US Programmatic Ad Spending Forecast 2018

Private Setups Pull Even More Ad Dollars to Automation

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eMarketer predicts that more than $46 billion will go to programmatic advertising in the US this year. By 2020, 86.2% of all digital display ads will be bought via automated channels.

  • Nearly $19 billion in additional ad spending will enter the programmatic display space between 2018 and 2020. And the majority will go to private setups, such as private marketplaces (PMPs) and programmatic direct transactions, as buyer wariness toward the open markets’ transparency and quality issues persists.
  • By 2020, almost 90% of all mobile display ads will transact programmatically, buoyed by continued investment in social platforms, and ongoing efforts to bring programmatic and its audience-buying capabilities to the in-app space.
  • Programmatic channels will claim nearly three-quarters of digital video ad dollars in 2018, a portion that will rise to almost 80% by 2020. As added investment in over-the-top (OTT) and connected TV (CTV) inventory grows, momentum around programmatic video will only rise.

WHAT’S IN THIS REPORT? Our latest forecast for programmatic digital display ad spending in the US, along with key trends likely to affect growth through 2020. Included in the forecast is a breakdown of projected ad spending for all major transaction methods. Further breakouts of mobile display and programmatic video are also included.

KEY STAT: By 2020, more than $65 billion will be spent on programmatic digital display advertising in the US.

What's Inside

This report explores how much US ad buyers will invest in programmatic advertising through 2020, highlighting critical trends and influences. It includes our forecasts for the following areas:

  • Total US programmatic digital display ad spending
  • US native programmatic digital display ad spending
  • US programmatic direct digital display ad spending
  • US digital display ad spending transacted via real-time bidding (RTB)
  • US digital display ad spending transacted via open exchanges
  • US digital display ad spending transacted via PMPs

Behind the Numbers

Our forecasts are based on an analysis of quantitative and qualitative data from research firms, government agencies, media firms and public companies, plus interviews with top executives at publishers, ad buyers and agencies. Data is weighted based on methodology and soundness. Each forecast fits within the larger matrix of all our forecasts, with the same assumptions and general framework used to project figures in a wide variety of areas. Regular re-evaluation of available data means the forecasts reflect the latest business developments, technology trends and economic changes.

  • US mobile programmatic display ad spending
  • US mobile programmatic display ad spending, by transaction method
  • US programmatic digital video ad spending
  • US mobile programmatic display ad spending, by format

For the full data set for our US programmatic forecast, see this report's accompanying spreadsheet.

Programmatic Ad Spending Outlook

More than four in five digital display ad dollars in the US transacts programmatically today, and that percentage is rising. By 2020, over $65 billion—86.2%—of all digital display ad spending will flow via automated channels.

eMarketer’s definition of programmatic digital display ad spending considers all dollars spent programmatically on banners, rich media, video and sponsorships, across desktop, mobile devices such as smartphones and tablets, and IP-connected TV and OTT devices. Social media and native ad units are also included.

We raised the total number for US programmatic ad spending slightly compared with our October 2017 forecast. This reflects the continued growth of the larger digital display advertising market and accounts for the continued momentum behind programmatic advertising across all major properties and ad formats.

While some of that momentum centers around buyers’ and sellers’ unwaivering interest in leaning on programmatic to streamline and automate their processes, a significant portion now focuses on programmatic’s rich audience targeting capabilities.

Buyers have come to rely on programmatic as the primary way to infuse their ad campaigns with first-, second- or third-party data insights. And for sellers, it offers an unparalleled means of packaging and activating one’s own audience data alongside premium inventory across screens to command higher CPMs.

The added nearly $19 billion moving into programmatic between 2018 and 2020 will be driven by the continued growth of major programmatic platforms and ad tech players, as well as a sustained industry push to improve digital advertising quality and transparency across the ecosystem. While some of these transparency and cleanup initiatives will drive investment in the open markets, the greatest portion of dollars will flow toward safer, more private or one-to-one setups such as programmatic direct deals and PMPs.

Programmatic Direct

Programmatic direct accounts for the lion’s share of programmatic display ad spending, thanks to marketers’ continued investment in social properties like Facebook and their heightened interest in moving more automated dollars direct to publishers.

Spend allocated to programmatic direct setups, such as programmatic guarantees and big social platforms’ API-based buying, will account for 58.0% of total programmatic ad expenditures this year, or $27.00 billion.

