Size of Industry

$16,270,000,000

What is it?

Ad tech (short for advertising technology) is the umbrella term for the software and tools that help agencies and brands target, deliver, and analyze their digital advertising efforts.

If you've ever scratched your head at the terms "programmatic" or "omnichannel," you've likely already heard a little about what ad tech does (though you may not have even realized it). Programmatic advertising, for instance, buys target audiences instead of time slots: Think about buying ad space that reaches a particular demographic wherever it is instead of buying a prime time TV spot and hoping the right people are watching.

Omnichannel marketing reaches target consumers across all channels -- mobile, video, desktop, and more -- within the context of how they've interacted with a brand (those first seeing an ad will receive a different message from those who have engaged with that brand a number of times). Omnichannel and programmatic aren’t the only two tools within ad tech, but they are two of the most revolutionary.

That said, ad tech is designed to help advertisers make better use of their budgets. Ad tech methodologies deliver the right content at the right time to the right consumers, so there's less wasteful spending.

HOW does it work?

How AdTech Processes Meet Demand- and Supply-side Needs

AdTech wouldn’t be anything without the tools that make it work, but before we get into AdTech platforms themselves, we should understand some of the main processes which go with them.

These processes were born out of the needs (both of publishers and advertisers) mentioned above.

1) Programmatic media-buying and -selling:

At the heart of the AdTech system is programmatic media-buying (and -selling.) Basically this means an automation of the process whereby publishers sell their inventory and advertisers (or agencies) buy it. Instead of direct contact between two sales people, both sides use a technology platform to place an order, purchase ads as well as select and serve the appropriate creative.

How it helps: Using technology to speed up the process of buying and selling ads helps both sides keep up with the pace of digital interactions. It also makes it possible for advertisers to connect with publishers who aren’t close enough to contact personally. Now a brand in the US can advertise in Brazil without having to call up and place an insertion order.

2) Programmatic Direct (Automated Guaranteed):

Two of the main varieties of programmatic media-buying and -selling are programmatic direct and real-time bidding. The first of these provides a way for brands and publishers to buy and sell ads in an automated way but still in a one-to-one relationship.

How it helps: Publishers are glad to make direct deals with brands they trust when it involves premium inventory. They can usually charge a set (often premium) price and they can also get more control over which ads show on their pages – which makes for a better user experience. Both advertisers and publishers benefit by being able to accurately predict their cash flow, because the price (per thousand impressions served) and inventory volume is set in advance.

3) Real-time Bidding (RTB):

The other main kind of programmatic advertising involves real-time bidding, in which ad slots are sold on an “on-demand” basis, usually through an ad exchange where different advertisers have access to inventory from different publishers.

How it helps: Real-time bidding originated as a means for publishers to sell their remnant inventory and it continues to offer this advantage. With RTB, publishers have to worry less about leaving impressions unsold and advertisers can be more assured of getting a fair shake since prices are determined by market demand. Real-time bidding also helps publishers monetize their audience data by letting them connect with advertisers who want to target the publisher’s traffic based on that data.

4) Header Bidding:

As an improvement to the waterfall auction process used to connect multiple demand sources on the publisher’s site, header bidding eliminates the sequential prioritization of demand sources and gives all advertisers equal chance to “see” the inventory being sold and bid on it.

How it helps: By removing the preferential treatment involved in waterfall auctions, publishers have the opportunity to make sure that they receive all the possible bids for an ad slot and therefore truly get the highest price. Advertisers get an equal chance to reach their target audiences if they are willing to pay the highest price.

5) Cookie-syncing and data exchange:

Because advertisers and publishers track their traffic separately (using cookies) the process of cookie-syncing and data exchange allows different AdTech tools to communicate with each other. Without this ability and the data involved, display advertising would be one big guessing game.

How it helps: If cookie-syncing didn’t exist, publishers would have a hard time interesting advertisers in their ad inventory, because advertisers wouldn’t know if the site visitor was worth targeting. Cookie-syncing also helps advertisers optimize their campaign spend by buying only that inventory which will be viewed by valuable potential customers. Being better able to track audience members also helps advertisers attribute sales and conversions and measure campaign success.

How AdTech Platforms Meet the Needs of Advertisers & Publishers

Now that we know what digital advertisers and publishers need from their technical solutions, and how different AdTech processes help meet those needs, we can look at some of the major components of the advertising technology ecosystem.

All the platforms in the AdTech ecosystem work together to facilitate the needs of advertisers and publishers.

Ad Server:

To place ad creatives on their site publishers can use a first-party ad server (if there is a direct publisher-advertiser relationship) or a third-party server which is used by advertisers to serve and measure campaigns across multiple publishers and sites.

