PMPs, AI and the challenges of in-housing

In the latest in our series of predictions pieces running between Christmas and the New Year, Saurabh Bhatia, CEO and co-founder of Chocolate, outlines six key programmatic advertising trends for 2019.

The rise in programmatic advertising is no surprise centre of discussion in the ad tech industry. Zenith forecasts that programmatic ad spend will grow 19 per cent in 2019, reaching $84bn (£67bn). With such an immense growth rate, let’s look at the key trends shaping the future of programmatic advertising.

Video will remain the top media buy among all ad formats
Video content is rising rapidly across all platforms and mobile video ads are poised to rock the digital world in 2019. The reason is quite obvious: mobile video is the fastest-growing consumption channel among consumers and currently takes the greatest share of time spent. It is also quite obvious that users who watch video on their mobile devices are giving it their full attention.

Even though the screen sizes of smartphones and phablets are small compared to TVs and desktops, the effectiveness of mobile video content and advertising is set to reach new heights in the year ahead – especially when mobile video is playing a pivotal role in influencing and enhancing the purchasing journey. That’s why mobile video ad spend is already growing faster than any other digital advertising format, and the momentum is going to continue.

Advertisers are expected to spend a large amount of their ad dollars on mobile video advertising. At the same time, it becomes equally important for publishers to take advantage of this growing opportunity. For publishers, it is important to focus on high-value content and robust quality controls that will attract brand advertisers.

In-app will continue to dominate
Mobile users have gradually moved away from using their mobile browsers to focus on a wide range of apps across various verticals. This affinity towards in-app has changed the industry’s advertising model and demands that advertisers shift their ad spend more towards in-app advertising. Additionally, in-app advertising offers marketers a better opportunity to target the right audience at the right time. This is mainly due to the availability of location data, device identifiers via in-app SDKs and enhanced user engagement, thanks to effective in-app ad formats.

On the other hand for publishers, mobile header bidding is now marching towards app environments (known as unified auctions), after an initial focus on the mobile web. Publishers who keep up with the evolution of in-app header bidding/unified auctions will definitely tap into a fast-growing revenue stream in the future.

A desperate industry-wide push towards tackling ad fraud

It is evident that there’s a need for deeper conversations on ad quality between publishers and marketers. Every stakeholder in the programmatic ecosystem will have to expand the focus to address quality control now.

The Trustworthy Accountability Group (TAG) claims that a clean supply reduces ad fraud by 84 per cent compared to the industry average, when all players in the supply chain are attentive. Pixalate’s Ads.txt trends report highlights that ads.txt adoption increased by over 5.4x in the first half of 2018, and on average, sites with ads.txt have a 10 per cent lower invalid traffic rate, compared to sites without ads.txt.

Marketers should feel encouraged that we are seeing ad quality improving across metrics such as viewability and brand safety, with initiatives such as ads.txt further helping to clean up the supply-side. Despite these improvements, it remains critically important for advertisers to adopt a robust approach to brand safety and ad fraud, ensuring that they are working with partners able to effectively mitigate against the risks and protect their brand.

Publishers are fighting hard against practices such as ad fraud and non-viewable inventory, while bolstering brand safety. Whereas buyers are turning to technology to assist with eliminating and reducing their ad spend on these misleading practices.Hence, publishers and ad tech vendors need to adopt ads.txt and TAG initiatives as ‘non-negotiable’ and advertisers need to be selective when buying inventory across the open market.

Managed Services will be replaced by PMP Programmatic buys

Advertisers and their agencies are keen to invest in solutions that offer them operational efficiency. Private Marketplace (PMP) transactions are regarded as a major factor for driving down the fixed cost of media, as they bridge the gap between the traditional direct sales model (IO-based buying) and an automated framework. PMPs offer superior workflow automation (faster deal set-up and execution) when compared with traditional buying, by significantly reducing time-consuming processes.With PMPs offering efficiencies for the sales process, the ability to target specific audiences, real-time evaluation and optimization, we expect PMPs to wipe out managed services in coming years. 

AI in programmatic will unlock untapped efficiency
Let’s take a look at what AI is contributing to the ad tech industry and why the use of AI should be welcomed in 2019?

Artificial intelligence promises to unlock new understanding of users’ behaviour, as well as improving the optimization of the overall auction process. With the help of Artificial Intelligence, it is possible to effortlessly identify which advertisers will have more possibilities to bid and win in the auctions at the most reasonable price for them. This avoids unnecessary participation in bids that are outside their threshold, hence reducing administration costs. It will further lower the cost of infrastructure and improve response times by filtering the number of participants in each auction by staying only with those who have a greater chance of winning.

There are other numerous scenarios where artificial intelligence will play in the programmatic space in the near future to deliver the best solutions for publishers, brands, and agencies, for example:

• More accurate targeting by identifying prime times of the day to serve an ad for a given audience.

• Unearthing the likelihood of a user interacting with certain products by drawing parallels from app usage data.

• Discovering the probability of a conversion from an impression served.

AI algorithms will empower advertisers and publishers to exponentially improve the effectiveness of their campaigns by boosting data analytics and audience targeting.

Moving programmatic in-house won’t be sustainable
There has been a lot of buzz around bringing programmatic in-house. But there are some unanticipated consequences of doing so. Navigating complexity will always require specialists, continuous investment and organizational restructuring. Here are the key challenges which indicate that in-housing is not a quick fix solution:

• Continuous Investment – Apart from the significant initial investment required to move an entire programmatic stack in-house, there is a need for continuous funding to ensure that the  organization stays on top of the ongoing advancements in technology.

• Skilled Talent Pool – Programmatic requires a certain set of skills, cross-functional team culture and aptitude to grasp the latest developments in this dynamic industry. Brands and agencies that don’t have the same internal expertise in programmatic will struggle to deliver effective and competitive campaigns. They still need to invest in the right talent, solutions and processes to ensure a successful programmatic in-housing effort. 

• Tech Infrastructure – This is another component which requires serious scrutiny. Programmatic advertising is a highly technical field and moving it in-house requires a tech stack that can handle a load of data efficiently.

As we steer towards 2019, programmatic advertising brings a set of challenges that all stakeholders need to navigate together in order to create a truly successful ecosystem for digital advertising. Consistent growth in programmatic ad spend by brands and marketers is a positive sign, which opens a flurry of opportunities for agencies, publishers and ad tech providers to keep delivering top-notch performance.