To find out more on eMarketer’s latest projections for US ad spending, look out for our upcoming April 2018 report, “US Ad Spending Forecast 2018: TV Slides, Facebook and Google Grow, Mobile Surges.”

Healthy outlooks for major properties like Facebook, Snapchat and Amazon will help to drive programmatic direct’s share of total programmatic display ad spending to 61.0% by 2020, as will growing demand for programmatic direct setups across the broader landscape. While social players such as Facebook and Twitter account for well over half of all programmatic direct ad dollars in the US today, by 2020 programmatic investment outside of these two properties will nearly double, causing their share of the programmatic direct pie to fall.

Factors driving growth and interest in programmatic direct during the forecast period include:

  • Continued pushes from marketers for more brand-safe, transparent relationships. As noted in prior forecasts, difficulties associated with transparency and brand safety in open programmatic environments have led to a pullback in open-market participation over the past 24 months. Instead, big brand advertisers are transitioning dollars to programmatic guarantees or other one-to-one direct setups, where they can ensure spend is going to brand-safe, fraud-minimized publishers.
  • Added focus on streamlining and cost savings. Shifts to programmatic direct aren’t just about brand safety. For a growing number of brands, agencies and even buy-side platforms, transparency and ad quality initiatives have brought about heightened demand for weeding out partners and publishers that add little value—in terms of both cost and performance. As this continues, some of these dollars will inevitably move direct. But these practices aren’t aimed only at cutting low-quality partners. Hardeep Bindra, managing director of real-time value creation at ad tech firm Sizmek, said buyers are also shifting to programmatic guarantees to minimize payments to intermediaries such as fraud verification services or brand safety vendors.
  • Buyers’ continued push for ownership and activation of their own data. First-party data has become table stakes for buyers leveraging their own customers and realizing cross-screen goals. As marketers readily invest in the tools and technology required to own and manage proprietary data (along with other key data assets), reluctance to share it with intermediaries and open exchanges is growing. As a result, PMPs and guarantees are flourishing. “When we first started our data business, we were pushing these data segments to our clients at a [demand-side platform] DSP level,” said Michael Jacobson, manager of advertising data and solutions at ratings and reviews software Bazaarvoice. “But now we’re seeing buyers wanting the data pushed to them at a DMP level. Everyone wants to be able to control their own destiny in terms of centralized buying. We see a lot of brands directly asking for our data to be put into their system so they can use it alongside their own first-party data or third-party data sources that they’re also buying from.”
  • Premium publishers’ pursuit of programmatic. Programmatic is no longer seen as a remnant, real-time bidding (RTB) arena. Premium publishers now know it can be an efficient mechanism for streamlining sales with large-scale clients and enabling more advanced audience targeting capabilities. We expect more premium video content providers and aggregators to shift larger portions of their inventory to programmatic during the forecast period, which will mean more spending on programmatic guarantees. “More and more premium publishers and networks are coming online and leveraging technology and programmatic for greater scale,” said Tammy Le, head of product marketing for Adobe Advertising Cloud. “This is especially true for TV-like content or even TV content: They’re using programmatic software to figure out how to better monetize some of their inventory.”

Real-Time Bidding (RTB)

RTB, which includes both open market and PMP spending, will account for 42.0% of total programmatic ad investment this year, or $19.55 billion.

As noted earlier, RTB’s share of programmatic ad dollars trails that of programmatic direct. Take Facebook and Twitter out of the picture, however, and RTB’s share of programmatic display ad spend rises to 61.7%. The bottom line? Outside social, RTB dominates—at least for now.

RTB ad outlays will continue to climb throughout the forecast period, reaching $25.59 billion by 2020. Its overall share of ad spending, however, will fall slightly to 39.0% as investment in programmatic direct—both social sites and guarantees—outpaces both open market and PMP spending growth.

Open Exchange

Open exchanges, or open markets, remain the dominant RTB arena. Despite buyers’ and sellers’ continued frustrations with the levels of brand safety, ad quality and transparency in the open markets, spending in this segment will rise slightly each year through 2020. The total share of open marketplace dollars going to programmatic display will fall, though, as PMP investment outpaces that of the open markets by more than 2 to 1.

