First of all, if you’re unclear on what programmatic advertising is, in short it can be summed up in two ways.

Programmatic direct: automation of the process by which a publisher or network sells advertising space to an advertiser.

RTB: the more intriguing side of automation, an advertiser bids across a network of publishers, looking for specific audiences. When any user loads a website, data is sent to the ad exchange about the user (browsing history, demographics etc) and a very quick auction happens, with the successful advertiser getting an impression if the criteria match, often paying the second highest bid price, to keep things a bit fairer.

I’d highly recommend reading the Econsultancy RTB Buyer’s Guide for some background on programmatic, as well as the Econsultancy report, Programmatic Marketing: Beyond RTB 

What are the advantages of programmatic?

In short the advantage is greater accountability, with advertisers more sure of when and where their ads are showing and to whom. The targeting effectively allows advertisers to pay for a specific audience, rather than impressions served with the hope of reaching the right people.

The benefit for the publisher is that web real estate previously undervalued, such as ads below the fold, can be sold more competitively (to the highest bidder) and this helps publishers to sell more of their inventory.

Increase in spend

Magna Global estimates overall programmatic ad spend will reach $33 billion by 2017. This means that most sectors are beginning to be disrupted by programmatic, whether it be financial services or apparel.

More people are buying

Turn Advertising Intelligence Index (TAII) is a measure of competition for advertising space. The index is based on the Herfindahl Index, the global standard methodology for measuring competition.

[TAII is defined as the sum of the squares of the advertiser spend shares of the 50 largest firms (or summed over all the firms if there are fewer than 50) within the industry, where the spend shares are expressed as fractions.]

This index shows that all channels have become more competitive over the year. In ascending order of competition these are display, social, video, and mobile.

But eCPM decreasing in mobile

On the whole, this increase in competition across each channel has lead to an increase in price of programmatic advertising. The one exception however is mobile, where supply is increasing significantly enough for price to come down, despite more advertisers in the market.

increasing cpm in programmatic across social, display and video, but decreasing in mobile

Competition varies by sector

The chart below shows that competition isn’t increasing in all sectors at once. Predictably, travel, financial services and telecoms are three sectors seeing increased competition in programmatic.

These sectors are ones you’d traditional expect to see some level of retargeting as browsers are coaxed through to purchase.

travel, financial services and telecoms are three sectors seeing increased competition in programmatic. autos, real estate and jewelry have seen decreased competition in programmatic.

Global trends

Globally, too, there are differences in competition across markets and channels.

Established programmatic markets (Americas, Europe) are predictably more competitive than emerging markets (Asia, Africa, and the Middle East). And counter to global trends, the mobile market in Europe is more competitive than the video market. 

Seasonal trends

It’s interesting to look at apparel ad spend on Black Friday, where a small number of advertisers (low competition) spend a lot of money on advertising looking to drive footfall into stores.

On Cyber Monday, competition is higher and spend is lower, showing that companies may be able to benefit by going larger with their bid range and perhaps being smart enough to target traffic that may have been browsing in store over Black Friday.

Black Friday sees a small number of programmatic advertisers (low competition) spend a lot of money. Cyber Monday, competition is higher and spend is lower.

It’ll be interesting to see how the programmatic market develops. Check out the Turn research here, and some of our other posts on programmatic.