Why The IAB Numbers Show Us Programmatic Is An Unstoppable Force

15 Oct, 2014

The decline of free marketing opportunities on social media and search engines, plus the growing rivalry between Facebook and Google, as well as an increased demand for cross-screen ad campaigns are all spurring the programmatic display ad sector, according to ExchangeWire sources.

The IAB last week published figures valuing the UK’s digital advertising market at £3.5bn in the first six months of the year (an increase of 16.6% year-on-year), and in the first of a two-part look at indsutry dynamics driving the trends ExchangeWire sources opinions from leading programmatic experts.

Although the latest figures do not specifically break out how much of the £3.5bn spent during the period used programmatic technology, earlier in the year the trade body claimed almost one-in-three pounds spent on display advertising were bought using programmatic technologies in 2013, and further forecast this number will reach 50% in 2014, representing a £500M increase.

Display challenges search

GoogleAdWordsCloser inspection of the numbers suggests the rapid increase in display ad budgets are starting to erode paid-for search budgets (the historically dominant form of premium digital media). Albeit, paid-for search is still the most valuable online ad format, with the amount spent on such units totalling £1.92bn, according to the figures.

Meanwhile, the growth of display advertising on desktop and mobile was almost twice the overall digital rate at 30.1%, hitting £1.02bn during the period. This is compared to the growth in paid-for search advertising which slowed to 11% year-on-year growth (paid-for search budgets grew by 18.9% during the same period in 2013).

Nigel Gilbert, AppNexus. VP, EMEA, explains that shifts in Facebook’s marketing opportunities (such as reducing the organic reach of brands’ Facebook pages) are altering how budgets are being channelled.

“A significant driving factor behind these results is the ‘commercialisation’ of social media,” he says. “The era of free social reach is now long gone.”

He also muses that the increase in display ad budgets, and programmatic in particular, has been further accelerated by marketers eager to find alternatives to paid-for search advertising, and help reduce their dependance on Google, which is also making organic search more difficult with the removal of keyword data.

“The intensity of keyword competition [which drives up cost] eventually drives diminishing returns for the advertiser. Combine that with changes in consumer behaviour that push brands to engage before intent is declared, and programmatic becomes an increasingly attractive advertising investment,” adds Gilbert.

Facebook and Google’s increasing rivalry

Meanwhile, Ben Walmsley, Sizmek, managing director, UK, further explains how programmatic spend is being increasingly fuelled by budgets from the small-to-medium sized (SME) companies, which previously would have invested in search advertising.

“Direct response advertisers and smaller businesses are also offered viable alternatives through display retargeting and social channels, in particular Facebook,” he says.

“Historically, search was the immediate choice for lower funnel targeting, but as Facebook now offers easily accessible performance based advertising for SME businesses, it is becoming a more viable alternative to search.”

Tony Evans, Crimtan, corporate development director, adds: “Programmatic, undoubtedly, has a big part to play in the rapid growth of display spend.

“Much of it is probably down to the boom in retargeting and other targeting opportunities that has occurred in the last 12 months, which is primarily done using programmatic real-time bidding (RTB) – whereas there aren’t really any new search strategies to boost growth.”

fbxRachel Powney, OpenX, marketing director, EMEA, says: “Programmatic trading of Facebook’s sponsored stories via [its ad exchange] FBX has become a major category within programmatic. We’re also starting to see cutting-edge work on programmatic native with mobile.

“Many industries evolve from a preliminary homogeneous scale phase in which they prove themselves before entering a new level of sophistication that emphasises more flexibility and enables a much more heterogeneous array of applications.

Mobile and video further fuel growth

Similarly, the IAB figures attest to the rising tide of social. Social media ad spend grew 73% to £396.0m, with 53% (£209.7m) allocated to mobile, according to the statistics (see chart). Meanwhile mobile and video ad units were also identified as major drivers to growth in the IAB study, with video advertising across desktop and mobile phones growing by 59% year-on-year to £202m in the first half of 2014.

Meanwhile mobile video advertising, alone, grew 196% to £63.9m, making it the fastest growing digital ad formats, similarly ad formats served on tablet devices increased 60% year-on-year during the period. The figures indicate that mobile accounts for 20% of the UK’s digital ad spend, with the amount spent on mobile display ads increasing 116% during the period.

This increased desire for mobile inventory is also playing into the hands of social networks, according to most sources approached by ExchangeWire, a trend that has been facilitated by the launch of app install products such as Facebook’s ad network, as well as both it and Twitter’s app installation services. A market that Google is also keen to capitalise on.

AppNexus’ Gilbert says: “With social media now being a mobile first proposition, the need for advertisers to pay for reach is driving significant budgets into mobile. At the same time, the emergence of genuine scale across programmatic inventory on mobile app and mobile browser makes cross-screen campaigns far easier to plan and deliver beyond pilot test and learn levels of spend.”

This article appeared on ExchangeWire