Open exchanges have borne the brunt of the negativity associated with ad fraud, brand safety and lack of transparency, but buyers and sellers have made positive strides over the past 12 to 24 months toward making the open markets a safer, more transparent arena. We expect those efforts to continue throughout the forecast period, though they will not happen fast enough to prevent buyers and sellers from shifting a good portion of dollars from the open markets to more private-type setups.

Over the next two years, the following factors are likely to affect open market participation:

  • The adoption of ads.txt and other industry initiatives aimed at bringing greater supply chain transparency to the programmatic ecosystem. Over the past six months alone, the portion of publishers using ads.txt—a text file through which they can clearly list all authorized resellers of inventory—has risen substantially. A review of websites worldwide conducted by fraud verification firm Pixalate found that the number using ads.txt increased more than 4,400% between September 18, 2017 and February 26, 2018, jumping from 3,500 sites to 154,400. Further adoption of ads.txt, along with growing interest in supply path optimization—a practice aimed at finding the most direct and beneficial route between buyer and seller—will continue to bring greater clarity to the open markets. That clarity will help to keep ad dollars there.
  • The continued rise of header bidding for web-based inventory, coupled with the growing shift to first-price auctions, is driving up CPMs for both desktop and mobile web inventory. These changes aren’t just fetching publishers higher prices for inventory. They’re also drawing a greater number of sellers to consider monetizing more premium inventory via open marketplace auctions, as buyers are increasingly eager to access such inventory via header without upfront commitments.

PMP

Advertisers are upping their PMP budgets faster than their open market ones. This year, they will spend almost $9 billion on PMPs. By 2020, that will rise to nearly $13 billion, or 50.2% of RTB ad dollars and 19.6% of total programmatic display spending.

As noted, many of the issues associated with open market buying continue to draw hesitant buyers to PMPs and even programmatic direct deals. We forecast that by 2020, advertisers will spend the vast majority—80.6%—of their programmatic ad dollars either directly with publishers or through PMPs.

Factors driving growth in ad spending on PMPs over the next 24 months include:

  • Investment on the part of sellers to work out the kinks associated with implementing and delivering on PMPs. Industry discussions about PMPs often reveal that while such deals are promising alternatives to the open markets’ woes, they are hardly foolproof. Difficulties with prioritizing specific advertisers and delivering enough volume frustrate buyers, but the continued draw of a brand-safe, transparent real-time arena for transacting often outweighs these short-term gripes. “We’ve seen a dramatic pickup in publishers making PMPs a much bigger part of their sales strategy,” said Jeff Hirsch, CMO and head of US publisher development at supply-side platform (SSP) PubMatic. “And buyers are all for that in terms of the transparency and brand safety it offers.” As publishers work to make these deals live up to their promise, investment in PMPs will only rise.
  • Heightened interest in leveraging audience data within PMPs. The rising importance of first-party data to buyers and sellers will continue to draw both to PMPs as a mechanism for leveraging real-time audience data in premium environments. For both, protecting first-party and proprietary data in one-to-one setups is important, but it’s not the only gain. PMPs are instrumental not just for direct deals that meet price and brand safety requirements, but also for buyers’ and sellers’ audience needs.

Native Advertising

As native advertising (digital display ads that follow the form, feel and function of the content of the media on which they appear, be it a webpage or an app) continues to flourish, the portion of native ads transacting programmatically also climbs.

With so much of the native ad dollar pie consisting of social and mobile ads—both of which have a high tendency to transact via automated means—programmatic’s share of native ad spending is already high. We estimate that programmatic will account for over 85% of all US native display ad dollars this year, a share that will only grow throughout the forecast period.

Looking at this year’s $28.13 billion in native programmatic spend another way, one can see how greatly native advertising is contributing to the larger programmatic display ad ecosystem. More than seven in 10 dollars invested programmatically this year will go to native ads, and that figure will jump to nearly 79% in 2019.

Mobile Programmatic

Programmatic ad spending in the US is predominantly mobile at this point. We forecast that seven in 10 dollars allocated to programmatic display in 2018 will go to a mobile device, rising to 73.3%—or $48.08 billion—by 2020.

For a more in-depth look at native display ad spending, look out for eMarketer’s upcoming report, “US Native Digital Display Advertising Forecast: Mobile Growth Leads the Way.”

