MAGNA GLOBAL Ad Forecasts: Programmatic Buying Reaching a Tipping Point

Key Findings

• According to MAGNA GLOBAL research, programmatic buying of digital media inventory will reach $7.4 billion this year in the US, of which $3.9bn will be transacted through Real-Time Bidding (RTB), and another $3.5bn will be transacted through other programmatic/automated platforms (including social media).
• We forecast robust growth as more publishers, advertisers and agencies embrace programmatic technologies. As a result, the volume of transactions will grow to $17bn by 2017 in the US, of which $10.5bn will be RTB-based.
• RTB-based programmatic will grow from 28% of display-related* transactions this year, to 52% by 2017.
• In our first analysis of the programmatic marketplace outside the US, we find that the share of RTB and programmatic, as a % of display-related formats, is and will remain lower than the US’s, but it will approach 60% in markets like the UK, France and the Netherlands.
• For online video formats, programmatic trading has been lagging behind display in recent years, but MAGNA estimates that this year 25% of the inventory will be traded programmatically, and that proportion should climb to 69% in 2017.
• Globally, over the 9 key markets surveyed by MAGNA GLOBAL, programmatic buying already represents $12bn in 2013 and will nearly triple in the next four years to $33bn.

(*) Display-related formats include banners, social and video, on desktop or mobile devices.

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RTB Programmatic reaches $3.9bn in the US

The Programmatic revolution has started in the US. The United States is and will remain the largest programmatic market, with $3.9 billion worth of display-related digital inventory being sold through Real-Time Bidding (RTB) platforms, according to the latest MAGNA GLOBAL research.

If we include transactions conducted through automated platforms but not through real-time bidding, programmatic in the broader sense used in this MAGNA report will be expanding from $4.7bn in 2012 to $7.4bn this year, a growth rate of 56%. Of that total, RTB will represent $3.9bn and non-RTB (NRTB) platforms will represent $3.5bn. The value of programmatic transactions will continue to grow by double-digit growth rates to nearly $17bn ($16.9n) by 2017. The share of programmatic spend in US digital media (display-related) transactions, when looking at both RTB and NRTB, will expand from 38% in 2012 to 53% this year and to 83% by 2017.

MAGNA GLOBAL also modeled the rise of programmatic across digital formats and environments in the US. Desktop display formats (banners and social) represent $5.3bn i.e. 72% of total US programmatic spend in 2013, down from 83% in 2012. Video and mobile (incl. social mobile) are quickly rising from a low base and now represent 9% ($685m) and 19% ($1.4bn), respectively, in 2013. In 2013, 58% of desktop display is traded programmatically, compared to 25% for video and 68% for mobile. By 2017, we expect those proportions to grow to 87%, 69% and 88% respectively.

In the early days, the attention of analysts was entirely focused on RTB. In this 2013 report, the definition of ‘Programmatic’ used by MAGNA GLOBAL also encompasses transactions between media buyers and media owners via new platforms and technologies to improve discovery, negotiation and workflow during the purchase of ad inventory. Compared to migrating to RTB, adopting such technology solutions will enable parties to maintain direct relationships, transparency and predictability of prices, if so desired by publishers, while still leveraging efficiency gains, reducing transaction cost and taking advantage of “big data”. The same technology players who are designing RTB technologies are also designing platforms for media vendors and buyers who wish to automate media transactions without significantly altering the traditional business and contractual models. The NRTB forms of programmatic buying are sometimes referred to as “guaranteed programmatic”. In the case of social ad formats, most of the inventory is already transacted in a programmatic way, whether RTB (e.g. Facebook Exchange) or NRTB (e.g. Facebook API).

Programmatic globally: a $12 billion market

For the first time, MAGNA GLOBAL looked at programmatic trends outside the US. Looking at the 9 most advanced markets (US, UK, Germany, France, The Netherlands, Australia, Japan, China, Spain), MAGNA GLOBAL forecasts that the value of impressions being traded programmatically will grow from over $7.5bn in 2012 to over $12.0bn in 2013 (of which 51% is RTB – $6.1bn) and to more than $32.5bn in 2017.

The UK, the Netherlands, Australia and France are the markets where programmatic trading is going to become the most prominent in the short and medium term. The UK and the Netherlands will lead among European markets, with programmatic penetration ratios of 59% and 60%, respectively. France and Australia will follow closely, at 56% and 52% respectively. That proportion will be significantly smaller in Japan (40%), Germany (33%), Spain (31%) and China (23%) where we have identified various obstacles to overcome: strict privacy laws restricting the use of behavioral data, traditional publishers resisting change and a slow to develop ecosystem infrastructure. While Japan and China will be slower to ramp programmatic spend, the total volume will ultimately be bigger than any other overseas market given the much larger size of their digital markets: $4.1 and $3.5bn respectively, by 2017.

