Throughout this book, we’ve explained how many different areas of programmatic advertising and AdTech work.
In this chapter, we’ll list the main challenges and opportunities in the web, in-app mobile, CTV and OTT, and DOOH industries.
The Main Challenges and Opportunities in Web Advertising
Identity and Privacy
In programmatic advertising, identity refers to the process of identifying individual users across different websites, mobile apps, or other devices.
Identity powers many key AdTech processes, including:
- Behavioral targeting
- Frequency capping
- Ad fraud detection
For the past decade, third-party cookies have been the main mechanism for identifying online visitors in web browsers, but this is changing fast.
Over the past few years, there’s been a big movement towards strengthening online user privacy.
And in digital advertising, strengthening user privacy typically means making it harder for companies to identify individuals across different websites, mobile apps, and devices.
We’ve seen the introduction of privacy laws like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), as well as many other privacy laws in other countries.
We’ve also seen many popular web browsers strengthen privacy for their users by limiting or blocking identification methods.
Safari and Firefox already block third-party cookies by default, and in January 2020, Google Chrome announced that it would be shutting off support for third-party cookies in Chrome by 2022, which, because of Chrome’s global market share, will have a much bigger impact on programmatic advertising than Safari and Firefox have had so far.
The changes made by Safari and Firefox have given the programmatic advertising industry a preview of what a world without third-party cookies looks like, and it’s not pretty.
For the most part, publishers have seen CPMs decrease and advertisers have noticed their addressable audiences shrink.
In 2021, all players in the programmatic advertising industry, from advertisers and agencies to tech vendors and publishers, will need to evaluate their identity strategies and look for solutions that solve their problems, which may differ from one company to another.
For most companies, the opportunities will come in the form of solutions already available on the market. For others, there are opportunities to innovate and build new tech to power the future of identity or meet their business goals.
Below is an overview of the solutions available to brands and agencies, tech vendors, and publishers:
Advertisers and agencies
In the past, advertisers and agencies have utilized third-party data to expand the size of their addressable audiences and reach more of their target audiences.
The privacy changes mentioned above have reduced the availability of third-party data, leaving advertisers and agencies looking for new ways to reach their audiences.
Here are just some ways advertisers and agencies can navigate the identity challenges in 2021:
First-party data: Most brands collect a treasure trove of first-party data, whether it’s from their website, mobile apps, CRM platforms, ecommerce tools, or offline systems.
But simply collecting this data isn’t enough. Advertisers and agencies will need to activate it, and one way they can do this is via an ID resolution service.
ID resolution services and ID graphs: Although some advertisers are moving away from behavioral targeting and towards other targeting methods, such as contextual, there are many that still see more value in being able to identify members of their audience across different websites and devices.
But with the availability of third-party cookies declining and mobile IDs facing a similar fate (at least, Apple’s IDFA for now), advertisers will have to utilize a new set of tools to run identification, targeting, and attribution.
And ID resolution services and ID graphs are good options to explore.
ID resolution services and ID graphs aim to piece together IDs from online and offline channels to create a centralized view of consumers that can identify them across different websites, apps, and devices.
From there, advertisers can run behavioral targeting, retargeting, frequency capping, measurement, and attribution.
Contextual targeting: There’s been a lot of talk in the programmatic industry about the revival of contextual targeting.
Even though some advertisers won’t see the same campaign performance from contextual targeting as they do from other targeting methods like behavioral or retargeting, others may find that this type of targeting is more effective.
Because of its revived popularity, advertisers can expect to see more tools and options for contextual targeting in 2021 and beyond.
For tech companies, the challenges around privacy have brought about platform consolidation, thrown up all kinds of obstacles, and threatened their business models.
But despite the challenges, tech companies actually stand to benefit the most from the current situation.
Advertisers will still need to advertise and publishers will still need to monetize their audiences. The changing privacy landscape isn’t going to bring an end to digital advertising, it will just change the way it’s done.
Also, the solution to many of these challenges is a technological one.
Below are just some opportunities that tech vendors can take advantage of:
Build identity resolution services: Although there are already a number of ID resolution services and ID graphs on the market, there are some AdTech and MarTech vendors that could benefit from building their own ID tools and solutions and incorporating them into their current product offerings.
