DIGITAL ADVERTISING

by Adam Heimlich and Yang Xu

WHAT WE EXPECT FROM THE DIGITAL ADVERTISING MARKET IN 2020

The advertising-funded model is a core driver of multi-sided platform businesses such as Facebook and Google, in which users pay nothing for the service while advertisers pay for a chance to reach and influence those users. With market share concentrated in the hands of a few dominant players, the industry is rapidly evolving, bringing increased scrutiny from economists, governments and antitrust regulators. In recent years, inventions such as header bidding and cross-device measurement have fundamentally transformed online advertising—not to mention regulatory currents such as the GDPR in Europe and the California Consumer Privacy Act. The leading digital advertising platforms are also facing antitrust investigations in several jurisdictions. Heading into Q4 2019, the industry is under conflicting pressures: to improve privacy and retain transparency interoperability, to innovate and to retrench. Does this moment call for courage or caution?

Actively engaged in the digital advertising space, Keystone works with clients to help them better understand the wide-ranging implications of new technologies and trends. Here are the business drivers we predict will shape the digital advertising landscape and technologies in 2020 and beyond:

Data and Regulation: The increased focus on data privacy—coming from lawmakers, privacy advocates, and the general public alike—has so far had the unintended consequence of making dominant players stronger. ePrivacy in Europe, when it comes into effect in 2020, will further restrict data usage. Citing privacy as the main driver, Google is tightening rules around 3rd party cookies in its market-leading browser, Chrome. Yet restricting 3rd party cookies will further entrench Google’s leading position as a data provider with a wealth of consumer data amassed from popular services such as YouTube and Android.

While these trends are inspiring concerted efforts by ad tech intermediaries to claim first-party status for their tracking tech, a global implementation of Europe’s standards seems distant. US officials have remarked upon GDPR’s unintended consequences, and researchers are questioning its impact on everything from entrepreneurship to cancer research. Meanwhile, the scope of the ongoing FTC and DOJ antitrust investigations suggest a preference among at least some regulators to address advertising-related harms more broadly.

New Entrants: Amazon continues its rapid ascent in the digital advertising market. Amazon Advertising delivered $10B in revenue, making Amazon one of the few viable challengers to the Facebook and Google duopoly. Amazon’s new partnerships with The Trade Desk and Dataxu to sell ad inventory on Amazon’s Fire TV, coupled with its new attribution tool signal Amazon’s support for the open internet and greater head-on competition with Google in the future.

The Trade Desk, who competes with Google and Amazon in the DSP space, recently earned status as the most successful technology IPO of the last decade, having grown 1,000% + since it went public. Nascent ad players include TikTok, a popular lip-syncing video app now pushing into ads, and Beeswax, a customizable DSP that announced $15MM in Series B funding in January.

Transformative Technologies: There are numerous technologies that could potentially disrupt digital advertising, but are still premature. Blockchain and artificial intelligence are generating much buzz in the industry, though their optimal applications are yet to arrive.

In the view of Keystone’s resident Ad-Tech Expert, Adam Heimlich, the same confluence of forces that are causing stagnation in some parts of the ad industry are injecting new energy into others. His latest article, “The Practice of Awareness,” was inspired by the experience of helping C-suite executives deeply investigate ad tech for the first time. It can be found here: https://medium.com/@adam.heimlich/the-practice-of-awareness-ea4c55eb115d.