Programmatic acceptance driven by industry initiatives

In the last twelve months a numbers of trends and initiatives have emerged driving the acceptance and usage of programmatic techniques. RTB is being used for more premium formats, by more premium publishers and more extensively for branding campaigns. RTB has thus diversified from being seen as a technology that optimizes low-value “remnant” inventory and mostly around Direct Response campaigns. The launch of Facebook Exchange has instantly pumped an enormous amount of impressions into the programmatic ecosystem. Increasingly, brands are unifying programmatic campaigns and cross-referencing campaign tracking data between display and video. Cheap display inventory is being used to identify valued properties on which expensive video inventory can be purchased.

Significant digital media owners such AOL, Yahoo and Microsoft are all in various stages of making a much larger share of their digital inventory available through programmatic methods in the coming months. Just in the last few weeks, AOL announced a programmatic initiative with all major advertising agencies. On the agency side, MAGNA GLOBAL launched the MAGNA Consortium with A+E Networks, AOL, Cablevision,Clear Channel Media and Entertainment, ESPN and Tribune, to establish an industry-leading end-to-end integrated programmatic-buying business model to drive critical automation advances across all media transactions.

Ultimately, MAGNA GLOBAL believes that RTB techniques will become the dominant way of dealing with non-premium digital formats, while premium formats and branding campaigns will be traded through a mix of RTB and NRTB platforms. Only high-touch, high-value customized formats, sponsorship and “native” advertising (including advertorials) will stay entirely outside the programmatic revolution affecting digital media buying.

Outside digital media, programmatic buying and automation are only starting to affect the advertising value chain. For example, agencies and television media owners are starting to revamp their planning/buying/booking workflows to better integrate data and realize efficiency gains. MAGNA GLOBAL believes most traditional media will be affected, to some extent, in the long term: television, radio, digital out-of-home being first in line.

About MAGNA GLOBAL Advertising Research

For more than 40 years, MAGNA GLOBAL forecasts have been the industry’s leading source for measuring and forecasting advertising revenues. MAGNA GLOBAL forecasts media owners’ advertising revenues in the US and around the world through financial analyses of media companies’ public filings, government reports, trade association data and local market expertise. MAGNA GLOBAL’s new methodology was introduced to the industry in 2009 and has redefined measurement for the advertising-supported media economy, delivering unparalleled authority and accuracy.

Our Global Media Suppliers Advertising Revenue Forecasts include television (pay and free), internet (search, display, video, mobile), newspapers, magazines, radio, cinema and out-of-home (traditional and digital). Our report monitors media suppliers’ revenues in 73 markets, including all major countries, representing 95% of the world’s economy. Three new markets have been added in the June 2013 report: Sri-Lanka, Pakistan and Kenya. Our forecasts are updated twice a year and available to our subscribers. Our US Advertising Revenue Forecast study includes detailed data for more than 40 categories of media on a quarterly basis from 1990 to 2012 and on an annual basis from 1980 to 2017, updated quarterly.

Please contact vincent.letang@magnaglobal.com for further details.

About MAGNA GLOBAL

MAGNA GLOBAL is the strategic global media unit of IPG Mediabrands, comprised of two key divisions.

MAGNA GLOBAL Investment harnesses the aggregate power of all IPG media investments to create power and leverage in the market, drive savings and efficiencies, and ultimately make smarter, more effective media investments on behalf of our clients.

With a stated goal of reaching 50% automated buying by 2016, the team in North America invests across digital, programmatic, broadcast and all traditional media platforms and is therefore considered the most comprehensive buying and negotiating unit in the media industry. The architects of the MAGNA Consortium – a powerful committee of executives from A&E Networks, AOL, Cablevision, Clear Channel Media and Entertainment, ESPN and Tribune – MAGNA North America is also dedicated to shaping industry automation and audience specific buying.

MAGNA GLOBAL Intelligence has set the industry standard for more than 50 years by predicting the future of media value. MAGNA GLOBAL Intelligence produces more than 40 annual reports on audience trends, media spend and market demand, and ad effectiveness.

MAGNA GLOBAL has offices in 24 countries around the world. For more information, please visit www.magnaglobal.com or follow us @MAGNAGLOBAL.