Build or update existing tech: The changing programmatic industry requires tech companies to change their tech. Whether it’s incorporating new targeting methods (e.g. contextual), integrating with other platforms and tools, or building new tech, the successful AdTech and MarTech companies of the future focus on innovation and solve the various challenges with new technologies.
Innovation has also been a core component of programmatic advertising. We saw this with things like real-time bidding (RTB) and we’ll see it again with the challenges around identity and privacy.
The challenges and opportunities that publishers face regarding identity and privacy are very similar to those that advertisers face.
For publishers, the fact that third-party cookies are no longer available in Safari and Firefox and will soon be scrapped from Chrome means that they’re not able to identify their audience on the same scale as they used to, resulting in advertisers paying lower CPMs because they’re not able to identify their target audiences.
This has caused publishers to look for solutions that will enable them to continue identifying their audiences, or at least part of their audience, and bolster their monetization strategies.
First-party data: Out of all of the players in the programmatic advertising industry, publishers are the only ones that have direct access to the most prized asset of all; audiences.
Sure, some advertisers also function as publishers and have access to audiences, but publishers are the ones that hold the key to the castle.
The ever-growing challenges around privacy and identity have led publishers to focus on creating stronger relationships with their audiences and unlocking the potential of their first-party data.
Luckily for publishers, many AdTech and MarTech companies have also turned their focus to helping publishers unlock the value of their first-party data.
- The Trade Desk’s Unified ID 2.0.
- Independent identity providers like ID5.
- ID resolution services and ID graphs like LiveRamp, Tapad, Signal, Zeotap, and InfoSum.
Tech development investments: Traditionally, many publishers haven’t seen the need to invest in tech development, but the privacy and identity challenges are providing publishers with the opportunity to not only solve these challenges via tech development, but also give them more control over their audiences and data.
In 2020, we saw many large publishers invest in tech development, and in 2021, we’ll likely see an increase in publishers entering this space.
The New York Times, for example, has built its own audience segments that it offers to advertisers. By building out these audience segments based on its rich first-party data, it has taken ownership of its audience and provided a solution to a problem that is usually handled by tech companies.
While building new tech and tools, or even a small amount of custom tech development, won’t suit every publisher, there are certainly many publishers that stand to benefit by making technology development a part of their monetization and growth strategy for 2021.
Google Chrome’s Privacy Sandbox
There’s also another solution that publishers, advertisers, ad agencies, and AdTech companies can explore; Google Chrome’s Privacy Sandbox.
Chrome’s Privacy Sandbox is a series of standards and APIs designed to replace the processes currently underpinned by third-party cookies.
The goal of Privacy Sandbox is to maintain targeted advertising and measurement for both advertisers and publishers, but do it in a much more privacy-friendly way.
Privacy Sandbox is currently being worked on in a W3C business group between Google Chrome, Google’s ad product teams, and independent AdTech companies, publishers, advertisers, and agencies. Although some of the standards have been tested, it’s not yet known when Privacy Sandbox will go live.
The Main Challenges and Opportunities in In-App Mobile Advertising
The mobile advertising industry has been on a constant incline over the past 5-10 years, but in 2021, the industry will face challenges it hasn’t faced before.
Apple’s Privacy Changes
Traditionally, Apple’s privacy crusade has been isolated to its Safari web browser, but in June 2020 at the Worldwide Developers Conference (WWDC), the tech giant announced a series of privacy changes to its upcoming release of iOS 14 that will have a negative impact on in-app mobile advertising.
Here’s an overview of the privacy changes in iOS 14:
Apple’s Identifier for Advertisers (IDFA)
Apple announced that it will be releasing a new feature in its mobile devices known as the AppTrackingTransparency (ATT) framework.
This feature will require app developers to obtain permission from users before collecting the device’s identifier for advertisers (IDFA) and passing it to AdTech companies, such as ad networks, supply-side platforms (SSPs), and mobile measurement platforms (MMPs).
Apple’s IDFA is a string of random numbers and letters assigned to Apple devices like iPhones, iPad, and Apple TVs.
Advertisers can use the IDFA to identify iOS, iPadOS, and tvOS users across different apps to deliver personalized and targeted advertising, run frequency capping, measure campaign performance, and attribute impressions and clicks to app installs.
