Programmatic Advertising Spend Key Trends

Forrester Survey Reveals Programmatic Advertising Spend Is Evolving Across Multiple Formats, Device Types, And Buying Models

January 25, 2021 Brandon Verblow with Joanna O'Connell, Reineke Reitsma, Sanjeev Kumar, Himank Joshi, David Novitzky

Summary

Programmatic buying has become increasingly dominant in recent years, growing its share of US digital advertising spend from 36% in 2014 to 64% in 2019. What began with a focus on online display banner ads on computers has expanded to cover ad buying across the digital advertising spectrum. This survey report sheds new light on programmatic’s widening scope, revealing how programmatic ad spend is evolving across multiple formats, device types, and buying models.

Topics

·        Forrester’s Survey Reveals Key Trends In Programmatic Ad Spend

·        Video On Connected TV And Mobile Will Boost Programmatic Spend

·        Private Exchange And Programmatic Guaranteed Will Gain Share

·        Key Takeaways

·        Supplemental Material

Forrester’s Survey Reveals Key Trends In Programmatic Ad Spend

In late 2019, we fielded Forrester’s Q4 2019 Global Programmatic Advertising Survey with several demand-side platforms (DSPs) to understand the size and growth rate of various types of programmatic advertising spend flowing through their platforms. Unfortunately, the outbreak of the coronavirus delayed our plans for analyzing and reporting on the data. Although the advertising landscape has changed significantly due to the pandemic, we believe the survey data collected is still valuable. The absolute growth rates reported by the survey respondents will almost certainly be lower in 2020 than they were in 2018 — the year reflected in our survey data. However, the relative differences in programmatic segment sizes and growth rates should not have changed materially. This report focuses on these relative differences as revealed by our survey and outlines their significance for broader trends in programmatic advertising spend.

Video On Connected TV And Mobile Will Boost Programmatic Spend

Programmatic video advertising has been growing faster than programmatic banner advertising. In our online display advertising forecast, we calculated that programmatic video grew at a compound annual growth rate (CAGR) of 37% from 2016 to 2019, increasing faster than programmatic banner’s growth of 12%. Forrester’s Q4 2019 Global Programmatic Advertising Survey corroborates faster programmatic video growth, and it reveals that — at least prior to the pandemic — programmatic video was growing faster than programmatic banner on all devices (see Figure 1). Within programmatic video, connected TV (CTV) was growing fastest, followed by mobile and then computer. ( In this report, “mobile” refers to smartphones and tablets, and “computer” refers to desktops and laptops.) We expect this dynamic to persist.

CTV holds the most long-term promise, but its challenges must be addressed. In 2018, the year reflected in our survey, programmatic video ad spend on CTV was growing faster than it was on either mobile or computer. The rapid growth rate highlights marketer interest in the channel. Given the $70 billion spent annually on linear TV advertising, compared with only $6 billion spent on CTV, the long-term opportunity for CTV is huge. CTV’s faster growth was made easier by the fact that spend was — and likely still is — small relative to mobile and computer (see Figure 2). For CTV to continue growing robustly even as its market size expands, the advertising ecosystem will have to address several issues, including ad fraud, fragmentation, and measurement challenges.

Mobile will drive programmatic video in the near term. Although CTV had the fastest growth in our survey, mobile was the primary driver of programmatic video spend. Programmatic mobile video was more than three times as large as programmatic CTV, but it grew only slightly more slowly. This combination of size and growth means that mobile has been contributing the most in dollar terms to programmatic video growth. We believe this trend will continue in the near term.

Computer is the most vulnerable to third-party cookie deprecation. Programmatic video spend on computer has been important. With a 54% share in 2018, computer represented the largest portion of programmatic video ad spend in our survey, and it was growing at a healthy 25% annual rate. Given this size and growth, it was also a strong contributor to dollar growth in programmatic video ad spend, just like mobile. However, this growth will face headwinds from third-party cookie deprecation, given that the vast majority of computer advertising occurs within the browser. In contrast, a significant portion of advertising on CTV and mobile occurs within apps, making third-party cookie deprecation less of a problem for these devices. Of course, CTV and mobile app advertising are still vulnerable to operating system changes, such as Apple’s decision to limit the ability of advertisers to leverage a device’s unique identifier for advertisers (IDFA). But this move will only affect advertising on devices running iOS, not Android (at least for now), whereas cookie deprecation will impact advertising on all browsers — even Chrome.

Private Exchange And Programmatic Guaranteed Will Gain Share

Open exchange was the programmatic ad buying model with the largest share of spend among respondents, followed by private exchange then programmatic guaranteed (see Figure 3). However, private exchange and programmatic guaranteed were gaining share, with annual growth of 20% and 40%, respectively, compared with 13% for open exchange (see Figure 4). We believe this trend will continue.

