Programmatic Advertising: Next Level of Personalization After the Pandemic
After the global health crisis paralyzed many businesses, digital advertising had to change its ways and evolve. Programmatic advertising, in particular, demonstrated remarkable adaptability and innovation, positioning itself as a robust player in the changing advertising landscape.
Against the backdrop of the crisis, marketers recognized the great importance of personalized experiences in engaging the contemporary consumer. This realization created a new focus on personalization and discovery within programmatic advertising campaigns. The gist of it lies in its capacity to forge profound connections between brands and consumers. At the same time, technological advancements play a central role in actualizing this potential, with automation and customization taking priority.
How the Pandemic Changed Worldwide Ad Spend
As the power and prevalence of artificial intelligence (AI) and other advanced technologies increased exponentially, automation in advertising has rapidly become the norm. The market in 2020 was dominated by Facebook and Google, with eMarketer predicting back then that this duopoly would account for more than 50% of the total programmatic display spending this year.
Several programmatic platforms experienced the rise during the COVID-19 pandemic. Connected TV, streaming, communication (Messenger, web conferencing), digital audio, and podcasts were undergoing a significant spike in traffic, making them particularly desirable to advertisers. With consumers spending more time on these platforms, advertisers could leverage the opportunity for increased impressions and engagements derived from their marketing campaigns.
According to the Coronavirus Ad Spend Impact: Buy-side report, released in March 2020, almost one-quarter of respondents paused all of their ad spending back in 2020. The COVID-19 outbreak led to a temporary pause in ad spending for lots of businesses. Still, a considerable portion remained committed to advertising, adapting their budgets to navigate the evolving landscape.
Despite the setbacks in 2020, the final figures for worldwide ad spending outperformed mid-pandemic projections, signaling a more robust recovery. By the end of the year, worldwide ad spending only experienced a marginal decline of -1.2%, while the projected figure during the crisis was -4.5%. The industry witnessed a delicate balancing act of spending reductions, surges, and redirections, resulting in a total very close to what it would have been without the virus.
As 2021 unfolded, it indeed became a banner year for global ad spending growth: digital ad spending worldwide anticipated a catch-up growth rate of 29.8%.
The momentum slowed down in 2022, returning to more modest growth rates. Despite this decline and a slowdown in digital ad spending growth, projections for 2023 still anticipate a respectable 9.5% year-over-year increase. This shift toward a slower “new normal” suggests a more measured pace, yet the industry remains poised for double-digit annual increases in the years to come.
Contextual and Native Ads
With data privacy concerns leading to the decline of cookies and a shift toward opt-in consent, advertisers are strategically adjusting their tactics to navigate this signal loss. A recent study by Nano Interactive speaks on these changes, indicating an 8% increase in contextual targeting-driven spending among the largest advertisers, translating to an estimated $970 million surge in contextual spending during 2023. This shift reflects a response to the challenges posed by signal loss, making people-based ad targeting more complex.
Cookie decline emerges as a top concern for larger advertisers, influencing their decision-making as they reassess how to measure success in a post-cookie era. Yet, as attention metrics are gaining prominence, 63% of advertisers express a positive view of attention metrics as a valuable measurement tool.
Along with these changes, AI has emerged as a key player, with advertisers recognizing its potential to address the challenges of contextual advertising in the absence of traditional signals. Looking ahead, AI is anticipated to play a pivotal role in targeting, campaign optimization, and streamlining operations, with 52%, 47%, and 37% of advertisers, respectively, identifying these areas as most likely to be impacted by AI. This underscores the industry’s recognition that AI-driven solutions are crucial for future-proofing advertising strategies in the evolving landscape of data privacy and signal loss.
Audio Ads
The remarkable growth of music streaming platforms makes programmatic audio advertising increasingly attractive to brands. The interest in automated audio ads goes beyond music streaming to inserting advertisements in podcasts and digital radio as these formats rise in popularity.
Although there was a time when programmatic audio ads lacked clear standards for delivery, the Interactive Advertising Bureau (IAB) enhanced support for audio ads in VAST 4.3 and VAST Addendum for Attribution Reporting, the association’s prominent standard for video ad buys. The growth of programmatic audio ads is being driven by mobile. Mobile devices are the primary ones for reaching the audio content audience. 70% of respondents from the buy-side said they would like to reach their customers through mobile devices, while 84% of publishers stated the same.