Our estimate for total US mobile programmatic display ad spending was raised from the October 2017 forecast, due to strong revenue gains reported by Facebook and Google for 2017. The two companies enjoy a significant portion of programmatic ad revenues and are predominantly mobile platforms. Mobile’s share of overall programmatic ad investment, however, was lowered to rightsize estimates for desktop ad spending, which prior forecasts had underestimated. As noted by Google in both its Q3 and Q4 2017 earnings calls, desktops and laptops remain the preferred devices for performing more complex (and less mobile-friendly) tasks such as booking travel or comparing providers and vendors. Accordingly, we revised our forecast of mobile’s share of US programmatic digital display ad spend for 2018 down from 77.0% to 70.4%.

A revision to mobile’s influence on programmatic does not suggest that mobile programmatic investment is declining. Our revised estimate for US mobile programmatic display ad spending also led to a more optimistic revision for mobile programmatic as a proportion of total mobile display. Today, more than four in five dollars spent on mobile display ads transact programmatically, and that share will rise to nearly 90% by 2020.

Ongoing shifts in consumption habits will draw more dollars to mobile devices during the forecast, as will investment in mobile-heavy arenas such as social advertising. Other factors likely to draw additional ad spending to mobile programmatic include:

  • Improvements to viewability and ad verification measurement in-app. It’s no secret that many advertisers and app developers have been slow to pursue programmatic in-app. Limitations surrounding viewability measurement, ad verification and identity resolution have kept big brands from shifting dollars to in-app environments.
  • But with more app developers incorporating verification and measurement software development kits (SDKs) in the past 12 months, big brands are starting to lower the guardrails on in-app ad buying, as it becomes a more measurable arena for extending audience reach. “Advertisers’ ability to actually leverage and understand what value they’re getting from mobile has started to improve dramatically over the past year,” said James Malins, senior vice president of programmatic at ad tech firm Amobee. “If you can’t measure it, to a large extent in our industry, it’s not happening. But the fact that advertisers can now gauge the value and return affords them to pay more and spend more on those platforms than in previous years.”
  • The migration of in-app ad dollars beyond traditional brands. In spite of big brands’ reticence, app developers haven’t been starved for ad spend, thanks to other app developers pursuing cost-per-install (CPI) objectives—for example, gaming apps. But while those dollars have always been there, they are now more readily moving programmatically, due to buyers’ and sellers’ growing awareness of programmatic as a primary mechanism for creating audience-driven campaigns.
  • Continued emphasis and pushes on cracking cross-device identity. Efforts to make cross-device audience identification an easier, more seamless practice will help to draw more spend from advertisers still optimistically pursuing a holistic, audience-centric view. “As users have shifted to mobile, buyers have needed to find a way to find those same users,” said Jocelyn Gillespie, principal analyst at Index Exchange, an SSP. “Identity is going to be a big focus for 2018, and we’re only going to see that continue to rise.”
  • Momentum for more location data. Location data has become a prime programmatic input for mobile advertisers hoping to both target and measure their efforts against a more precise, localized audience. As more buyers and sellers lean on location data to enhance their mobile ad dollars, programmatic’s role in the allocation of those dollars—and the resulting dollars allocated—will only rise.

Mobile Programmatic by Transaction Method

The portion of mobile programmatic spending allocated to each of the three transaction methods mirrors the broader programmatic display landscape. We predict that 61.2% of all US mobile programmatic display ad dollars will go to programmatic direct transactions this year, with the remainder divided among open and private marketplaces. Of the $12.72 billion devoted to mobile RTB in 2018, the open markets will see the greatest share (58.8%). That share, however, will slide to 53.2% in 2020 as PMP growth outpaces that of open marketplaces.

There are slight differences in trends surrounding transaction types in mobile vs. the broader display space. For one, the direct share of total mobile programmatic display will remain relatively flat between 2018 and 2020, despite roughly $9.5 billion in incremental ad spending. The health of social buying—which is predominantly mobile in nature—and brands’ inclination to move dollars toward guarantees will keep spend flowing into programmatic direct.

While RTB’s share of mobile programmatic will decline slightly, growth in mobile programmatic investment via PMPs will outpace both open market and programmatic direct spending growth throughout the forecast period.

Still, many believe a good portion of the in-app space to be largely open market-driven—a trend most don’t see fading until app and web environments are more seamlessly integrated.