·        Video growth supports the uptake of private exchange and programmatic guaranteed. At the time of the survey, some 40% of programmatic video ad spend occurred via private exchange or programmatic guaranteed, versus only 17% of programmatic banner ad spend bought via these methods (see Figure 5). This result indicates that marketers are more inclined to use private exchange or programmatic guaranteed when purchasing video ads. If this faster growth of programmatic video versus programmatic banner continues, private exchange and programmatic guaranteed will benefit more than the open exchange.

·        Private exchange and programmatic guaranteed offer a more controlled environment. Over the past few years, the downsides of the open exchange have become more apparent. Ad fraud costs advertisers billions of dollars each year. Ads have the potential to appear adjacent to objectionable content. And the quality of inventory is diminishing as premium publishers like The New York Times shun the open exchange because it degrades their users’ experience and reduces their pricing power. These drawbacks are pushing marketers toward the relative safety of private exchange and programmatic guaranteed — particularly for video. Because video ads are more expensive, advertisers are more intent on ensuring that these ads appear in an environment that gives them their money’s worth.

·        Open exchange’s future growth will face headwinds from privacy regulation. Because of its more “open” nature, as its name implies, the open exchange is more vulnerable to the potential leakage of user data that would violate data protection rules. Real-time ad auctions, which occur on the open exchange, are already in the crosshairs of the Information Commissioner’s Office (ICO), the UK’s data protection watchdog. And Belgium is signaling that it may take action against the ad auction framework supported by the Interactive Advertising Bureau (IAB) because of the way it collects personal data. Actions by regulators to protect user privacy could impair marketers’ ability to target ads on the open exchange, pushing them to private exchange and programmatic guaranteed.

Figure 1 Programmatic Video Was Growing Faster Than Programmatic Banner On All Devices

Figure 2 Connected TV’s Share Of Programmatic Video Was Small Relative To Mobile And Computer Devices

Figure 3 Open Exchange Dominated Programmatic Spend

Figure 4 Faster Growth For Private Exchange And Programmatic Guaranteed Meant They Were Gaining Share

Figure 5 Marketers Were More Likely To Use Private Exchange Or Programmatic Guaranteed For Video Ads

Key Takeaways

Video On Connected TV And Mobile Will Drive Programmatic Advertising Spend

According to Forrester’s survey on programmatic advertising, programmatic video ad spend has been growing the fastest on connected TV devices, followed by mobile and then computer. Video ad spend on connected TV has the most upside opportunity over the long term, but the industry must address challenges around fraud, fragmentation, and measurement. Mobile video will be the key driver of programmatic spend growth in the near term. Computer video spend is sizable but will be vulnerable to third-party cookie deprecation.

Advertisers Will Reallocate Programmatic Budget To More Controlled Buying Models

While open exchange saw the most programmatic ad spend among our survey respondents, private exchange and programmatic guaranteed were gaining share, and we expect this trend to continue. Drawbacks of open exchanges — ad fraud, objectionable content, questionable inventory quality, and privacy concerns — will push advertisers toward the relative safety of private exchange and programmatic guaranteed, particularly for video.

Supplemental Material

Online Resource

The online version of this report includes a slide presentation in PDF format containing visualizations of the complete survey results.

Survey Methodology

We fielded Forrester’s Q4 2019 Global Programmatic Advertising Survey to five demand-side platforms (DSPs) representing $8.2 billion in digital advertising spend, including $4.7 billion in nonsocial banner and video digital advertising spend, spread across multiple regions including North America (46%), Europe (34%), and Asia Pacific (19%). The $4.7 billion represents roughly 8% of the market for nonsocial banner and video digital advertising spend in in 2019.

Forrester fielded the survey from September through October 2019. We asked respondents about the programmatic advertising spend via their platform for 2018, the most recent full calendar year. Respondent incentives included a summary of the survey results.

This data is not guaranteed to be representative of the population, and, unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes. While nonrandom, the survey is still a valuable tool for understanding current advertising market dynamics and where the industry is headed.

The result for each question is based on a weighted average of all DSPs’ responses to that question. Weightings are based on each DSP’s market share for a particular advertising type relative to the other respondents. Thus, respondents that have a larger share of spend receive a higher weight for their response. Weightings vary by question. While we believe a market share weighted approach yields the best representation of the data, we found that it does not vary significantly from results based on an equal weighting of each response.

Although this survey data was collected before the outbreak of COVID-19 and other newsworthy events, we believe that the key themes highlighted by the data still apply. Recent events like the pandemic, the advancement of data deprecation measures, and enactment of new regulations like the California Privacy Rights and Enforcement Act of 2020 will only accelerate the trends revealed by the survey that were already in progress.

https://reprints2.forrester.com/#/assets/2/1343/RES163835/report