Connected TV Ads
Smart TVs are steadily gaining ground across the United States. According to a recent report from Leichtman Research, smart TV penetration has reached 74% of US households, and 55% of all TV sets in the US (compared to 33% in 2020) are connected smart TVs.
The early emphasis on connected TV (CTV) is now evolving into an established and integrated component of the marketing mix: a whopping 76% of respondents of the DigiDay & MNTN survey highlighted its moderate to very significant role in their advertising programs. While CTV remains primarily a tool for brand awareness, the goals have expanded to include improved ad relevance, precise audience targeting, engaging creative formats, increased engagement, and higher conversion rates.
AI also plays a significant role in the CTV landscape, with 44% of the same survey respondents employing AI in testing CTV campaigns before, during, and after their flighting. An additional 31% leverage AI to analyze campaign results and optimize creative and targeting during and after the campaign. The rise of widely available generative AI options introduces a new dimension to the discussion, with 23% of advertisers already incorporating it into creating copy, art, video, and other components of a CTV campaign in 2023. Looking forward to 2024, 26% anticipate generative AI playing a similar role, suggesting a transformative shift in production dynamics and scalability within the CTV advertising landscape.
Shoppable Ads
In 2022, a collaboration between Roku and Walmart disrupted the industry with shoppable streaming ads. These ads allowed viewers to make direct purchases while enjoying their favorite shows, bridging the gap between entertainment and e-commerce. Roku’s strategic move expanded with a partnership with Shopify, introducing On-Screen Merchant Purchases, further enhancing accessible and convenient shopping opportunities for consumers. Following this trend, Peacock introduced its ‘Must ShopTV’ feature, empowering users to purchase products showcased in their streamed content. This fusion of shopping and entertainment not only elevates viewer engagement but also provides brands with a lucrative channel to showcase products directly to potential buyers.
Live commerce, often hailed as the “next big thing in retail,” has gained prominence, offering a unique shopping experience beyond traditional e-commerce. Live streaming and commerce synergy bring tangible value to video streaming platforms, transforming viewers into actively engaged consumers. It offers enhanced engagement, allowing users to actively participate, leave comments, and directly interact with brands. This dynamic and immersive shopping experience sets it apart from conventional online shopping, making the process more exciting and interactive.
One significant advantage of live commerce on streaming platforms is its ability to leverage social trust. Real-time reviews and recommendations during live sessions build confidence in buyers, guiding them through their purchasing journey. This social proof not only increases conversions but also fosters long-term brand loyalty among customers.
Embracing live-stream commerce early on provides a competitive advantage in the market. As this trend is still relatively new, streaming platforms incorporating live commerce functionality stand out from competitors. This positioning as pioneers in live commerce attracts tech-savvy consumers and solidifies their role as innovative industry leaders.
AR and VR Ads
Another transformative shift in the industry is the rapid rise of Augmented Reality (AR) and Virtual Reality (VR) ads, each presenting unique opportunities for brands to engage with their audiences.
AR advertising is experiencing explosive growth. By 2025, global AR ad revenue is projected to reach $6.68 billion, marking a significant increase from $1.36 billion in 2020. The benefits of AR ads are manifold, offering higher conversion rates, enhanced user engagement, more memorable connections with consumers, and expanded brand reach. An example of the power of AR in advertising is the experience that brought young Broadway fans back to theaters, demonstrating the immersive and captivating nature of AR ad experiences.
On the VR front, the market is poised for substantial growth, with the worldwide VR advertising market projected to achieve a revenue of €$167.8 million by the end of 2023. VR is making a significant impact on the advertising industry through innovative approaches, such as virtual try-before-you-buy campaigns, the creation of virtual rooms, and a storytelling approach that leverages the immersive nature of VR.
Final thoughts
The dynamic interplay of and the transformative influence of programmatic ad formats underscores the industry’s adaptability and innovation. As advertisers navigate through changing consumer behaviours, technological advancements, and regulatory landscapes, the synergies of these trends pave the way for engaging, personalized, and immersive advertising experiences that redefine the boundaries of brand-consumer connections. The future promises not just evolution but a revolution in how brands captivate, connect, and resonate in the digital era.
Author: Max Kalmykov
Vice President of Media and Entertainment Practice at DataArt
Originally published on https://www.dataart.com/blog.