How it helps: Ad servers help automate the process of placing the ad creative in the ad slot that needs to be filled when a visitor loads a publisher’s page in his or her browser. The ad server can also count impressions and in the case of clicks on an ad, redirect a visitor to an ad’s landing page and record the conversion if the visitor decides to perform a certain action on that page. Without ad servers, the whole process of media-buying and selling would have to be done manually by modifying the HTML code of the website.

Supply-Side Platform (SSP):

When publishers want to serve their inventory on ad exchanges (to maximize impressions sold) they need a tool to make inventory available for bidding on by DSPs. This tool is an SSP. It helps the publisher set a price floor (minimum price) for its inventory, receive and accept bids and communicate with the DSPs involved. The SSP is also responsible for adding additional information about the visitor (if possible) so that the advertiser can tell if that person is worth targeting.

How it helps: Obviously, an SSP allows the publisher to quickly sell inventory – often non-premium – so that it doesn’t miss out on revenue. The auction process that the SSP plays a part in makes it possible for demand-side technology to make real-time decisions so they can offer the best price and also helps the publisher maximize the value of audience data by matching it with interested advertisers’ campaigns.

Content Delivery Network (CDN):

When creatives are served on web pages or in apps they must be loaded quickly and smoothly (all in the time it takes to open the page). A CDN hosts the creatives until the moment the browser receives the ad markup from the advertiser’s ad server and there is a call for a creative.

How it helps: A CDN further enables the process of serving ads in real time, helps pages load faster and help create a better user experience. With the advent of programmatic video ads (with much bigger creative files) the role of a CDN becomes even more important.

Ad Networks:

Ad networks (such as Google AdSense or Taboola) bring together ad inventory from a number of publishers and give advertisers a wider range of choices than they would have in a direct, one-on-one relationship with one publisher. Ad networks can support both open auction buying and “guaranteed” media buys.

How it helps:Advertisers gladly make use of ad networks to increase the reach of their campaigns. With the help of media-buying platforms such as a DSP and in conjunction with a DMP for data-driven decisions, advertisers can access an ad network’s inventory and make intelligent choices about what to buy.

Ad Exchange:

Ad exchanges are the platform that connect advertisers (with their DSPs) and publishers (with their SSPs) and allow them to make an ad inventory transaction. Exchanges also offer publishers the possibility of setting up private marketplaces for restricted media-selling.

How it helps: Ad exchanges allow publishers to get rid of any remnant inventory while getting the highest possible price. Advertisers can serve targeted, real-time campaigns through ad exchanges taking advantage of the data that SSPs provide about the visitor that will be viewing the ad.

Agency Trade Desk:

Ad agencies have a vested interest in using AdTech and many brands rely on their ad agency to manage their campaigns. Agency trade desks buy ad inventory, repackage it and connect their clients with publishers using DSP-like technology.

How it helps: Advertisers who work closely with their ad agencies expect them to be able to help serve targeted campaigns, gather insights and manage their budgets. For brands who don’t want to invest in a DSP or a large in-house team to handle their campaigns, trade desks offer the advantages of stand-alone AdTech tools (with knowledgeable staff who are qualified to run campaigns on them) plus the possibility to connect with premium publishers that might not work directly with the brand itself.

Data Management Platform (DMP):

DMPs are becoming a more essential tool for both advertisers and publishers. They combine data from online and offline sources to create specific audience segments for ad targeting, track campaign data, connect with ad exchanges to buy ads and report data on campaign success.

How it helps: A DMP can help a publisher monetize his or her audience data by letting them gather behavioural data about site visitors, segment it and sell the segments through a DSP. Advertisers like a DMP because they can combine 1st-party and 3rd-party data to find out exactly who to target when buying ad space. They can also use it to measure which audience segments perform the best and analyze their customers’ journey.

Demand-Side Platform (DSP):

Demand-side platforms are the tool that advertisers use to communicate with ad exchanges and ad networks to bid on ad space. They can integrate and import data about which audiences to target from a DMP as well as information from the supply side about what kind of user the ad is being served to.

How it helps: Advertisers would be blind without a DSP to make intelligent bids on inventory that publishers and networks put up for sale. They wouldn’t know whether their ad spend was worth it or not. Additionally, they might be cut out of the 3rd-party data available through a DSP, meaning that they would have no way to intelligently extend the reach of their campaigns beyond the 1st-party data they possess.

Perhaps most importantly, thanks to a DSP, brands get access to worldwide ad inventory through a single platform. They don’t have to coordinate with AdOp teams from individual publishers and they can manage all their campaigns across a range of channels in one place.

