30 Jul 2019 | 02.24 pm
Challenges Ahead For The AdTech Sector
Analysis from Steven Roberts of Griffith College
30 Jul 2019 | 02.24 pm
Marketers must balance the business potential offered by automated and programmatic advertising platforms with the inherent data privacy and brand safety concerns that accompany this technology, writes Steven Roberts
Online advertising in Ireland has experienced exponential growth over the past 10 years, and is now more than five times the size it was in 2009. Total spend in 2018 was estimated at €489 million. Advertising agency Core expects further growth of 6.3% in 2019 to just under €520 million. Facebook and Google dominate the market, with 73% of online spend going to these two tech giants. However, the sector faces significant challenges over the next few years driven by concerns around consumer privacy, ad fraud and increased regulatory activity.
Cyber security and privacy experts such as Dr Augustine Fou and Dr Johnny Ryan have argued that fraud is rife within the online advertising ecosystem. In particular, the format known as programmatic advertising, where online ad space is bought and sold in real-time.
Global ad fraud is estimated to cost the world’s economy up to $30 billion per annum. A recent report by Cheq described researchers as ‘stunned by the scale of fraud in online advertising’. The direct cost to advertisers is forecast to reach $32 billion globally by 2022.
Increased Regulatory Activity
Regulators have the ad tech industry in their sights too. This is prompted by the introduction of the General Data Protection Regulation (GDPR) last year, and growing consumer concerns around privacy and the use of personal data. In the past few months, two of the largest European data protection authorities – the ICO in Britain and the CNIL in France – have outlined their plans for the sector.
On 20 June 2019, the Information Commissioner’s Office issued a report warning ad tech to clean up its act. It outlined several areas of concern regarding how personal data is used in real-time-bidding for programmatic advertising. The report highlighted issues around transparency, lack of clarity in privacy notices, the scale of data creation and sharing, and the reliance on contractual agreements within the supply chain. It referenced a ‘lack of maturity’ among some participants in what was deemed an extremely complex marketplace involving multiple technologies.
The French data protection authority, the CNIL, has also targeted online advertising, making it a priority in its action plan for 2019-2020. In July, it published guidelines on the use of online cookies (a small text file created by a website, stored in the user’s computer either temporarily for that session only or permanently on the hard disk) and what constitutes consent on the part of the consumer.
Brand Safety Concerns
Ad fraud and brand safety issues have generated significant concerns amongst global media buyers. According to Cheq, when Proctor & Gamble reduced its digital spend by $200m, shifting that budget elsewhere, it subsequently increased its audience reach by 10%. Keith Weed, former chief marketing officer for Unilever, has stated there is ‘clearly a trust problem’.
A recent article in The Drum stated a range of major advertisers had decreased their programmatic ad placements in 2018. These include household names such as Kellogg, Spotify and Gap. A number of these firms cited brand safety concerns as a key factor.
In spite of this trend, programmatic remains extremely popular with agencies and their clients. In the USA, 83% of digital display advertising spend in 2018 was spent programmatically according to eMarketer. Some Irish agencies expect up to 100% of digital advertising to be traded programmatically by the end of 2020.
It is not surprising many marketers are unsure how to interpret the conflicting messages around online and AdTech.
The ePrivacy Regulation
Looking further ahead, legislative work is ongoing in the EU on the introduction of a new ePrivacy Regulation. This will seek to update the 2002 Directive and subsequent amendments in 2009. It will aim to provide more clarity around data protection regarding electronic communications and the use of website cookies, recognising the step change in technology and services that has taken place. Recent drafts have prompted significant discussion between EU member states and current forecasts suggest the regulation is unlikely to be introduced before 2020.
It appears that marketers’ enthusiasm for online channels shows no sign of slowing down. Globally, digital advertising is forecast to grow from $294 billion this year to $520 billion by 2023, an average annual growth rate of 15%.
However, AdTech will face significant headwinds over the coming years. From businesses concerned about the potential for ad fraud and brand safety issues; from consumers who are now more savvy about how their personal data is being used; and from regulators keen to ensure the industry is compliant with GDPR. It will be interesting to see how the sector responds to these challenges.
• Steven Roberts (pictured) is head of marketing at Griffith College. A certified data protection officer and Fellow of the Chartered Institute of Marketing, he writes on data protection, strategy and marketing.