3 Things You Need to Know About IAB’s Programmatic Revenue Report
Programmatic accounts for a fifth of all digital ad spending.
Programmatic advertising is still a nascent practice with competing terminology and hazy estimates about industry size and scope, but its proliferation is certain—it’s making up a bigger chunk of advertiser budgets each year.
IAB is attempting to provide a framework for discussions around the growing business with its Programmatic Revenue Report though. Here’s what publishers need to know.
Programmatic Tops $10 Billion
Programmatic advertising totaled $10.1 billion last year, the report says. That’s more than half of all display ad spending ($19.6 billion) and about a fifth of the total Internet ad market ($49.5 billion).
The vast majority of that spending is driven by a few companies and by a single format though.
Nearly $7 billion of the total programmatic revenue was generated by the Top 10 largest earners in the category, with just $2.5 billion going to businesses outside the Top 25.
Meanwhile, $8 billion was spent on banner inventory. Formats like mobile are gaining ground, but obstacles like cross-device tracking and strict data sharing policies are making adoption difficult. Video, too, is seeing increased programmatic buying, though inventory is still scarce.
Open Auctions Dominate the Market
IAB estimates that 70 percent of all programmatic advertising is conducted via open auction. Other methods like invitation-only auctions, unreserved fixed rate and automated guarantee made up less than a third of the market.
Interviews with respondents suggest that it a shift is coming though.
“They see that private marketplaces are becoming much more prevalent,” the report says. “We believe this shift is due to an increase in demand on the buy side for increased transparency (i.e. reporting, targeting and features), brand safeguarding, along with a desire from ad buyers to ensure reserved and quality inventory.”
There’s also evidence that sell-side participants are looking to take advantage of the benefits private marketplaces offer, like greater control over pricing and inventory access.
Who Keeps the Cash?
While programmatic spending is increasing, not all of that cash is flowing directly to publishers. In fact, most of it isn’t.
More than half (55 percent) of the revenue generated by programmatic advertising went to ad tech vendors last year.
Those “ad tech taxes” can vary widely though, depending on the number of vendors involved and the level of services being requested.