What’s on the Horizon in Programmatic Advertising?

Programmatic advertising has a brief yet dynamic history. What began 15 years ago with a narrow focus on display banner ads has quickly expanded across the entire digital media ecosystem.

This year, it is estimated that programmatic will account for a massive 90.2% of all spending on US digital display inventory—a broad bucket that includes digital display (obviously!), digital video, connected TV (CTV), digital audio (as a subset of rich media), and, within that, podcast advertising. It is already consuming a hefty share of the market, and all signs suggest programmatic will maintain its incremental growth through 2024 as advertisers and publishers look to shed the burden of insertion orders and tap into the myriad benefits that automated purchasing offers.

The path to programmatic ubiquity was essentially laid by the real-time revolution and the pace of technological advancement that made digital the new frontline of the consumer experience. Marketers today must meet customers in the right place and at the right time, and programmatic helps satisfy this imperative—its automated processes and in-flight flexibility make the old ways of buying and placing ads (think RFPs, manual bid negotiations, and predetermined campaign windows) look somewhat primitive by comparison.

Here, we shine a light on the trends behind programmatic’s continued evolution, covering its widening scope across multiple formats, the growing popularity of private marketplaces (PMPs), the identity solution saga, and a whole lot more.

Video is experiencing huge growth (thanks to CTV!)

2022 marks the first year that video will account for more than half of all programmatic ad spending. It’s a transition driven primarily by growing investment in one key area: CTV—the next great frontier for brands. The influence of CTV is so profound, in fact, that without it, video’s share of programmatic spend would amount to only 39.7%.

The current excitement around CTV is fairly self-explanatory: advertisers are simply following cord-cutting (or cord never) consumers who are spending more time flicking between Netflix, Hulu, Amazon Prime, Disney+, Peacock TV, and other streaming services to watch movies, shows, and even live sports. By 2024, programmatic CTV video ad spend is projected to sustain its solid double-digit growth and likely play an even bigger role in the broader TV advertising market.

Of course, the lion’s share of programmatic video ad spending still takes place on mobile—66.6% in 2022—but it’s worth mentioning that ad spending on non-video formats on mobile will still account for more than half of mobile programmatic display ad spending through 2024 (54.8%). However, given the rising tide of social video advertising, propelled by the TikTok juggernaut, it’s likely that video will continue gaining share of mobile programmatic display.

Private marketplaces are growing in popularity

Over the years, the vast majority of programmatic business has funneled through direct buying methods. Today, they account for three-quarters of all programmatic transactions—a dominance attributable to the influence of social media, where the bulk of display ads are purchased directly at a fixed price via a particular platform and then served programmatically. That share looks set to stay as it is through 2024, but what’s especially interesting here is the story within the other 25%—the RTB side of the coin.

Indeed, a notable shift is occurring here as advertisers continue to pull more and more media dollars away from the open exchange and plug them into PMPs. The reasons behind this trend? Greater control and increased transparency. In open auction transactions, anyone can buy or sell ad inventory without either side knowing who’s on the other end. In the customized, invite-only environments of PMPs, however, advertisers and publishers can work together directly, helping advertisers insulate themselves from brand safety risks and the growing threat of ad fraud while reaching targeted audiences with better precision.

The significant growth of CTV also contributes to this shift in buying behavior, since the vast majority of programmatic ad spending in CTV transacts through programmatic direct and PMP deals.

Programmatic is expanding its reach across emerging channels

There’s no denying that CTV is this year’s MVP of programmatic digital display, but there are a few other channels seeing increased programmatic penetration—namely, linear TV, digital out-of-home (DOOH), and podcasts. Increased programmatic investments in these areas indicate that advertisers are expanding their horizons, evolving their omnichannel strategies, and embracing new ways to deliver brand messaging with higher levels of targeting and efficiency.

Here are a few key stats:

• Programmatic linear TV ad spend will hit $6.90 billion this year, accounting for 10.1% of total ad spend on the channel. Both the dollar amount and the overall share are expected to grow steadily in the coming years, reaching $8.42 billion and 12.5% respectively in 2024. It is a trend that reflects advertisers’ increasing appetite for addressability, even on channels that have historically been more one-to-many.
• Programmatic currently constitutes 15.6% of DOOH advertising ($412.2 million), and by 2024, this share is projected to increase to 25.5% ($807.8 million). While this is still very much a nascent category, the way advertisers can leverage it to generate highly personalized messaging for mass audiences on the move—and the presumptive increase in DOOH inventory in the years ahead—will likely mean adoption is only going to accelerate.
• Programmatic podcast advertising enjoyed over 100% growth for three years running from 2019 through 2021 (no prizes for guessing the cause there!). Today, despite a deceleration in that breakneck growth (to a measly 78.5%!), programmatic podcast spending continues to outpace growth in total podcast ad spend. Host read ads embedded in specific programs remain the “gold standard” here, but as automation becomes more common in podcasting, podcast advertising revenue will continue to rise.

Privacy and identity resolution still up in the air

Programmatic advertising was effectively built on the connective tissue of third-party identifiers, so it’s no surprise the ongoing privacy and identity saga is the most important force reshaping programmatic today.

Back in July 2022, Google once again announced it is delaying third-party cookie deprecation in its Chrome browser—this time until the second half of 2024. This has been widely positioned as the de facto deadline for the industry to have reliable alternative targeting and measurement solutions in place. But here’s the thing: we’re already in the “cookieless future.” Non-Google browsers like Apple’s Safari, Mozilla’s Firefox, and others stopped supporting third-party cookies years ago, so it’s not really a “future” problem—it’s a “now” problem.

Recent research published by the Interactive Advertising Bureau (IAB) paints a stark picture of the industry’s inactivity in this area, spanning across brands, agencies, publishers, and adtech companies:

• Less than half (43%) are expanding engagement with third-party groups seeking to build “post-cookie” identity resolution solutions
• Only three in 10 (31%) are increasing use of artificial intelligence (AI) solutions for consumer insight development and marketing decisioning
• Only 35% are very or somewhat concerned about currently having enough first-party data at their disposal

These numbers show that organizations throughout the advertising industry must inevitably take more action to address the new measurement reality.

As of right now, there are a handful of privacy-friendly targeting solutions on the market. You’ve got universal IDs that are based on a persistent data signal such as an email address. There are cohort-based solutions, which aggregate user data and place individuals into targetable groups (for example, Google Topics). Then you’ve got seller-defined audiences that leverage publisher first-party data. And finally, there are contextual targeting tactics that work by serving ads based on similarity between the characteristics of the ad and the content adjacent to it.

Each of these comes with benefits and limitations, and advertisers would do well to start exploring any and all solutions that are available to them and determine what combination may make the most sense from a goal and data strategy perspective (that is, if they’re not doing so already!)

In essence: don’t wait!

The Evolution of Programmatic Advertising—Wrapping Up

The programmatic advertising landscape is an incredibly complex beast. It involves a smorgasbord of moving parts, and it is in a perpetual state of evolution. Here, we didn’t even touch upon the mounting regulatory pressures facing Big Tech around the world, how programmatic can be effective in the world of B2B, how marketers can assess whether they’re ready to bring programmatic in-house, how programmatic may fit into the metaverse, and the value between direct and third-party measurement.

The good news, though, is that all those topics are covered in our webinar, Programmatic Advertising: The Automation that’s Dominating Digital, featuring eMarketer analyst Evelyn Mitchell. Check it out on-demand to get an overview of where programmatic advertising is today and where it’s heading tomorrow.