Within the marketing services industry, adtech has perhaps experienced the most monumental changes over the past decade.
Some of the changes have been positive. Programmatic has offered a new revenue stream to struggling publishers navigating away from print, broadcasters from cable, radio from analogue, and to a lesser but growing extent, OOH providers from static to programmatic digital/addressable. The ease and cost efficiency of delivering programmatic advertising in many ways levels the playing field, offering small advertisers and media owners a fighting chance. But growing unregulated and unconstrained has meant fundamental issues such as privacy, competition, brand safety, fraud—and also the general user experience of the internet—have been overlooked. The beast has grown too large, and now regulators and industry players are attempting to retrofit rules while others are happy profiting from its flaws. In short, it’s a bit of a mess.
Industry veterans Ryan Pestano (Iponweb general manager of international) and Eric Bozinny (Pubmatic director of inventory quality) look back at the simultaneously exciting and terrifying growth of adtech over the 2010s, in hopes the industry can course correct as it approaches a new decade.
How has the structure of the adtech industry changed over the past decade?
Pestano: “We started the decade with what are now the larger DSPs that at the time were more specialist—Invite Media which was acquired by Google to become what is now DV360, Turn which is now under Amobee. We were buying through exchanges—Google Ad Exchange and Yahoo Right Media, and we had the smaller SSPs that have become more progressive like Pubmatic and Rubicon Project.
“It was very technology focused at the time, back then a lot of conversations were around queries per second (QPS), what kind of geographic footprint an SSP or DSP has, liquidity, fill rates, low CPMs. It was very much focused on remnant inventory, a lot of performance budgets, shifting from ad network model to this new programmatic realm, a lot of reselling, a lot of fraud.”
“The following five years we started to see the stacks being built up, with platforms building end-to-end solutions. As this started to evolve what we started to see was some consolidation happening. The smaller DSPs couldn’t keep up with the pace of growth and either shut down (like BrandScreen where Pestano used to work) or were acquired and put together into a stack. Companies like Salesforce, Oracle, Adobe started making acquisitions in this space, and companies started building stacks like Google, The Trade Desk, Appnexus. As the pace of change accelerated the walled gardens got built up, and we saw Facebook Exchange pulling out of the RTB."
How has the method of buying programmatic changed?
Bozinny: "Over the last 10 years brand advertisers have flooded the programmatic marketplace, and since it is hard to track business outcomes this has led to the explosion of vanity metrics which are nearly worthless at measuring business outcomes but agencies buy into that. Performance-based advertisers just want to track ROI, and you can trust performance data that leads to a sale. But brand advertisers are just doing their best using click through rates, which is the easiest metric to manipulate."
Pestano: "As the supply chain has got more fragmented what we have started to see over the past two years is the use of PMPs and programmatic guaranteed has really increased. It goes back to the basics of negotiating with the top publishers out there, making sure I am getting content I want, and leveraging my size and scale to get better pricing. You are still doing it through same programmatic pipes, so have the advantages of targeting, frequency capping, controls, but are able to choose granularly what I buy, the audience, context, price I want to pay. That relationship may have been more fragmented and broken over the past seven years as publishers were struggling to get this available programmatically, advertisers shifting more into trading desks, now that relationship becoming more important."
Bozinny: "Programmatic has been great at getting money into digital in an efficient way: imagine trying to scale direct IOs. But now because of its gargantuan size, buyers are realising for every inventory source they see dozens of supply paths, a lot of them inefficient, so now they are trying to get a handle on cost. Quality is coming up as part of that conversation too, because the more hops between buyer and supply source the more opportunity for fraud to extract value away."
What are the biggest issues that have dogged the industry over the past decade?
Bozinny: "Before programmatic there were very few places where ad fraud could be siphoned off. Then came the RTB, which had a lack of transparency built in, and because it grew so quickly there were lots of opportunities for fraud to take off. It’s not like it was created by fiat with a governing body, it spread quickly from the bottom up. Anything that grows without regulation will lead to bad things. It is a monster that is hard to reverse. It didn’t help that the global economy has been rolling for over 10 years, there’s been no inhibitor like a global recession, so it went on unchecked. The next recession will allow the ecosystem to spur some change. It is very hard to get it done when there is so much money in it."
Pestano: "Over the past two years the brand safety conversation has really accelerated. In 2017 we started to see a lot more focus on ad fraud. It had always been an issue, but reselling and the adtech tax problem all became really evident, so we started to see the development of industry initiatives like ads.txt, supply object, sellers.json. Since then, and because companies like Moat, Integral Ad Science, White Ops have popped up, we started to see ad fraud decrease in 2019 (by some estimates from US$7 billion in 2016 to $5.8 billion in 2019)."
Bozinny: “Privacy is the entry point for regulation of the industry—we are seeing that with GDPR and CCPA—because privacy impacts people, where the average citizen doesn’t feel the impact of ad fraud. It is privacy that is going to gain momentum in regulating other parts of the digital ecosystem.”
Pestano: “What we have seen as a result of GDPR in Europe is more consolidation and smaller companies pulling out of Europe. At the same time, tech companies are blocking third party cookies like Apple with ITP, Mozilla, so everyone is speculating on the dreaded cookie apocalypse.”