Here’s an example of what an IDFA could look like:
A device’s IDFA can be accessed by the app’s developer and then passed on to different AdTech platforms.
However, Apple’s changes to its IDFA means that before a device’s IDFA can be accessed by a mobile app developer, they’ll first need to get consent from the user using the ATT framework.
Users will be shown a message similar to the one below and asked to make a choice:
If the user selects the Allow Tracking options, then the IDFA will be passed as usual. If the user doesn’t allow the app developer to access their IDFA, i.e. selects Ask App Not to Track, then the IDFA will be zeroed out, making it useless from an identification point of view.
The mobile app developer will only be able to ask the user for access to their IDFA once per install.
Nobody knows for sure but most estimates put the opt-in rate between 1% to 20%.
Tim Koschella, CEO at Kayzan, posted some figures that show the initial opt-in rates were around 15% to 20%.
However, it’s still early days and the opt-in rates will depend on a number of factors, such as the vertical (gaming vs dating) and whether app developers have displayed their own message to users before showing them the ATT message.
As you can imagine, it’s likely that most users will select the Ask App Not to Track option, meaning the IDFA won’t be as readily available as it is now. This will have a negative impact on the performance of in-app mobile advertising campaigns as ad targeting and attribution will be less accurate.
Although Apple hasn’t offered up any kind of solution for ad targeting, it has proposed a tool for attributing ad clicks to add installs. And it’s called SKAdNetwork.
Apple’s SKAdNetwork is designed to provide advertisers with conversion data without revealing any user-level or device-level data. It’s Apple’s version of a privacy-friendly way to attribute app installs.
Here’s how Apple’s SKAdNetwork will work:
A couple of points about the SKAdNetwork:
- The IDFA won’t be passed to AdTech platforms or MMPs, even if the user has opted in.
- All attribution data will pass through SKAdNetwork and then onto the AdTech platform or MMP.
- SKAdNetwork will only attribute app installs (via the last-click model) and not view-through conversions.
- Campaign IDs are limited to 100 per AdTech platform (e.g. ad network or MMP).
Privacy Report and ITP for All Browsers in iOS 14, iPad 14, and Safari 14
In addition to the AppTrackingTransparency framework, Apple also announced a couple other privacy changes in iOS 14:
- Privacy Report: Users will now be able to see how many trackers were blocked by Safari on a given page, as well as other information about trackers.
- ITP for all web browsers: For iOS 14 users, ITP will be applied to all web browsers, not only Safari.
This means that all web browsers, not just Safari, in iOS (v14 and above) will include the Intelligent Tracking Prevention feature.
WWGD = What Will Google Do?
Ever since Apple announced its changes to its IDFA, many people in the industry asked the question, “Will Google make changes to its mobile ID?”
A recent story reported in Bloomberg suggests that Google is considering making changes to its Android Advertising ID (AAID), also known as the Google Advertising ID (GAID). This shouldn’t come as a surprise as it was always somewhat inevitable that Google would introduce its own privacy changes to AAID.
Although Google has announced that it will require app developers to include privacy information in their Google Play Store listings, similar to the privacy information displayed in Apple’s App Store listings, there’s no details on what the future of its AAID will look like.
It’s likely that whatever changes Google does make to its mobile ID, they won’t be anywhere near as severe as the ones Apple has made to its IDFA. Google will no doubt try and balance privacy with personalized advertising and measurement.
We might see an announcement from Google this year with some more specific details about what the privacy changes to its AAID will look like.
Just like with the privacy challenges in web browsers, the main opportunity here for companies is to create solutions that will allow advertisers to reach their target audience and measure the performance of their ad campaigns, and help mobile app developers to continue their app monetization strategies via advertising.
But this won’t be easy, and in some ways it will be harder to solve the IDFA challenges than it will be to solve the third-party cookies challenges in web browsers.
The Main Challenges and Opportunities in CTV and OTT
The hype around the connected TV (CTV) and over-the-top (OTT) industries is akin to the hype around mobile in the late 2000s.
There’s a lot happening in the CTV and OTT worlds, and just like all new channels, they are experiencing a few teething problems.
The main challenges in the CTV and OTT advertising industries are:
Unlike the fragmentation of tech platforms and devices that we’re used to seeing, the fragmentation issue in CTV and OTT runs much deeper.
