I have read some utterly depressing outlooks for the year ahead. It would seem most think it will be an epic struggle for the advertising industry in 2019 – but then when was it ever easy for anyone?
There’s always an existential crisis out there, if you look hard enough for one. It has become too easy to blame the duopoly for everything (I, too, get caught up in the ‘GooBook’ bashing).
Ever the contrarians, we at ExchangeWire have an unashamedly positive view of 2019. The following 19-point listicle is a heady mix of prediction, resolution, and opportunity-spotting. Here’s to your continued success in 2019.
1. TV: ad tech’s USD$300bn opportunity
The digital display wars are over. Google and Facebook won. There is now a race to win the USD$300bn (£237bn) global TV marketing budget. The duopoly needs growth; and both are trying to take a share from incumbents. Given the antipathy towards Google and Facebook, TV could well be ad tech’s biggest ever opportunity. Broadcasters need ad tech to sell programmatically. Scaled TV and video ad stacks are thin on the ground. If there were ever a time for ad tech to productise for TV, it is now.
The positive ad tech spin: build an ad stack for TV, and acquisitions are guaranteed.
2. Inevitable consolidation is coming to middle-layer ad tech; but opportunities remain
There is still a lot of bloat in the ad tech ecosystem. With take rates reducing to single digits, there is inevitably going to be consolidation in the middle layer. At the end of the year, we saw a bunch of layoffs at ad tech firms. You will see this continue (particularly on the sell side), as firms look to rationalise their business to survive the single-digit-margin age.
Ad tech that specialises and focuses on high-growth areas (particularly those non-friendly duopoly channels) will thrive. But there will be trouble in the execution layer over the coming 12 months.
Areas of note for 2019 (outside of TV and video): audio; OOH; native; attribution; identity; SPO; and servicing the DTC segment.
Positive ad tech spin: there is still room for differentiated ad tech companies.
3. Publishers won’t die, they will diversify
Publishers have undoubtedly had a tough time of late. A lot of publishers have been going to the wall – but then those companies not only built their entire business on the back of Facebook, but also raised a ton of money. It is unfortunate, but hardly unsurprising.
Premium publishers with diversified revenue streams will survive the cull. Subscriptions, advertising, events, and commerce will all contribute to a more sustainable publisher ecosystem. It will get easier going forward. But VC-backed pubs with unrealistic valuations will struggle badly.
Positive ad tech spin: a healthy publisher ecosystem is good for everyone
4. The universal login becomes prevalent among Europe’s premium publishers
First-party data is king. With the advent of GDPR and ITP, expect to see more universal logins across premium publishers in Europe. Premium context is where marketers go to build brand equity. If publishers can get loyal readers to log in, they will grab more spend. I see a big opportunity for next-generation publisher collectives, like The Ozone Project. With this first-party data, Ozone could build similar targeting capabilities to Google and Facebook – and attract spend.
Positive ad tech spin: first-party data will help publishers compete with platforms, helping the ecosystem
5. Industry needs to contend with more in-housing in 2019
In-housing as a trend has been over-exaggerated by the trades. The complexities of buying across a patchwork of countries in Europe or APAC will make ‘total’ in-housing impossible. But the centralisation of certain processes are certainly having an impact. Tech contracts are now being centralised with marketers. Agencies are being left with just media execution, as data management is either outsourced to consultancies or done internally. Those global trading deals mean nothing if a vendor decides it wants to run an RFP for a DSP, DMP, or ad server.
Service-layer businesses are optimising their solutions to meet this change in marketer strategy. This trend even seems to be affecting the thinking of Sir Martin Sorrell, as evidenced by his recent merger with MightyHive (an in-housing specialist built on the Google stack).
Positive ad tech spin: you might need to rip up those trading deals and go direct; no pretend reverence required for trading directors.
6. Rewarded video becomes big revenue generator for gaming companies
With declining in-game purchases and increasing costs to reach those users, gaming companies will turn to rewarded videos to power growth.
Positive ad tech spin: another big area of growth for ad tech; six-second video, the sweet spot.
