Technology trends

Adtech: Technology Trends

The ad tech (adtech) industry is primarily a showdown between tech giants like Google, Meta, Amazon, and Alibaba and pure game providers like The Trade Desk, MediaMath, and Amobee. Tech giants dominate the market with their massive user bases and sophisticated adtech walled gardens. Several pure play vendors will become acquisition targets for Big Tech vendors over the next three years.

Below are the top tech trends impacting the adtech theme, as identified by GlobalData.

First party data

First-party data is information that a company collects directly from its customers. It includes demographic data such as age and location, online shopping history, web activity, and email engagement. In Merkle’s 2021 Customer Engagement Report, 88% of 600 surveyed marketing, analytics and technology leaders said first-party data collection and storage was a high priority over the past six months. to next 12 months. The survey further suggested that privacy regulations and the abolition of third-party cookies are transforming the advertising industry and forcing companies to rethink their data generation systems.

Adtech and third-party cookies

Third-party cookies (data packets generated by websites that track a user’s online activity) have been the basis of digital advertising for several years. Therefore, Google’s plan to remove cookies from Chrome by 2023 would significantly disrupt the ad tech market. Apple’s Safari and Mozilla’s Firefox web browsers have already stopped supporting third-party cookies, but adtech will feel the biggest impact when Chrome, the largest browser by market share, drops cookies.

At the time of writing, there is no clear alternative to cookies. However, some key initiatives to prepare for a post-cookie era include Google’s alternative profiling system, dubbed Privacy Sandbox. The product initially used Federated Learning of Cohorts (FLoC), a technology that brought together groups of people with similar interests. In January 2022, Google replaced FLoC with “Topics”, which divides users into categories based on their interests. These categories are defined based on the last three weeks of browsing activity.

As the search for a viable alternative to cookies continues, the future of online advertising will be driven by first-party data. Ad technology vendors that provide third-party data will be the most impacted as advertisers move data generation in-house.

iOS App Tracking Transparency (ATT)

In April 2021, Apple released a privacy feature on iOS called App Tracking Transparency (ATT), which requires apps and games on its App Store to ask users’ permission before tracking their activity. According to data from Flurry Analytics, as of December 2021, 76% of users worldwide have opted out, meaning they don’t allow apps to track them. As ads are a vital source of revenue and data for app developers, Apple is offering advertisers access to SKAdNetwork, a tool that tracks iOS user activity in the app and shares it with ad networks without no data at the user or device level.

Advertisers have access to trending data such as types of games played and overall time spent by users in a particular app. However, they cannot track individual users or devices, which will have a significant negative impact on their revenue.

Android Advertising ID

Google’s Android is also introducing an iOS-style privacy policy, driven by growing regulatory pressure and competition from Apple. While Android users have long been able to opt out of personalized ads, the Advertising ID is still in use. Google says it allows developers to track users’ online activities and target them with ads.

However, Android 12 allows users to disable Advertising ID. While Apple ATT is a default option for iOS users, Google’s approach is more passive, requiring the user to act on privacy and personalized tracking. However, it still represents another blow to the adtech industry, as it limits tracking of Android users through cookies and advertising IDs.

AI

AI-powered advertising tools can detect large-scale patterns in advertising data and predict changes to campaigns that will improve performance. All of this can be done in seconds, rather than the hours, days, or weeks it would take a human to analyze, test, and navigate campaigns. AI can also analyze ad performance on specific platforms and recommend ways to improve performance.

In the post-cookie world, advertisers will seek to return to first-party data based on direct consumer interaction and reduce their reliance on third-party data.

Adtech and Ad Fraud

The growing volume of fraudulent traffic compromises the effectiveness of any advertising campaign. The World Federation of Advertisers predicts that global ad fraud will become the largest organized crime market by 2025 and will reach $50 billion. Pixalate, an ad fraud protection company, reported in its 2020 Connected TV (CTV) Advertising Supply Trends Report that approximately 24% of CTV programmatic ads in the United States involved invalid traffic.

Ad fraud not only limits an advertiser’s desired impressions, but also increases operational expenses. A major challenge for publishers and advertisers is to accurately verify ad impressions and distinguish between real users and bots.

However, ad verification methods are also becoming sophisticated, incorporating real-time user analysis to, for example, detect bots. Ad fraud protection companies will increasingly deploy artificial intelligence and cybersecurity techniques to address ad verification issues.

Internet of Things (IoT)

IoT devices such as wearables and smart speakers provide opportunities for advertising technologies to expand beyond PCs and smartphones. These devices help brands collect first-party data about user preferences and needs. They’re also popular with younger consumers, helping brands reach a valuable demographic. While these techniques are under development, increased penetration of IoT devices will drive ad tech companies to explore new channels for advertising delivery.

Adtech and native advertising

Native advertising is a type of contextual advertising that integrates paid advertising into the platform on which it appears. Unlike banner ads, native ads appear as regular content on a web page or app, helping to minimize intrusion and maximize click-through rate (CTR). Brands in various industries use native ads to promote their offerings, increase sales, and improve user engagement.

Native ads are usually labeled as “Sponsored”, “Suggested”, “Featured” or “Advertisement”, allowing publishers to be transparent with users that the ads are directed to them. However, these tags are usually small and easy for users to miss.

Adtech and Buyable Ads

Buyable ads allow users to directly purchase a product featured in an ad. Video, image, or barcode-based advertising includes embedded tags that direct the user to the product page on the brand’s website. Buyable ads aim to make ad views and online shopping seamless and interactive. Brands use buyable ads on streaming platforms, social media, instant messaging services, e-commerce sites, and TV channels to increase sales and build a first-party relationship with users.

Augmented Reality (AR)

According to Zenith UK, global AR ad spend will grow by more than 30% in 2022 and 2023. AR enables advertisers to deliver more inventive, eye-catching and interactive ads and reach beyond non-interactive media like print written and television. In September 2020, Shopify reported a 94% increase in conversion rate for products containing AR or 3D content.

WebAR allows users to experience AR content through web browsers rather than a standalone app. It is already used in advertising by major brands including Coca-Cola, Toyota, EE, Sephora and Universal Pictures. Instant visibility, faster targeting of potential customers, better online visualization of physical products and reduced volumes of digital storage spaces are some of the advantages of WebAR.

Ad Blockers

Ad blockers, software that prevent advertisements from appearing on a web page or application, present a significant challenge for advertisers because they reduce the click-through rate (CTR). Some prominent ad blockers include AdBlock, Poper Blocker, and AdGuard. According to search engine optimization (SEO) company Backlinko, around 43% of global internet users use ad blockers every month.

The Acceptable Ads Committee (AAC) is an independent, self-regulating organization that creates ad filtering standards and champions the concept of acceptable ads, primarily native ads. Advertisers must comply with AAC standards to serve ads to users without being filtered by ad blockers.

This is an edited excerpt from the Advertising Tech (Adtech) – Thematic Research report produced by GlobalData Thematic Research.