In our last post on programmatic ad buying (or ‘programmatic’), we provided a broad introduction to the topic.
Here we take a look at the size of the programmatic market in APAC and draw conclusions about whether programmatic is a niche or essential skill for digital marketers in the region.
But before we start, I’d just like to highlight that Econsultancy will be hosting a webinar on the subject, Programmatic: Trends, Data and Best Practice (APAC), on 15 October at 10am Singapore / 1pm Sydney time.
If you’re not already familiar with programmatic, then we suggest that you take a look at our previous post (Programmatic advertising in APAC: An Introduction) so that you can become familiar with the elements of programmatic.
In particular it’s important to understand the participants, the systems, and the acronyms and how all the pieces fit together.
In short, the diagram below should make sense. That way, you know what we are talking about when we say ‘programmatic’
The goal of this post, however, is to try and come up with an estimate of how big the programmatic market will be in APAC in the next few years. And to be precise, we’ll aim for the size of the market in three years’ time, 2018.
We want to know this in order to determine just how important programmatic will be to digital marketers.
And the reason to look at 2018 instead of current figures is that the market now is quite small, but with the spread of technology and data we expect it to become much larger.
First, data on US digital marketing spend
To get started, have a look at this eMarketer chart about US programmatic spending on display. It shows that by 2017, 83% of display ads in the US will be bought programmatically.
Now if we consider that display makes up around 50% of the US digital ad spending, that means that in 2017 over 40% of the US digital ad budget will be spent on programmatic ad buying.
If that’s true for APAC – and part of your job is buying digital ad space – then you need to get with the programmatic quick, or else risk being left behind.
But is that the case? Will programmatic ad buying have 40% market share in APAC in 2018? Let’s have a look.
Programmatic in APAC
Before we go too deep, I would like to point out that figuring out how much marketers spend on programmatic buying in APAC is tough. This is partially because it’s a relatively new topic and few studies have been published on the subject.
Also, programmatic buying is largely done by big companies and agencies, who don’t readily share spending figures and results.
And to make it even more difficult, the ad buying platforms are fragmented so there isn’t a single figure we can all look at.
But I have managed to dig up a few fragments from in-depth reports and I will attempt to assemble them into a picture of the size of the APAC programmatic market in 2018.
Magna Global programmatic report
To see how much APAC spends on digital advertising, it’s useful to start with other figures from eMarketer, published in June 2014, which offers APAC digital marketing spending figures from 2012 to 2018 (estimated).
These figures show that the total digital marketing spend will be around $56bn for the APAC region in 2017 (I’ll get to 2018 in a bit).
Next let’s look at APAC programmatic spending figures from the Magna Global report, published in April 2014.
And, just so you know, Magna Global is the strategic global media unit of IPG Mediabrands and part of IPG, a publicly-listed (NYSE) global advertising and marketing services company. It frequently publishes the results of the surveys it conducts with partners and other third-parties.
So, Magna Global estimates that by 2017 APAC spending on programmatic ad buying will be 10.2bn which is around 18% of the ad buying (using eMarketer’s estimate of total spend).
And if it’s true, we can all relax because it means that programmatic will still be just a small part of the APAC ad ecosystem over the next few years.
But what worried me is the previous Magna Global paper about US programmatic from October 2014.
Remember, it estimates that in 2015 US digital ad buying will be over 40% programmatic. That means that US programmatic buying will have more than twice the market share that it does in Asia.
Now, it’s possible that the US will adopt the technology faster than APAC and use it more aggressively. One potential reason for this is that the US has a long history of gathering and using third-party data for marketing purposes.
US-based marketers, then, will be able to use their DMP to target their potential customers much more widely and effectively. Better results mean more investment.
Yet, such a difference still seems a bit high, so I wanted to get a second opinion. I found one in another report.
SOCintel360 programmatic report
Socintel360 is a strategy research and consulting firm with analysts globally and it, too, published figures on APAC programmatic ad buying.
The report was published at about the same time, August 2014.
Unfortunately, Socintel360 does not cover the same dates as Magna Global’s. Instead of 2017, it used 2018 as the target date, so it will take a bit of unpacking to see how the figures compare with Magna Global’s.
SOCintel360 estimates that in 2018 Australia and China will spend $12bn combined on programmatic. That’s $1.4bn for Australia and $10.6bn for China.
In order to compare that with Magna Global we need to estimate the 2018 APAC spending on programmatic based on Magna’s 2017 figure.
As we only have the 2017 figures, we have to estimate the 2018 number. Now, if we use the rate of growth between 2016 and 2017 (31%), we can safely estimate that the Magna Global figures would show that programmatic will total $13.3bn in APAC in 2018.
If both Magna Global and Socintel260 are correct, it would mean that China and Australia (at $12bn) would account for 90% of APAC programmatic spend (at $13.3bn) in 2018.
That doesn’t seem quite right either, so let’s go back to the eMarketer figures we looked at earlier.
eMarketer APAC digital marketing report
Here we see that in 2018, Australia and China will spend $33.3bn on digital advertising, which is approximately 60% of the $56bn that APAC will spend in total.
That is a large share but it’s significantly less than the 90% that the SOCintel figures, combined with Magna Global’s, imply.
So let’s assume, instead, that the programmatic spending by country will resemble the digital spend by country.
If we do, and use 60% for Australia and China’s market share, the two countries’ $12bn spend on programmatic buying offers a different picture.
Dividing $12bn by 60% we see that programmatic spending in APAC in 2018 is actually estimated to be $20bn. That is now around 1/3 of the total APAC digital marketing spend and much closer to the estimate that Magna Global provides for the US.
So how big will programmatic be in 2018?
In order to know how big programmatic ad buying will be in APAC in 2018, it makes sense to consider both estimates.
- If Magna Global is correct, then APAC programmatic spending will be $13.3bn in in 2018 which will be around 22% of the market.
- If Socintel360 is correct, then APAC programmatic spending will be nearer $20bn in 2018, around 33% of the $61bn market.
And, of course both of these rely on assuming that eMarketer is correct.
Back to the original goal. We just want to know how big programmatic wil be in APAC in 2018. Should we consider it something that all digital marketers should know? Or will it be a niche skill more suitable for a specialist?
From the data above, the results are mixed. Going by Magna Global and eMarketer’s reports alone we estimate that programmatic ad buying will be around 22% of the digital ad spending in 2018. That is significant, but still probably niche.
If we, instead, use SOCintel360’s estimates it seems that programmatic will be almost a third of our digital ad budgets.
And if that is the case, then there is a much stronger possibility that programmatic will be more of an essential skill for digital marketers.
Ultimately, though, we are relying entirely on projections here and need to keep in mind that methods and considerations vary from company to company, so we may not be exactly comparing the same thing.
Also, despite market size, we may find that programmatic remains with large corporations and specialist agency ‘trading desks’, so again the skill won’t be widely required.
But my money is on programmatic going mainstream and it will become something all digital marketers will have to learn.
Why? Well, I’ll cover that more in my next post and the upcoming webinar.