Programmatic Growth Rate to Slow During Shift From Cookie-​Based Advertising

BY Kathy Crosett
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Programmatic ad buying gave marketers a way to target consumers like never before. Some ad industry experts believe the rise of the direct-​to-​consumer market grew quickly over the past few years specifically because of programmatic advertising. This method of buying ads will likely account for 69% of all digital advertising globally next year. But there are storm clouds on the horizon.

Programmatic Projections

The latest projections from Zenith Media point to a programmatic ad market value of $67 billion in the U.S. this year. In our market, about 82% of all digital advertising is handled through programmatic means. For purposes of their study, Zenith analysts did not include paid search or classified advertising. Despite its success, programmatic advertising faces big challenges. Until these challenges are resolved, growth rates will drop from 35% in 2018 to 16% in 2021.

The Problem With Programmatic

When your clients need to connect with hard-​to-​reach audiences, programmatic ad buying has been a good strategy. Publishers make ad space available on ad exchanges. Businesses bid on and buy ad space. In the middle, giant algorithms access data about consumers’ online behavior and calculate when to show a marketer’s ad to a consumer and how much it will cost the marketer.

Large online operators like Google and Apple have tracked consumer behavior through the use of cookies and facilitated the programmatic data manipulation process. But analysts predict the death of cookies is not far off. The new GDPR law in Europe limits the consumer-​related data tech companies can sell to advertisers. Similarly, the state of CA’s Consumer Privacy Act will take effect on January 1, 2020. 

In response, Google, Apple, Facebook and Twitter are making changes. In some cases, they let consumers block ads. In other cases, the companies block third-​party cookie ads completely. This shift is a threat to many industry operators.

At the end of last year, U.S. marketers paid third parties nearly $12 billion for consumer data acquisition. The purchase of consumer data is nothing new. For decades, direct mail companies sold lists of consumer names, addresses and other demographic data. But the mingling of tech solutions and consumer data, without notifying consumers of what’s happening, led to privacy concerns and legislation.

The Way Forward

If your clients have been buying programmatic, they’ll need to make some changes. Matt James, Zenith’s Global Brand President encourages marketers to concentrate on building their own databases. First-​party information is as simple as cleaning up their in-​house email lists. They can also collect consumer information on their websites. 

Your clients should also be looking into contextual advertising. This “is basically ads that are relevant to the other content on the screen,” says Owen Ray. Ray also points out marketers may experience a higher ROI from contextual advertising, as about half of cookie-​based messaging doesn’t reach the right kind of consumer.

Talk with your clients about the changes coming to programmatic buying. Pitch new ad strategies and show them relevant AudienceSCAN profiles from AdMall by SalesFuel to support your presentation.