Firstly, every CTV device has its own hardware and software, meaning they all have their own IDs (some don’t have any!). This makes it difficult to create any kind of unified identifier across all of the different CTV devices.
Also, the fact that a consumer might use multiple devices to watch video content across different OTT services only exacerbates the problem. What this means for advertisers is that it’s quite hard to reach their target audience at scale within the CTV and OTT environments.
As mentioned above, the fragmentation of devices and apps is causing a lot of issues around identity.
Compare this to advertising in web browsers. If an advertiser wanted to reach their target audience, then the only real challenge would be identifying them across different browsers (ignoring for a moment the various privacy challenges around identity in web browsers).
Even though there are many web browsers available, most people use Google Chrome and don’t tend to switch between web browsers.
In the CTV and OTT environments, there are multiple CTV devices and multiple OTT apps, meaning identifying audiences across all of those devices and apps is a huge challenge.
To help alleviate these identity challenges, the IAB Tech Lab has released a set of guidelines to help companies operating in the CTV and OTT industry use and pass the correct ID from the various devices to OTT apps and AdTech platforms.
The key to accurate measurement and attribution in digital advertising is identity. And as you saw above, there are many challenges around identity. In the short term, this means measuring the performance of CTV and OTT campaigns and attributing ad views to conversions will be limited at best.
When it comes to viewability and measurement, there are a few key challenges that need to be addressed:
- Identifiers: The lack of a consistent identifier across all the different CTV devices means that identification is fragmented and limited.
- Access to devices: Most CTV devices are closed off, meaning third-party verification tools have restricted access.
- Server-side ad insertion: Server-side ad insertion is a common way to serve ads inside CTV and OTT environments, but it presents many challenges (listed in the next section). Because of the way SSAI is set up, it is harder to identify invalid traffic (IVT) and collect measurement data.
To help address these key challenges, the IAB has been working on refining some of its existing standards, specifically, VAST and OM.
The video ad serving template (VAST) is an IAB standard that is used in video advertising in both web browser and in-app mobile environments. Although VAST is responsible for video ad serving, it doesn’t handle the measurement side of video advertising. For that, there’s video Video Player Ad Interface Definition (VPAID).
However, VPAID will soon be depreciated and the measurement function of VPAID will be replaced with the open measurement (OM) standard.
The goal of OM is to not only power measurement for video advertising in web browser and in-app mobile environments, but also in CTV and OTT environments.
The IAB is continually working on both VAST and OM to help standardize the ad serving and measurement processes within the CTV and OTT environments.
Server-side ad insertion is becoming the main way to serve ads in CTV and OTT environments. Although SSAI is an improvement on CSAI, it does have a couple of drawbacks.
For starters, it’s vulnerable to ad fraud as it’s not easy to identify if the ad requests are coming from an actual AdTech platform or whether there’s a fraudster on the other end. Because of this, it is also hard for invalid traffic detection tools to tell the difference between genuine and fake traffic.
Secondly, it’s harder to incorporate IAB standards, such as VPAID and older VAST versions, into SSAI.
But as mentioned above, the IAB Tech Lab is working on updating the existing video ad-serving standards VAST and OM to support ad serving and measurement.
Ad fraud has been a constant challenge in programmatic advertising for the best part of a decade, with fraudsters following the money; from display to mobile, and now, to CTV and OTT.
Just like with other channels, fraudsters have been looking for the vulnerabilities and opacity to carry out and conceal their fraudulent activities.
The fact that the CTV and OTT industry is still fairly new, it’s not really surprising that we’ve seen so many ad fraud schemes already.
As the industry matures, we’ll likely see more IAB standards like app-ads.txt be adopted, which will help address and hopefully eradicate some of the ad fraud schemes listed above.
But as we’ve seen in other digital advertising channels, ad fraud is a constant theme that is difficult to eliminate completely.
The main opportunity here is to address and solve these challenges via technical innovation.
The main challenge facing the out-of-home (DOOH) industry is returning to the pre-pandemic levels of both ad spend and investment in technology.
Prior to the COVID19 outbreak, the OOH industry was one the fastest growing digital advertising industries, with most of this growth originating from digital out-of-home (DOOH).
When most cities around the world went into lockdown, the OOH market was one of the hardest hit.
