Ad Tech & Ad Ops

State of Ad Tech: 2016, Year In Review

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2016 was one eventful year for ad tech industry. Client side Header Bidding went mainstream. Publishers got heavy-handed with anti-ad block measures with varying successes and failures. Fake news registered on the radar of mainstream media and ad tech took the flack for it. Ad viewability adoption increased, creating panic among publishers. Then, the year wrapped up with a bang as WhiteOps uncovered a ubiquitous, million-dollar ad fraud ring called Methbot.

That was the abridged version; barely enough information to start a workplace debate.

This post gives a more holistic view of the developments in ad tech in 2016, focussed on subjects and perspectives that you, the enterprising publisher, ought to care about, or find interesting.

1. Header Bidding adoption continues to rise despite publisher skepticism about higher latency

Header bidding is all the rage these days. A complete chronology of industry developments can even be found in a post on AdExchanger.

Here’s a brief summary:

In 2016, the industry news revolved around various header bidding demand partners and vendors coming up with their own wrappers (and/or adaptors).

Pioneer AppNexus launched its Mobile wrapper and refused to take part in bids at Google’s response to Header Bidding — exchange bidding in Dynamic Allocation (in DFP). Undeterred, Google continued to add more demand and supply to exchange bidding.

We saw Rubicon’s stocks take a nosedive (30% loss) by Q2 thanks to inventory lost to other, header bidding-ready SSPs instead. Ad tech giant Criteo planned out strategies to get priority within Header Bidding wrapper (via First-Price auctions). Publishers like Purch and The Guardian began testing S2S (server-to-server) header bidding, outpacing small/medium-sized publishers.

By this point in 2017, everyone within the ad tech ecosystem is already preparing to do away with the wrappers (a band-aid) and move the bids to server-side instead. Pioneering this leap are industry players like Amazon A9, Media.net, OpenX (Meta) and more.

But server-to-server is going to take a little longer to go mainstream, especially for small to medium publishers. In the meantime, publishers are making do with the wrapper to bottleneck impression supply to demand partners.

The results, in 2016, were spectacular.

  • Pubmatic has seen about 50% higher eCPMs in mobile inventory sold through header bidding (compared to global average).
  • In a BI Intelligence report, Tom Shields, SVP of publisher strategy at AppNexus, said that as many 70% of all publishers are using header bidding.
  • Alex Groth of Gladly.io revealed the findings of their foray into header bidding on their site Tab For a Cause (with its 40 million monthly banner ad impressions) in a post at AdMonsters. This was the result, in his own words:

We launched a header bidding setup on Tab for a Cause at the beginning of June, and since the day it was live, we have more than doubled the average CPM of ads sold on our site.

Tab for a Cause earnings with Header Bidding. (Image Source: AdMonsters)

Even Mashable got its programmatic act together in 2016 and by the time of writing, Mashable has implemented header bidding with Index Exchange and Rubicon.

Here’s how you can get started with header bidding and some tips to help you maximize your CPM with header bidding without taking latency through the roof.

2. Spends on Programmatic Private Exchanges increase as advertisers and publishers flock to them

Brand conscious advertisers are spending more on programmatic private auctions and direct deals to get greater exclusivity (without loss of automation) and drive better RoI on their ad spend.

The trend is not exclusive to Index Exchange. Here’s Google’s interactive report on State of Programmatic Direct in 2016, separable by niche, which also shows consistent growth in direct deals over the year.

According to Zenith’s Programmatic Marketing Forecast, 2017 report, premium models like PMPs will grow while open-RTB will taper off as programmatic continues to mature, especially in markets like US and UK.

We believe that the growth of programmatic will continue to be fuelled by improvements in the quality of media available in programmatic environments – especially private market places – and the greater availability of programmatic mobile media, as well as the sophistication provided by ad tech solutions such as data management platforms and connected ad tech stacks.

— Benoit Cacheux, Global Head of Digital & Innovation, Zenith

According to Jonathan Barnard, head of forecasting at Zenith, PMPs will be the quickest premium programmatic buying method to adopt in most markets, followed by preferred and guaranteed deals. (Source)

It’s time publishers took a good hard look at their impressions and realize the wealth of data they are sitting on. Learn to package your inventory in ways relevant to the buyers and sell it through programmatic private marketplaces.

Take a look at this guide to PMPs to get some ideas.

3. Ad Blocking growth still projected in double digits, but it is showing signs of slowing down

This time in 2016, IAB made a very strong statement by rescinding AdBlock Plus’ CEO’s invitation to leadership summit, with a curt note and a full refund. IAB has always made its stance clear in the past against ‘extortion’ schemes that make for adblock companies’ business models.

