Programmatic advertising is undergoing a decisive change as privacy-invasive practices give way to more ethical and effective alternatives. In this blog, we briefly recap the history of programmatic advertising, some of the recent changes, and where programmatic advertising may be heading soon.
A brief history of programmatic advertising
Programmatic advertising started out in the early 2000s. The approach involves using automated systems to buy and sell ad space, relying on algorithms to analyse and reach audiences. The innovation has brought unimaginable efficiency and precision to an industry previously dominated by manual systems.
The advent of Real-Time Bidding (RTB) in 2009 had a major impact on programmatic advertising, enabling advertisers to bid on impressions in real time and based on user data. Concurrently, introduction of Demand-Side Platforms (DSPs) and Supply-Side Platforms (SSPs) streamlined the buying and selling process.
With advances in AI and data analytics, programmatic advertising has grown increasingly sophisticated, enabling personalised ads that have improved ROI for advertisers. In 2022, ads bought programmatically accounted for 84% of global digital advertising spending. The share is forecast to increase to 87% by 2026.
However, the practice now faces criticism over privacy concerns, and global privacy regulations and consumer demand for privacy-conscious approaches are forcing change.
The evolution of programmatic advertising
Today, traditional programmatic methods that rely on third-party cookies for user tracking and personalised ad targeting are being phased out due to these regulations and industry changes led by companies like Apple and Google.
As a result, the industry is shifting towards privacy-first strategies like contextual advertising, which targets ads based on the content of a webpage, rather than personal data. It’s also pivoting towards solutions based on first-party data, collected directly from consumers with their consent. This change aims to maintain effective ad personalisation and audience engagement while respecting privacy.
Recent changes to programmatic advertising
This year and next will likely prove crucial in the story of programmatic advertising evolution. Several important changes are taking place that define the market for years to come. These include:
- The phasing out of third-party cookies on Google Chrome. With a 62% share of the total web browser market, Google’s approach to tracking cookies has a decisive impact on the programmatic ecosystem. The company has announced that it will phase out third-party cookies in 2024, putting an end to the legacy model for personalised programmatic advertising.
- The rise of telco-verified IDs. The vacuum left by the demise of cookies is being filled by a range of alternative, privacy-conscious IDs. One of the most exciting approaches is the use of telco verification services. These combine first-party data from publishers and brands with telco network intelligence in IDs that can help build audiences across the open web and provide a mechanism for consistent use recognition. With telco verification, the ability to programmatically deliver the right message, to the right audience, and at the time, regardless of which device they are using or where they are on the web, will survive the so-called “cookie winter.”
- Google Privacy Sandbox. Google’s own effort to replace third-party cookies is its Privacy Sandbox, which includes Google Topics. With Topics, users’ web browsers identify which topics (e.g., music, food, sports, travel, etc.) are their top interests in a week. When users visit a website that is using the Topics API, they would be shown advertising related to one of their topics for that week. While this will be a useful tool in the arsenal of digital marketers it is essentially contextual advertising and it will only work for authenticated users (i.e., people who are logged into Google Chrome).
The future of programmatic advertising
From a privacy perspective, the programmatic advertising industry is maturing. The move away from tracking cookies to privacy-first alternatives is to be welcomed. Not only will it help brands comply with privacy laws, but it will mean that consumers can continue to benefit from tailored content and engagements. Without new innovations around programmatic advertising the danger would be that advertising returns to the bad old days of “pay and spray” campaigns.
The global programmatic advertising market grew from $7.31 billion in 2022 to $8.87 billion in 2023 at a compound annual growth rate (CAGR) of 21.4%. What’s more, the market is forecast to continue its impressive growth and reach $19.12 billion by 2027, at a CAGR of 21.2%. These figures reflect an ecosystem that is adapting to change well and is confident of its privacy-first future. Role on the next age of programmatic digital advertising.