7. AT&T either partners with or buys scaled European telco; Xandr goes big
Xandr is AT&T’s big bet on addressable TV. Led by the illustrious Brian Lesser, Xandr could be a proper challenger to the duopoly. Combining ad tech, analytics, content, and first-party data, it is probably the most audacious attempt to go toe-to-toe with Silicon Valley’s data kings. I am very bullish on Xandr. I think it will look more like an IO business in the U.S., but backed with real content, data, and ad tech assets.
I don’t see AT&T just focusing on the Americas going forward. There are rumours that the company is in talks with some of Europe’s biggest telcos about partnering. Given the privacy shitshow of GDPR, telcos are looking for solutions that can allow them not only to onboard data, but also to execute buys in compliance with the current regulation. Throw in the content assets, and you could have a powerful option for buyers in Europe.
There is no growth in telco, so it’s inevitable that these partnerships will happen. AT&T could forgo the partnership, and instead buy Vodafone or Telefonica. If none of this happens, don’t be surprised to see Vodafone, et al, buy ad-tech assets. With its deep integrations with Adform, Vodafone could pick up the Danish company to help it with its own ad business.
The positive ad tech spin: you might get bought by a telco.
8. Here come the platform challengers (mostly BIG TECH and the Chinese)
Do you remember when Microsoft said it was getting out of the ad business? Me too. I am sure Microsoft is glad it did not execute on that particular objective, given it’s doing over USD$4bn (£3.2bn) in ad revenue. Like Microsoft, big tech seems to be doing very well in the ad business.
In 2019, more scaled platforms will challenge the duopoly for a chunk of their 80% market share. Facebook seems to be most vulnerable. This recent piece by The Information outlines why Chinese mega app company, ByteDance, will challenge Facebook for spend in SE Asia and beyond.
Apple will also be hungry for marketer spend in 2019, as its hardware starts to decline. Smaller players like Roku and Pinterest will challenge. And lest we forget Amazon. This is great for buyers, as it adds more competitors, as well as forcing the duopoly to be transparent.
Positive ad tech spin: these companies will be looking for ad tech talent – so get those CVs ready.
9. Amazon goes big in ad technology
As I perused the mid-tail of the digital ecosystem over the festive period, I noticed a lot of Amazon header-bidding tech running on mid-sized publishers. These commodity publishers are not on the radar of the IO buyers or agency trading directors – ranging between one million and 10 million impressions. Amazon is clearly showing an appetite for the publisher business. You are going to see more of this on the sell side, as Amazon ups its game. Its buy-side business is also growing strongly. Amazon is becoming a strong competitor to Google in the pure-play ad tech space.
Positive ad tech spin: more choices to buy from, and pressure on Google’s monopoly in ad tech.
10. Google introduces some form of ITP; restricting third-party cookie
There is speculation that Google will introduce ITP as standard on its browser – thus neutering any third-party targeting or measurement. Google moved most of its products to one platform, so its first-party cookie opt-in makes the big G compliant for all its own targeting. You could argue that this has anti-competitive behaviour written all over it, but then this would have likely happened anyway with the ePrivacy legislation. The legislation would probably have moved all opt-ins to the browser. Let’s move on from the cookie, shall we?
Positive ad tech spin: makes the industry evolve its thinking, as this was inevitable.
11. After GDPR & Google ITP, ad tech will lead the way on compliant targeting
2019 will be the year of the identity. With third-party targeting in the cross-hairs of GDPR and ITP, buyers and sellers will be looking for options that are privacy compliant. The contextual option will be popular. Ad tech will provide these privacy-compliant solutions for marketers and sellers looking to eschew the duopoly’s digital hegemony.
Positive ad tech spin: there will be huge opportunities for companies building contextual plays and companies building targeting solutions beyond the cookie.
12. THERE WILL BE NO BIG TECH BREAK-UPS IN 2019
I have been banging on about an orderly break-up of BIG TECH for the best part of ten years. It looks unlikely to happen in 2019. There is no appetite for it – even from Margrethe Vestager. In fairness to regulators, legislation seems to be out of step with the all-consuming FAANG (Facebook, Amazon, Apple, Netflix, and Google). Maybe it will be shareholders that will precipitate an orderly break-up, as some of these assets might be more valuable as independent stand alones (particularly AWS, YouTube, and Instagram).