Industry gossip aside, numbers speak for themselves, PageFair and Adobe report continues to forecast a double-digit increase in ad block adoption.

And yet, ad block adoption does show signs of slowing down. For the third straight quarter, ad blocking in Germany shows a modest decline on desktop display ad impressions.

Germany and Sweden are nations with the highest ad block adoption rate. With Germany also being at the heart of some very public legal disputes over ad blocking, some industry leaders are hopeful that this little slow-down may actually be the beginning of the end of ad block.

But it’s too early to hope and publishers continue to fight to take back control over their inventory. Independent research firm Ovum forecasts that productive measures like improved ad experiences, few or no interstitials, and improved page load and ad serving speeds would keep the publisher losses to ad blocking in check.

If publishers continue to respond to the ad-blocking threat with measured approaches, by 2020, revenue losses from ad blocking will be $10.5 billion (£7 billion) in the U.S., and $1.9 billion (£1.3 billion) in the U.K. The silver lining to that steep bill: It’s far lower than the $78 billion in losses Ovum predicts if nothing whatsoever is done to address ad blocking.

IAB/Yougov released a study early in 2016 in which over half the respondents said they would turn off ad blockers to access content.

Publishers like GQ and Forbes are blocking access to content unless users agree to turn off ad block. But measures like these are not for everyone.

Publishers who produce more mainstream (and less differentiated) content will have a harder time persuading readers to disable ad blockers.

— Martin Ashplant, Digital director, Metro

4. “Fake News” gets its 15 minutes of fame as advertisers strive to distance themselves from it

The global interest in US General Elections in 2016 also brought to light some very serious problems with cleverly disguised or outright ‘opinionated news’. Once the dust settled down, we walked away with ‘Post-truth’ as Oxford Word of the Year.

Google and Facebook, however, aren’t the only ones under fire for allowing publishers to spread and monetize misinformation — content recommendation engines (Taboola, Outbrain, etc.) were pulled under scrutiny too.

But mostly, it came down to advertisers being unaware of where their ads ended up as long as they were targeted to the right audience.

As ad buying has become more automated, with targeting based on audience over site environment, ads can end up in places the advertiser didn’t intend, even if they put safeguards in place. Brand advertisers buying opaque inventory could show up inadvertently on fake news sites.

— Anonymous media buyer (Source)

In response, ad tech pioneers made efforts to prove that the industry isn’t all a shady, money-grubbing bunch of troglodytes.

AppNexus banned Breitbart (ultra-conservative American website) from its exchange. Brand advertisers and agencies like Kellogg’s, Vanguard, MMM, AARP pulled their adverts from the site citing contextual inappropriateness and ‘misaligned values’.

But the waters are murky and as long as people continue to visit sites with ‘fake’ news and dubious content, there will be a system for such publishers to monetize it.

5. Ad Fraud, its impact on the industry, and what publishers can do to tackle it

In 2016, many brand safety and pure-play vendors took the spotlight as first the advertisers and then the publishers attempted to fight ad fraud. TAG (Trustworthy Accountability Group) continued to promote transparency and combat ad fraud by awarding seals to ‘Certified Anti-Fraud‘ ad tech companies.

Then Methbot happened.

Image Source: The Methbot Operation Report

The fraud ring, on WhiteOps’ radar since 2015, “…began scaling aggressively in October 2016”. The bot was focused almost solely on high-CPM video inventory and, as per a previous WhiteOps report (Bot Baseline Study), highly specific audience targeting.

Here’s how the most recent bot farm operated:

Image Source: The Methbot Operation Report

Publishers (whose domains were spoofed and inventory fabricated) and advertisers (who wanted to advertise on those publishers’ sites) collectively lost $3 million to $5 million dollars per day to Methbot operators.

The report highlights the ubiquity of fraud and the importance of transparency in ad-tech ecosystem. Publishers can prevent revenue loss and fight fraud on their part by staying clear of (or otherwise, monitoring) sourced traffic, early detection and prevention of content scraping, and focusing more on direct deals (lowest bot rate of any sold-media).

Near the end (by Q3 of 2016), digital advertising spend had hit a record $17.6 billion (in US alone) and showed steady 20% YoY increase. As of now, in the face of considerable challenges (ethical concerns on fake news, Facebook and Google’s ‘duopoly’ on 99% of digital revenue, measurement errors, and of course, ad fraud), ad tech is stepping into 2017 with a greater-than-ever focus on transparency and user experience.

That’s a pretty good start to what’s shaping up to be another interesting year.