According to research from eMarketer conducted before March 2020, ad spend on OOH in the US was set to grow by 3.3% in 2020, with ad spend totalling US$8.87 billion. Adjusted forecasts in June 2020 put the total ad spend for 2020 at US$8.25 billion.
In the UK, a report by the Advertising Association and Warc showed that ad spend on OOH fell by 70.4% in the second quarter of 2020.
Apart from the impact of the pandemic, other challenges in the DOOH industry revolve around inventory availability, audience targeting, and measurement and attribution.
The opportunities in DOOH lie in solving the many technical challenges the industry faces.
The addition of the digital, and programmatic, element of out-of-home means that companies need to invest in developing the technology that will allow DOOH to mirror the other digital forms of advertising, such as display and in-app mobile.
But this is challenging, mainly because it’s much harder to set up a DOOH ad campaign than it is to set up a traditional display ad campaign. However, as more investment goes into DOOH, the gap between what’s possible currently with DOOH and what isn’t will decrease.
Another Topic to Keep an Eye on in 2021
The topic below isn’t a challenge, but rather an industry trend that we’ll likely see more of throughout 2021.
Antitrust investigations and Lawsuits Against GAFA
Over the past year or so, we’ve seen a number of governments around the world take aim at the dominance of Google, Amazon, Facebook, and Apple in the form of antitrust investigations.
This is an area worth keeping an eye on as it may lead to some of the walled gardens spinning off some of their products and companies, which may impact independent AdTech companies and the programmatic advertising industry (likely, in a positive way).
Below are the main antitrust investigations that have began so far:
The UK’s Competition and Markets Authority Investigates Google Chrome’s Privacy Sandbox
On January 8, 2021, the UK’s competition watchdog opened an investigation into Google’s intent to eliminate third-party cookies and other functions from Chrome browser that would negatively affect the advertising and marketing industry.
Online Publishers Sue Google in Advertising Antitrust Lawsuit
On Wednesday October 20, 2020, Genius Media Group together with The Nation put forward a lawsuit seeking justice over Google, claiming that it has hurt their businesses by controlling advertising opponents and displaying anticompetitive conduct.
The US Department of Justice (DOJ) Investigates Google
On Tuesday October 20, 2020, the US Department of Justice (DOJ) opened an investigation into Google’s dominance of its search and search advertising businesses.
A Bipartisan Group of State Attorneys General Sue Google
In December 2020, a bipartisan group of state attorneys general from 38 states sued Google for anticompetitive conduct relating to its search and search advertising businesses.
The lawsuit is very similar to the DOJ’s lawsuit (listed above) but provides more examples of Google’s anticompetitive behavior to secure the dominance of its services (e.g. search engine and mobile apps).
Republican Attorneys from 10 States Sue Google Over Anticompetitive Behavior in the Digital Advertising Market
On Wednesday December 16, 2020, the Republican attorneys from 10 states sued Google for its dominance of the digital advertising market.
The main allegations are that Google overcharged advertisers, boxed out competitors and squeezed publishers, adding up a monopoly tax on businesses.
The FTC and Attorneys General Sue Facebook Over Illegal Monopolization of the Social Networking Market
On Wednesday December 9, 2020, the US Federal Trade Commission (FTC) and 48 attorneys general sued Facebook for alleged illegal monopolization of the social networking market.
Although both of these lawsuits are separate, they were both announced at the same time and concern the same topic; Facebook’s violation of antitrust laws.
The Australian Government Introduces a New Media Bargaining Code to Make Google and Facebook Pay for Distributing News
While most governments are opening antitrust investigations into Google and Facebook, the Australian government has decided to tackle the duolpolgy’s dominance in a different way.
In December 2017, the Australian Government asked the Australian Competition and Consumer Commission (ACCC) to open an inquiry into Google and Facebook to determine the impact those companies have on competition in the media and advertising markets in Australia.
Then in July 2019, the ACCC released the final report and executive summary. For the most part, the code would require Google and Facebook to negotiate deals with media companies whereby the tech giants would pay them for the content they distribute.
After some initial backlash, which included Google threatening to block Australians from Google Search and Facebook temporarily blocking accounts of news sites, both Google and Facebook have agreed to make deals with Australian news companies.
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