“The big challenge in the app space is that it’s a cookieless environment,” said Jeremy Hlavacek, global head of monetization at IBM Watson Advertising. “Most of the audience buying through the DSPs has been built around the cookie and web-based protocols. Without those in place in mobile, a PMP is a bit harder to sell.”

Video

Once the major holdouts on programmatic advertising, premium video buyers and sellers now transact the vast majority of their dollars through automated pipes. We forecast that advertisers will spend $13.22 billion on programmatic video ads this year, or 74.0% of all US digital video ad outlays. This proportion will rise to 79.3% by 2020.

YouTube remains a significant contributor to both the broader digital video pie and the programmatic video one. While YouTube’s growth will contribute to the expansion of the programmatic video landscape in the next 24 months, its share of programmatic video ad revenues will slide as other premium video content makes its way into the space. That content will largely be monetized via PMPs and programmatic guarantees, as buyers and sellers look to these more direct, one-to-one deals as a means of maintaining control and activating important audience assets—such as first-party data.

Additional factors driving greater investment in programmatic video during the forecast period include:

  • Added demand for first-party data from both buyers and sellers. Anyone can buy third-party data, but not everyone has their own first-party data. Advertisers readily turn to programmatic to reach advanced targets across screens (not just audiences based on age and gender). As buyers and sellers rely on programmatic to automate these audience buys, dollars will move from traditional direct-sold agreements into programmatic direct and PMP campaigns. “The dollars are getting smarter,” said John Rogers, senior vice president of media development at video advertising platform Videology. “It’s not just a scale game anymore; people are using data in smarter ways. We’re starting to see more and more folks bringing in first-party data for planning and forecasting.”
  • Continued growth of OTT and CTV ecosystems. Many people interviewed for this report were optimistic that 2018 would prove a “breakout year” for CTV inventory. While some of that optimism comes from advertisers simply observing the shift in consumers’ TV viewing habits to more digitally enabled devices, a good part also comes from watching the industry improve its efforts to establish a more common currency between TV and digital viewership.
  • While experts suggest that today, many buy-side and sell-side platforms see just single-digit percentages of CTV inventory, most are optimistic those portions will ramp up substantially in the next two years, bringing a host of CTV inventory into the forecast. But while CTV might be in its infancy, programmatic spending is already occuring via OTT services, which stream video to mobile and desktop devices as well. Players such as YouTube, Hulu, Roku and some of the major broadcasters have already made inventory accessible to programmatic buyers, and that share of programmatic ad dollars will only climb during the forecast period.

Mobile Programmatic Video

The acceleration of OTT benefits mobile programmatic video. Mobile will account for 54.0% of total programmatic video ad spending this year, rising to 56.6% by 2020. Growth in mobile programmatic video will outpace that of desktop, at respective compound annual growth rates (CAGRs) of 45.2% and 27.7% between 2016 and 2019.

Still, video’s total share of mobile programmatic display expenditures remains small. A significant portion of mobile programmatic dollars still flow to social platforms, where in-stream video is largely unadopted.

And across the broader ecosystem, continued reliance on in-stream alternatives, such as native video, out-stream video and rich media, also keeps video’s portion of mobile programmatic ad spending minimal.

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authors

Lauren Fisher

Contributors

Nicole Perrin
Senior Analyst
Andrea Szasz
Forecasting Analyst
Tracy Tang
Senior Researcher

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Mobile Programmatic

Video

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Others Interviewed

Kerry Bianchi

President and CEO

Visto

Hardeep Bindra

Managing Director, Real-Time Value Creation

Sizmek

Anne Frisbie

Senior Vice President, Global Brand and Programmatic and General Manager

InMobi

Jocelyn Gillespie

Principal Analyst

Index Exchange

Jeff Hirsch

CMO and Head of US Publisher Development

PubMatic

Jeremy Hlavacek

Head of Global Automated Monetization, Watson Advertising

IBM

James Malins

Senior Vice President, Programmatic

Amobee

John Nardone

CEO

Flashtalking

Ari Paparo

CEO

Beeswax

John Rogers

Senior Vice President, Media Development

Videology

Lewis Rothkopf

General Manager, Supply

MediaMath

Adam Schenkel

Vice President, Programmatic

GumGum

Taylor Schreiner

Director, Adobe Digital Insights

Adobe

Jon Schulz

CMO

Viant

Scott Swanson

Co-Founder and CEO

Aki Technologies

Dean Vegliante

President

Netmining

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