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Buyers will drive ad tech consolidation in 2020

30-second summary:

  • The days when a programmatic buyer worked with 50 to 100 exchange partners are well and truly over.
  • Consolidation of the ad tech world is the inevitable result as providers who don’t make the cut merge with competitors or go out of business.
  • Agencies benefit from SPO in three ways; accountability, efficiency and transparency.
  • Programmatic buying exacerbated serious trust issues between brands and their agencies. A chaotic web of platforms and providers allowed questionable practices to thrive, from hidden fees and shady auction mechanics to unwarranted rebates and unsafe or non-viewable ad placement.
  • Many buyers still work with dozens of partners, but in truth they could operate with drastically fewer.
  • The supply partners that survive will also be those that take a proactive approach to SPO and contribute to the process through demand-path optimization (DPO).

Darwinism states that all species of organisms arise and develop through the natural selection of small, inherited variations that increase the individual’s ability to compete, survive, and reproduce. Whether you believe in the theory or not, there are parallels between Darwinism and what we’re seeing in ad tech as we head into 2020.

Supply and demand partners alike are anxiously seeking differentiation in an already crowded sea of sameness. The days when a programmatic buyer worked with 50 to 100 exchange partners are well and truly over. And with two of the larger DSP’s of years past – IgnitionOne and Sizmek – announcing bankruptcy in 2019, it’s never been so important for advertisers and publishers to ensure their ad tech partners are secure.

With data privacy now top of mind and demand for transparent relationships in ad tech, buyers are employing supply-path optimization (SPO) techniques to limit the partners they work with, keeping only those that add unique value on their roster. Consolidation of the ad tech world is the inevitable result as providers who don’t make the cut merge with competitors or go out of business.

Why agencies are optimizing supply

SPO is moving up the food chain. It began with demand-side platforms (DSPs) analyzing supply in an attempt to reduce duplication and effectively execute media buys through fewer partners. As SPO develops, industry standards such as sellers.json are used to prioritize supply partners with direct publisher integrations over those that are simply inventory resellers. Now agencies are using similar principles to reduce the number of DSPs and exchanges they do business with.

Agencies benefit from SPO in three ways; accountability, efficiency and transparency.

Programmatic buying exacerbated serious trust issues between brands and their agencies. A chaotic web of platforms and providers allowed questionable practices to thrive, from hidden fees and shady auction mechanics to unwarranted rebates and unsafe or non-viewable ad placement.

Agencies now need to rebuild trust by demonstrating total accountability to their brands and in turn holding their supply partners to the same standards. Dramatically simplifying their supply chain connections to a handful of meaningful relationships allows for innovation and true partnership, with information flowing in both directions.

When agencies target specific audiences through multiple programmatic partners, they can unwittingly drive up costs by bidding against themselves. By limiting the number of partners they work with, they can reduce overlap in publishers and placements and avoid duplication in bid requests while finding the most direct and efficient paths to quality inventory.

Finally, with the California Consumer Privacy Act (CCPA) kicking off this year, and other data regulations coming into force, transparency in data management is becoming a high priority. In addition to being compliant with regulations, agencies need to be sure their ad tech partners respect consumers’ privacy preferences and can apply these preferences across the supply chain, delivering a positive user experience and helping to build favorable brand recognition.

Surviving the 2020 consolidation

Ad tech is complex to navigate, with around 400 SSPs and DSPs. Many buyers still work with dozens of partners, but in truth they could operate with drastically fewer. They may choose three or four omnichannel providers, a couple with unique supply, plus a handful that specialize in specific channels. In 2020 we expect to see the larger, more savvy buyers consolidate down to a handful of trusted partners. Those left off the list are unlikely to remain viable.

As with evolutionary theory, it won’t necessarily be the biggest or strongest that survive, but those with characteristics that make them best suited to their environment. It doesn’t matter how big or well-known an exchange is. If it acts largely as a reseller or only offers access to the same supply as every other partner, buyers must question its value to the ecosystem.

The providers that survive and thrive will be those that can offer unique differentiation in the market. They might offer access to unique and valuable inventory and audiences through direct integrations.

They may be real-time verified for brand safety, fraud, viewability, and fee transparency helping to rebuild trust with buyers. They might offer unique creative assets. They might have unique data, analytics or products. Or they may deliver an exceptional combination of scale, efficiency, and transparency.

The supply partners that survive will also be those that take a proactive approach to SPO and contribute to the process through demand-path optimization (DPO). By considering buy-side capacity issues, understanding the inventory and type of audience buyers desire, and transacting on the preferred business model, supply-side partners can prove their worth and start to innovate rather than just operate.

Nature, red in tooth and claw, is at work in the programmatic ecosystem, and 2020 could be a brutal year for ad tech. Buyers are driving consolidation and only providers that prove themselves ‘fittest’ in the eyes of their partners will survive to tell the tale.

Alex Bradbury has worked across both buy and sell sides in multiple capacities from ad ops to innovative solutions at the forefront of programmatic advertising. He is currently the Business Development Director at Sovrn, working closely with agency trading desks on programmatic buying efficiencies.

The post Buyers will drive ad tech consolidation in 2020 appeared first on ClickZ.

Reblogged 3 months ago from www.clickz.com

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