Positive ad tech spin: spin outs are inevitable.
13. The duopoly hits serious headwinds as the 20% digs in to defend its patch
The good news is the duopoly is running out of growth in digital advertising. The TV/OOH/audio guys are spoiling for a fight and are not going to facilitate a takeover of their industry. Disney caved by signing a deal with Google. Some people will never learn.
Positive ad tech spin: 20% of a multibillion industry is still a lot; help content providers protect and grow revenue and you will thrive.
14. GDPR lightly slaps the industry; ePrivacy gets kicked down the road
There will be a few high-profile cases for noncompliance in 2019 (a light slap on the wrist will be the worst of it). Given the GDPR mess and patchy compliance, it’s inevitable that someone is going to be made an example of. The good news is that ePrivacy will not happen in 2019. With European parliament elections only a few months out, the ePrivacy legislation will not likely appear until 2020.
The bad news is that the IAB framework seems to be floundering, with Google still not onboard.
Positive ad tech spin: motivates industry to work together on solutions for compliant targeting.
15. Facebook goes big on commerce, offering its mid- to long-tail marketers a neutral buying platform
Facebook has had a shitty year overall, but its crown jewel, Instagram, has had another stellar 12 months. It is the undisputed go-to marketing platform for DTC brands. Capitalising on this, Facebook will go big on commerce in 2019. Amazon’s private-label brands makes the Amazon ecosystem a threat to DTC brands. With the industry looking for neutral platforms, Facebook could open up a huge revenue opportunity – and actually restore its reputation with marketers.
Positive ad tech spin: the more vibrant the DTC sector, the better it is for everyone.
16. The continued rise of the DTC [challenger brand writ large]
The number of DTC brands will continue to grow significantly in 2019. The platforms have made it easy to market and sell products direct to consumers. The propensity of consumers to subscribe to products has made it possible to build sustainable businesses with recurring income.
Challenger brands don’t even have to build big businesses. Given their reduced cost structures, a slither of market share would sustain these new brands. There will be literally hundreds of thousands of these businesses coming your way over the next few years. Everything from oral hygiene to dog food will be available to buy via your nearest friendly platform.
If you are interested in this segment of our industry, our DTC Index lists the fastest growing globally.
Positive ad tech spin: the DTC is a huge opportunity for ad-tech firms everywhere.
17. Holding groups get hit hard in 2019; independent specialists thrive
The holding groups had a torrid time last year. Expect this to continue. More layoffs and rationalisation are coming, as agencies grapple with their disjointed model. Eventually they will get there, but it will be a rough year. There might even be some M&A, with consultancies seeing value in buying one of the holding groups to bolster its execution layer. Accenture is a likely suitor.
On the flipside, independent specialist agencies will thrive. Those in the data and tech category will be a sweet spot for growth.
Positive ad tech spin: there will be a focus on quality as clients get more hands on with technology choices, helping the best-in-class ad-tech solution providers.
18. Consultancies get tangled in creative & conflicts
Am I the only one who cannot figure out the consultancy model? They buy a clutch of creative agencies and talk up creative any chance they get. That part of the business has very slow growth.
Execution, which consultancies talk down continuously, still has all the growth. Despite it having tighter margins, it is still massively scaled. Will they pivot to media execution in 2019?
The other big problem consultancy groups have is conflict. How can you remain objective when you do auditing, creative, and execution? I can see this being a problem for most marketers.
Positive ad tech spin: these consultancy creative shops will need to get into execution to grow, which means more business for ad tech.
19. More writing, more meetings, and less social in 2019
This is more of a personal resolution – and maybe one for the industry, also. A lot of time is spent spouting angry nonsense (mostly in my case) on Twitter, and to a lesser extent, Linkedin. I will try this year to interact less with the Russian ad tech tweet bots, write more, and meet more people.
Positive ad tech spin: more breakfast meetings in Smith’s of Smithfields, more in-depth discussion, and less bullshit online; this will be good for us all.