IAB Europe has again released its annual 'Attitudes to Programmatic Advertising' report. The report provides a comprehensive analysis of the state of programmatic advertising in Europe, covering trends, growth drivers, barriers, and future forecasts. If you work in programmatic, we recommend checking out the report. To make it easier, we've compiled what we believe are the key insights:
- A significant 58% of non-social display advertising is purchased programmatically.
- Over half of advertisers allocate over 41% of their investments in display, mobile, and video campaigns to programmatic advertising.
- In-housing is a growing trend among advertisers, but a common hybrid model, combining internal expertise with external resources, prevails.
- Cost efficiency remains the primary reason for programmatic advertising, especially for agencies, while advertisers emphasize operational efficiency.
- Advertisers face barriers to programmatic buying, including concerns about media quality, political and economic factors, and regulatory requirements.
- Traditional metrics like CPM and CPV remain important, but there is a shift towards quality metrics such as viewability and brand safety.
- First-party data usage is on the rise, and third-party data is also being utilised more extensively. Contextual targeting has gained popularity.
- Among advertisers, AI and, more broadly, audio, CTV, and retail are seen as key drivers of growth.
- Over 80% of respondents consider sustainability a strategic focus, with 44% of advertisers incorporating sustainable programmatic advertising into their strategies.
Investments and strategies
IAB Europe's AdEx Benchmark 2022 survey (published in June 2023) reveals that the European digital advertising market is valued at 86 billion euros, with 58% of non-social display advertising being transacted programmatically. Despite facing economic and geopolitical challenges such as the Ukraine conflict and inflation, the digital advertising market demonstrated flexibility by increasing the popularity of programmatic advertising. The 2023 survey results confirm this trend, showing a significant growth in the share of programmatic digital campaigns.
Over half of advertisers and agencies now purchase over 41% of their display campaigns programmatically, which is a significant increase from 2022. The situation is similar for mobile campaigns, with over 41% of mobile investments being programmatic. In video advertising, over 41% is bought programmatically, and around a third of buyers allocate over 81% of their video investments to programmatic advertising. This highlights the importance of programmatic advertising for buyers.
Buyers have experimented with various programmatic advertising operational models. In 2023, the popularity of the in-house model is on the rise again, with 27% of advertisers considering it as their primary operational model. The main reasons for opting for in-house programmatic trading are cost efficiency and transparency in control. The most commonly used model is the hybrid model, which combines both in-house and outsourced operations. Barriers to full in-house implementation include operational challenges and media quality. 67% of advertisers are considering bringing programmatic trading in-house in the coming year, but budget resources may be a limiting factor.
Drivers & barriers
In 2022, more than a quarter of advertisers and agencies considered media cost efficiency as the primary reason for programmatic advertising. However, in 2023, there have been subtle changes in this perspective. In 2023, cost efficiency continued to be the top reason for programmatic advertising for agencies, increasing significantly from 26% to 32%. Advertisers, on the other hand, shifted their focus and identified operational efficiency as their primary driver for programmatic advertising, with 25% selecting it as their number one reason. This was closely followed by 23% of advertisers who prioritised the ability to discover target audiences.
On the other hand, publishers consider operational efficiency (such as automation) and the availability and scalability of inventory as the key drivers of business impact. Ad Tech vendors also place significant importance on inventory availability, scalability, and the ability to discover target audiences, while recognising the importance of cost efficiency. It's worth noting that a new factor, "Improved Sustainable Advertising," was introduced for evaluation by advertisers and agencies this year. Both advertisers and agencies ranked this factor last among the drivers of programmatic advertising.
In 2022, costs were the primary barrier to programmatic advertising for buyers, but in 2023, the focus shifted more towards the quality of media and the political/economic environment. Approximately one-third of advertisers (35%) cited media quality, including concerns about brand safety, as their primary barrier. This indicates the need for educating buyers about the importance of brand safety and reliable advertising environments. Similar concerns were shared by publishers. Sustainability was the primary barrier for agencies, with hiring and training of staff as the second most significant barrier. Ad tech vendors, on the other hand, identified staff training as their primary obstacle.
Measurement and data
The 2023 survey reveals interesting insights into measurement and data. Despite the industry's shift towards new metrics like viewability and brand safety, traditional metrics such as CPM and CPV remain essential to advertisers and agencies. What's even more surprising is the increase in the lack of measurement for programmatic campaigns compared to the previous year – now, 30% of advertisers and 22% of agencies do not measure the success of their campaigns, marking a significant rise from the previous year (6% and 9%, respectively). This change is likely due to limited access to the necessary tools, data, and expertise rather than a lack of interest in measuring campaigns.
When examining the data, trends indicate that some traditional workflows are not yet changing. The use of third-party data is on the rise, especially among agencies, while ad tech vendors are decreasing their reliance on it. However, the use of first-party data is increasing and appears to be at the center of future plans. Additionally, contextual targeting is becoming an important area in digital advertising. In summary, the industry is currently employing both old and new measurement and data methods while waiting for clear winners for future-proof solutions.
Future of programmatic
We need to prepare for the future without third-party cookies, fingerprinting, and mobile IDs. First-party data is crucial for brands and publishers, and advertisers are expanding their ability to collect it. When it comes to the future of programmatic advertising, advertisers see artificial intelligence as a growth area, while publishers believe in audio and retail. Connected TV (CTV) is considered significant for the programmatic future by all stakeholder groups.
In 2023, respondents were asked questions about sustainability. In response to the first question (Is achieving sustainable programmatic advertising a strategic focus for your organisation?), the majority of respondents (over 80%) answered affirmatively. Over 40% of respondents stated that sustainable programmatic advertising is to some extent a strategic focus, and in ad tech companies, this figure was nearly 70%. However, advertisers are leading the way, with 44% of respondents indicating that sustainable programmatic advertising is a significant part of their organisation's strategic focus.
57% of respondents from agencies believe that progress has been made towards the Net Zero goal, followed closely by publishers (50%) and ad tech vendors. Less than 20% of respondents across all groups believe that no progress has been made, while nearly 10% of advertisers and 8% of ad tech vendors reported that they have achieved the Net Zero goal.
Should sustainability be added to all media plans? Ad tech vendors and advertisers are at the forefront of supporting sustainability in media plans. Over 2/3 of advertisers and 4/5 of ad tech vendors endorse the inclusion of sustainability in plans. Approximately 30% of advertisers already include it in their RFPs, with over 34% agreeing on the need for it. While only 17% of ad tech vendors currently do so, 50% plan to add it soon. On the other hand, a small but significant portion of each stakeholder group does not advocate for the consideration of sustainability. 30% of publishers and 22% believe that sustainability measures do not need to be added to programmatic media plans.
Source: IAB EUROPE: Attitudes to Programmatic Advertising 2023-report. You can find the full report here.