Who Will Dominate The Future Programmatic Landscape?

Vincent Potier, Captify, COO, reflects on  how ad tech has helped propel display advertising to become an arguable rival to search advertising, and asks whether programmatic advertising will be dominated by agency trading desks, the internet's big Silicon Valley players, or if third-way players can lead the innovation? 

The programmatic buying space is powering digital and radically transforming the media landscape for good. Programmatic is attracting more clients, driving the growth of digital and display, accelerating the migration of dollars, pounds, euros and yen away from traditional media and towards digital.

Now, what will happen next? Predicting the future is not easy. After all who would have predicted five years ago that display advertising would rocket in popularity, transforming it from search’s poor performing cousin, into the best method for achieving ROI online?

Progress is ongoing and consolidation is happening. Most ‘institutional’ stakeholders (agency trading desks, clients…) have caught up or are catching up with the pioneering early entrants.

Given the scale and speed of change, the consolidation and the massive budgets at stake and the rise of large integrated ecosystems (Google, Facebook, Amazon etc) all hoping one day to retain their users and advertisers within their environment, an informed guess would suggest the emergence of massive players which will soon dominate the landscape.

So, are we heading towards a future where programmatic buying will be dominated by agency trading desks, and a few key massive pure-players?

Innovation and consolidation - traditional media and digital media 

There will be some form of market dominance by the Agency Trading Desks (ATDs) and pure-players mentioned above, but it is unlikely that they will monopolise the market the way it happened with offline media. Let’s consider why.

Firstly, consider consolidation. Acquisitions are often a sign of increasing domination by a few players. Currently, there is movement in the market with several large consolidations taking place such as, Blukai by Oracle and Sociomantic by Dunn Humby, and many more; however this is not a sign of a future oligopoly on programmatic, but rather of the ever-changing dynamics at play in the ad tech sector.

Consolidation is a result of innovation taking place. Consolidation happens because there are new companies worth buying. So, consolidation is part and parcel of the sector, rather than a long-term sign of things to come.

To further the consolidation argument, if one looks at the history of technology, take search for example, consolidation leads to market dominance of just a few when innovation slows down or comes to a halt. However, that assumption is to believe that innovation halts, when in fact it is only displaced to another segment. Innovation never ceases; it is just focussed on another area.

Secondly, looking at the history of traditional media as a guide for what may happen to programmatic is a perilous exercise. Technology has transformed the media world for good. Traditional media was always sold a certain way, because they were aggregated in large volumes.

Offline media trading was a bit like trading in market towns with human interactions and large transactions, regular events with discounts applied because of volume aggregation. Whilst the current programmatic world is more like a stock exchange: an automated process where humans are separated by interfaces, and algorithms dictate activity.

In conclusion, there are fundamental differences between the offline world, and programmatic buying.

Concentration in offline media-buying was a product of scale and market dominance, ability to aggregate very large media volumes as an interface between buyers and sellers, but also dealing with finite inventory versus infinite inventory, panel data versus user-level data…. There are simply way too many differences between programmatic and the traditional media world in order to assume a similar future.

Clients will dictate the future of programmatic

Fundamentally, we believe the future programmatic market landscape will be driven by the clients’ diverse characteristics and needs. Clients are either transactional or not, large or small, international or local, e-merchants or brick and mortar, large media spenders or not.

In the past, these differences in client sizes were addressed through a ‘hierarchy of media’ (TV for the big boys, other media for others, radio or local print accessible to all).

That world has now been turned upside down. Clients instead will be segmented based on a few key variables, and ‘advertising solutions providers’ will be segmented based on this offering. Below are examples of what that segmentation might look like:

  1. Fortune 500 clients could become enabled by a SaaS-type integrated Data Management Platform (DMP) – Demand Side Platforms (DSP). This will give the clients the comfort of controlling the data and the media spend, adapting the role of the agency without eliminating them. Agencies servicing those clients will move to become more about consultancy, monitoring, benchmarking, insights, and ideas-generation. CFOs and CEOs will love this and so will the markets.
  2. Very large ‘marketing’ corporates will be more likely to integrate programmatic internally because marketing and media are at the core of their business, such as FMCG businesses, but they will also give a larger role to their agencies. The aim will be to retain control of their data along with creating transparency of their partners’ income. This is whilst creating ’central buying entities’ powered by DSP technology fed by data aggregated through DMPs in which they will plug their CRM, and overlay their client data with campaign data. In addition to all sorts of third party data; agency and client employees will work together within those entities; margins, data and data insights will stay with client.
  3. For mainstream large and mid-tier clients ATDs will be the natural port of call. ATDs will diversify and position themselves differently in order to address different segments of the market, such as brand, DR, and verticals. Also various programmatic landscapes will use their parent companies’ clout to buy guaranteed inventory and data on a worldwide basis, but also in order to sign worldwide deals with external partners they will develop ’preferred relationships’. There will be global deals not only with publishers but preferred partnerships with data providers and suppliers of specific tech stacks.
  4. Large to mid-tier “transactional” clients will have their own Client Trading Desks (CTDs), originally powered by major ’white-label‘ DSPs and will sometimes be manned through employees or through outsourced specialist teams, which are more flexible successors to Independent Trading Desks (ITDs).
  5. ITDs will work with small clients and will merge with specialist agencies or become specialist agencies themselves. They might become verticals specialists or experts at certain consoles.
  6. External partners, such as network DSPs and site and search retargeters will continue to be the driving force behind product and technology innovation. They will still appear on plans through integrated partnerships with both agencies and clients as they will have adapted and diversified their business models. For example, IO side of the business will decline, which investors and financial directors will prefer as relationships will have to become more long-term, transparent and cooperative. External partners will also spearhead more technology advancement that will then permeate ATDs and CTDs pioneering the use of programmatic in other media and spearheading cross-device and of course new markets.

The future is heterogeneous 

The nature of programmatic buying is that it can be easily scaled up and down in line with budgets. Unlike traditional TV and print budgets programmatic is open to any and all, creating an open system unlike anything that has gone before it. And more importantly, the constant innovation means the future landscape is more likely to be heterogeneous and changing rather than homogeneous and formulaic.

It’s this openness that will ensure there is no ‘world domination’ by a few global buying-houses and no system of programmatic oligopoly will be allowed to develop.

As a result, both opportunity and competition will be ripe, and we will see a fast-expanding global market where segmentation will be driven by client characteristics and needs.