Use Case

Ad tech has plenty of moving parts, which means there are countless opportunities for agencies to set themselves apart. The diversity of ad tech data allows for more granular and relevant targeting and integration. It also necessitates leaning upon trusted ad tech solutions and platforms to get the most out of every ad campaign.

One major effect for agencies and their clients is noticeable improvement in prospect interactions. Thanks to ad tech, brands can now connect all advertising channels. This means saying goodbye to clunky, unnatural advertising that irritates users and frustrates agencies and their clients. Instead, cross-platform uniformity ensures brands are reaching users consistently and logically.

Ad tech has also allowed retargeting to enjoy growing popularity -- so much that it represents about 90% of all advertising costs. In other words, it's not going away.

The problem is that it can be too intrusive, which leads to reduced effectiveness. By taking advantage of RTB options fueled by ad tech data, agencies can drill down and target only those audiences most likely to convert, without badgering those who aren’t.

Connecting the Dots Between Ad Tech Companies and Agencies

Knowing that they need each other to thrive, agencies and ad tech companies are on a joint mission to figure out how to forge long-lasting relationships. Deeper connections tend to occur naturally through regular communications, realistic expectations, and thoughtful customization.

Communication

Touching base regularly and working transparently between both parties is essential. There can no longer be a "set it and forget it" attitude in the online ad industry.

With new integrations between data, tech, and content, there needs to be consistent party involvement from start to finish. To this end, media publishers are having more discussions with their agency partners about content and other creative efforts than ever before. That makes it imperative for ad tech organizations and agencies to have an "open door" policy.

Expectations

Quick turnarounds are another key factor to keep an eye on in the relationship between agencies and ad tech pros. Everyone wants rapid turnarounds, but sometimes things can get lost when too much is happening at one time, and sometimes quality is compromised.

Do you want something mediocre that's finished tomorrow or something impressive you have at the end of the week? You likely want the latter. Project management helps smooth out the flow between ad tech and agencies and ensures more successful campaigns.

Customization

Imagine you're a consumer who just saw a mobile ad that piqued your interest. When you go to browse on your laptop, you see the same ad. Then you see the same next time you’re on YouTube, then again before your next Hulu binge session. Seeing the exact same content becomes annoying, and your interest inevitably lowers.

That said, there can't be a repurposing of content and strategy across all channels -- that’s a dinosaur-era approach destined to backfire. Agencies and brands are realizing that they need to customize creative for each channel and integration. It’s no longer acceptable to have a mentality of "matched luggage" when it comes to media. Agencies can work hand-in-hand with an ad tech partner to achieve exceptional outcomes through data interpretation.

Elephants and Ad Tech: A Story

Imagine being asked to wash an elephant’s ears while conserving water. You could always bathe the whole elephant -- you would definitely get his ears clean, but you'd use much more water than you need to, so that method doesn’t make much sense.

To save your resources, you could concentrate on the head instead, using less water but still more than you’d like. Or you could figure out a way to use just enough water to scrub those ears and make him the happiest pachyderm in the herd.

Now, take this analogy and put it in the context of online ad placements.

The traditional method of pushing advertisements to web users involves a broad-brush approach, much like showering the whole elephant just to get to its ears. Remember that publishers are not based on ad networks, they're based on content. Advertisements slipped alongside content that may or may not have relevancy for the viewer forces exposure. This method can work, but it can be inefficient, annoying, and wasteful. It's still not the best use of an agency’s resources.

Today, ad tech methods supported by influential data allow agencies to make wiser placements that effectively position advertisements when and where they are needed most. This helps reduce wasted efforts and gets ads to users at critical touch points, meaning it’s helpful for both brands and consumers.

Instead of the standard sort of placement buys, ad agencies can integrate their ads using high-level data and technology. It's a logical next step toward seamless integration and high-impact, value-added placements. And it's redefining how agency planning and strategy teams look at media.

Market

According to Verified Market Research, The Global Ad Tech Software Market was valued at USD 16.27 Billion in 2018 and is projected to reach USD 29.85 Billion by 2026, growing at a CAGR of 7.9% from 2019 to 2026.

The Global Ad Tech Software Market report provides a holistic evaluation of the market for the forecast period. The report comprises various segments as well as an analysis of the trends and factors that are playing a substantial role in the market. These factors; the market dynamics involve the drivers, restraints, opportunities, and challenges through which the impact of these factors in the market is outlined. The drivers and restraints are intrinsic factors whereas opportunities and challenges are extrinsic factors of the market. The Global Ad Tech Software Market study provides an outlook on the development of the market in terms of revenue throughout the prognosis period.