For digital advertisers, transparency is critical. Marketers are increasingly seeking greater confidence and clarity across a convoluted media supply chain. We’ve seen some of the world’s biggest brands, like P&G and Unilever, lead the charge here. Furthermore, as the ecosystem becomes more focused on transparency, the shift is having a profound impact on the programmatic marketplace.
According to eMarketer, US advertisers will spend almost $60 billion on programmatic advertising in 2019. That’s nearly 90% of the entire US digital display market. We’re at a point where advertisers want to know what media they’re buying, with what data, how their budget is being spent and what percent of working media is actually driving value.
As a result, some of the most interesting transparency-driven changes are around the types of data advertisers are using for programmatic buying. There’s also a shift away from open exchanges in favor of more trusted, brand-safe marketplaces.
First-Party Data Is King
Given current concerns, first-party data will become more important than ever to programmatic buyers, for several reasons. First, marketers are increasingly concerned about consumer privacy as regulations like GDPR and CCPA install stringent rules over what can and cannot be collected without consumer consent. This also ties into the demand for transparency from marketers, who want to know that the data they’re using isn’t just privacy-compliant, but of a high quality. Last year, a Lotame study confirmed this, finding that data accuracy is the most important factor among brands when considering audience data.
Second, browsers like Google, Apple and Mozilla are cracking down on third-party cookies, creating new barriers to data collection and consumer targeting. As a result, first-party data, which isn’t always as scaled but which offers quality and visibility into its origin, will be critical for use in programmatic and automated-buying environments.
Zero-Party Data Has Arrived
With more power shifting to consumers and ever-growing concerns about privacy, marketers are creating opportunities across the ecosystem by turning their attention not just to first-party data, but zero-party data. Whereas first-party data is “passively” collected consumer data from websites, apps, social platforms, etc., zero-party data is proactively and willingly shared by the consumer. Examples include purchase desires and preferences through interactive experiences like subscriptions, surveys, loyalty programs, and contests. It’s completely opt-in, so we can, therefore, presume a high level of quality, transparency, and accuracy.
As regulators and browser companies continue to tighten up on privacy, zero-party data has the potential to unlock deeper consumer profiling and targeting. A March report from Forrester, for example, lauded zero-party data’s value, saying it would help marketers “build direct relationships with consumers, and improve their product recommendations, services and offers.”
The challenge, however, for zero-party data is actually getting it. The bar is awfully high to entice consumers to proactively participate in a survey, loyalty program, contest, or subscription service. This means that zero-party data, while rich in quality, will always be difficult to scale. It’s also why first-party data will remain the go-to option for advertisers, with zero-party data supplementing it.
A Shift Towards Programmatic Guaranteed
In terms of investment, while programmatic spend is only increasing, open market programmatic exchanges will continue to tighten. A recent study by MediaRadar, for example, showed that one-third of large advertisers cut their open exchange spend. This is being driven by concerns over transparency, with programmatic exchanges not always operating in a “well-lit” way. Marketers cite continued opacity around media sources and fees, as well as ongoing brand safety challenges. As a result, rather than spend on open exchanges, more marketers are shifting to private marketplaces (PMPs) and programmatic guaranteed (PG) deals.
The numbers support that. eMarketer recently found that PG deals today are nearing $28 billion, or almost half of US programmatic display spend. Meanwhile, PMP deals will grow 21% to reach $13.5 billion by 2020. For comparison, the open exchange will grow less than 9% to $12.8 billion. The direction of the market is clear.
That’s not to say that open exchanges are going away, of course. Rather, we are seeing segmentation in the way that advertisers do their buying. Open exchanges are going back into the rightful position of monetizing lower value, remnant and long-tail inventory. Meanwhile, upper-funnel activity is moving back to more premium executions and strategies now that the technology has caught up with the market.
So What Does It All Mean?
Programmatic is fundamentally changing due to calls for greater transparency. Advertisers are likely to go all-in on first and zero-party data while moving programmatic investment to more private, premium and guaranteed marketplaces and channels. This shift will need to be supported by publishers, agencies and platforms alike.
For publishers, it means bringing your inventory to vendors that can support PMP and PG deals as growth continues. Agencies will also have to align their strategies with the shift or risk media buying becoming ‘in-housed’ by transparency-focused clients. On the vendor side, the platforms that are helping advertisers deliver on transparency goals — whether through first- and zero- party data optimization or with PMP and PG — will be well-positioned for the future.