers will implement
anti-adblocking measures

According to a study released by OnAudience.com, web publishers lost around $42 billion in ad revenue to ad blockers last year, up from $27 billion in 2016. Ad blocking companies have been routinely accused of running an “extortion-based” business. For the longest time, publishers had no recourse when it came to fighting back against ad blockers and had to simply watch those ad dollars go—but that’s changing now.

Anti-ad-blocking measures can range from polite on-site user whitelisting requests to more aggressive tactics such as dynamic redeployment of ads that effectively bypass ad blocking software. This new war that some publishers and ad tech vendors are quietly waging against ad blockers caught the attention of researchers at University of Iowa and UC Riverside, who published a study which found that “nearly a third of the top 10,000 sites on the web are taking ad blocking countermeasures, many silent and highly sophisticated”.

The researchers of the study viewed ad blocking as a necessarily catalyst that forced the online ad industry to clean up its act, as such, the study is aimed “to keep up the pressure on publishers and advertisers in the long term, so that adblockers keep pace with anti-adblockers in the rapidly escalating technological arms race.”

Takeaway: The market conditions created by long-disgruntled publishers and ad tech vendors coming together to circumvent ad blockers indicates that this new breed of high-tech anti-adblocking solutions are here to stay.

2. Machine learning will finally
go mainstream in ad tech

Back in 2013, few people outside of technology and product companies knew what machine learning was, and even fewer thought that it could find application in ad delivery and optimization. Between then and last year, machine learning patents grew by 34%, the third fastest-growing category. International Data Corporation predicts that spending on AI and machine learning will grow from $12 billion in 2017 to $57.6 billion in 2021.

Our company pioneered the use of machine learning in ad tech by allowing publishers to pit ad variants against each other for optimizing ad yield. Running these tests manually used to be cumbersome, if not impossible. Fast forward to 2018, Google AdSense has launched “auto ads” that uses machine learning to find the best ad placements without user intervention. Ad layout optimization is an important application of machine learning, but by no means the only one. Machine learning is also finding use in real-time user targeting, network selection, bidding optimization, inventory management, and automating analytics and reporting.

Takeaway: Machine learning is no longer a “buzzword”. As the applications of AI and machine learning in ad tech come of age and start generating measurable results with a direct impact on ad revenues, publisher scepticism will give way to mainstream adoption.

3. GDPR will further accelerate the consolidation of ad tech

Ben Kneen of Ad Ops Insider defines the period after 2015 as “The Consolidation Era” of ad tech. Between then and now, there’s been an increase in both the number of acquisitions and deal size. During the first quarter of 2017, ad tech and mar tech M&A activity clocked a record high with 215 completed deals. In an AdExchanger post, Brian Anderson of Luma Partners has predicted a similar level of activity in 2018.

Enter GDPR. In the days leading up to the 25th of May, a bunch of smaller tech companies announced that they were shutting down citing vague reasons, but the real reason is this: They didn’t see profitability in becoming GDPR compliant and couldn’t afford the regulatory fines if they didn’t. Many smaller publishers have responded to GDPR by simply banning EU traffic on their websites—opting to lose traffic than invest in compliance. As things are now, publishers, ad tech startups, networks, and exchanges have to either develop their own consent management systems or partner with a consent management platform (CMP).

“There will be no room for exchanges that simply sit in the middle and add no value,” says Michael Connolly, CEO at the ad-tech provider Sonobi. “No longer will they only be creating an unnecessary ad tech tax. They will also be creating a liability.”

Takeaway: Only the biggest players with the resources to implement proper compliance will survive in the post-GDPR world with smaller publishers and ad tech companies either merging into bigger entities or shutting shop.

4. Global ad spend on new
ad formats will increase

In recent times, the average CTR for banner ads has fallen to 0.05%, driven in part by banner blindness and ad blocking. Growing discontent with banner ads on both the buy and sell side has prompted ad tech companies to create alternatives for the standard banner. According to a report by eMarketer, native ad spend will make up for nearly 60% of all display spend in 2018, a number that has been steadily growing over the past few years, giving the format a lead over banner ads.

Newer display ad formats such as native advertising, in-image advertising, and sticky advertising are delivering superior performance for buyers. On the publisher side, since these formats can run concurrently with banner ads, they help create additional channels of revenue for and reduce a singular dependence on banner ads. Apart from display and video, programmatic audio is also gaining mainstream attention since AppNexus and Google’s DoubleClick started offering access to supply from services such as Google Play Music, SoundCloud, Spotify, TuneIn, and Pandora.

“It’s still early days for audio ads in general. But the demand is there. Now, it’s really just a question of showing buyers the breadth of inventory available,” says Payam Shodjai, director of product management at DoubleClick.

Takeaway: As publishers create new inventory categories on their websites using innovative ad formats, buyers who are looking to explore avenues beyond banner ads will increase spend on newer channels and formats.

5. Mobile devices will dominate programmatic buys

Across the world, people are spending more and more time on their mobile devices. According to data provided by Statista, globally, around 76% people spend more than three hours on their mobile devices every day now, while 47% people spend more than five hours every day. This makes sense if you consider that mobile is where we live, that’s where we go to for work, entertainment, shopping, calling cabs, chatting with friends—everything.

Global ad spend on the mobile has been increasing steadily for the past few years now, in 2018, spend it is expected to reach $30 billion, which is more than thrice the expected spend on desktop. As far as formats are concerned, video is clear winner on mobile. According to Recode, people will spend 36 minutes every day on an average watching video content via mobile devices, as opposed to 18.5 minutes on other devices; that’s a huge opportunity for buyers to access a highly engaged audience with timely brand messaging.

According to Recode, people will spend 36 minutes every day on an average watching video content via mobile devices, as opposed to 18.5 minutes on other devices; that’s a huge opportunity for buyers to access a highly engaged audience with timely brand messaging.

“Our market is chameleon-like,” says Gai Le Roy, IAB Director of Research, “Mirroring the significant shifts in consumer behaviour towards mobile and video, so it’s little surprise to see an increased investment in these formats. While it’s likely we will see a continued softening in some of the more established digital ad revenue streams, we fully expect mobile and video advertising continue to surge as marketers explore and challenge the possibilities of digital to build trust and reputation for their brands.”

Takeaway: Media buyers will be spending more money on mobile and video ad formats this year, with some possible cutbacks on the desktop.

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