What Is Advertising Technology (Adtech)? Definition, Ecosystem, Programmatic, & Trends
- Published on March 16
- Advertising technology (adtech) is a set of software and tools that brands and agencies use to plan, set up and manage their digital advertising activities. In this introduction, we look at the concept of adtech, the world of programmatic advertising (including ad buying, direct advertising, and real-time bidding), the adtech ecosystem, and future trends in adtech to watch out for. In Digital Advertising, we briefly looked at the beginnings of the digital advertising industry and how a 468*60 px banner started a revolution in advertising in 1994. The rapid developments in e-commerce eventually led to agencies helping their clients place ads on websites that gave clients the maximum return on investments (ROI). The growth of online advertising was guaranteed when the Interactive Advertising Bureau (IAB) was created in 1995 to regulate the industry. And now, almost twenty years after the dot-com boom, this democratization of digital advertising is more stable than ever. And it's all thanks to adtech. As brands increasingly rely on adtech to create buzz, engage audiences, and increase brand exposure, it's time we explain what adtech is, the adtech ecosystem, programmatic, and the ad tech trends you can look forward to. Table of ContentsWhat is advertising technology (adtech)?
- The World of Programmatic
- What Is Programmatic Ad Buying?
- What Is Programmatic Direct?
- What Is Real-Time Bidding (RTB)?
- The AdTech Ecosystem
- 7 Advertising Technology Trends to Watch Out for
What is advertising technology (adtech)? Adtech is an acronym for Advertising Technology. It encompasses a suite of software and tools that brands and agencies use to strategically plan, set up and manage all digital advertising activities. The adtech ecosystem consists of two main players, advertisers (the demand side) and publishers (the supply side). Advertisers want to get the most out of their invested budget by running effective ad campaigns to reach their target audience, optimizing those campaigns, measuring ROI and gathering customer insights. Publishers meet advertiser needs and generate revenue from ads by displaying those ads in their publications (website, app, etc.), increasing ad impressions, maximizing bids for ad space, and collecting visitor insights. Publishers need to take care of all these things in accordance with the platform's user interface (UI). Adtech helps advertisers and publishers achieve their goals by providing applications that meet the specific needs of both parties. Popular adtech platforms include SmartyAds, TubeMogul, Simpli.fi, MediaMath, and PubMatic. Features like transparency, interface, flexibility, and real-time analytics are what you need to look for in an ideal platform. The World of Programmatic When you read about adtech and its peripheral concepts, you will often come across terms like Programmatic Buying, Programmatic Direct or RTB. So before we dive into the adtech ecosystem, let us first discuss all about Programmatic Buying, Programmatic Direct and RTB
. So, before we dive into the adtech ecosystem, lets discuss all things programmatic.Representation of Programmatic Buying, Programmatic Direct, and RTB
What is Programmatic Ad Buying? Programmatic refers to the use of technology and data to automate and streamline the transaction process of online media. In other words, with the introduction of Programmatic, publishers and advertisers or agencies no longer need to sit down at a table to discuss and negotiate the contract. Ad buying is done through algorithms. 2. What is Programmatic Direct? Programmatic Direct is a method of programmatic media buying. Programmatic Direct is a digital replication of the traditional media buying process, where advertisers enter into a one-to-one contract with publishers to run their ads. During the negotiation, both parties agree on a fixed price per thousand (CPM). This method is suitable for high-value ad inventory or publishers. Advertisers opt for programmatic direct advertising with publishers that have the strongest user base. Publishers choose this method because they can serve ads without compromising the user experience. Although the initial process may not sound too programmatic due to human involvement, the rest of the process, including ad placement, is done programmatically. 3. What is Real-Time Bidding (RTB)? Real-Time Bidding (RTB) is the second type of programmatic ad buying. RTB is probably the most common method of media buying due to its scalability and flexibility. With RTB, advertisers bid on ad inventory in real time through an ad market. For publishers, this is a viable method because they can now sell unsold inventory without actively intervening in the process. Even though publishers do not get premium value with RTB, they still get a fair deal because bids are based on demand for ad inventory. Learn more: what is programmatic advertising? Definition, Types, Channels, and Benefits The Adtech Ecosystem The traditional media value chain is straightforward. An advertiser who wants to place an ad in a newspaper or magazine contacts an advertising agency and inquires about suitable publications, their reach, ad rates, and so on. After negotiations and pre-selection of publications, the advertiser places an order and waits for his ad to be published in the various publications.
- In principle, the media buying process is still the same today, but the advent of adtech has introduced several components into the ecosystem that facilitate the management of advertising campaigns for both the demand and supply sides. Let us look at the key components of the adtech supply chain to better understand them: 1. Media agencies Media agencies are responsible for allocating advertisers' ad spend across multiple channels, i.e., they buy media for their clients. They differ from advertising agencies in that they do not participate in the creative aspects of advertising campaigns. 2. Agency Trading Desk (ATD) An agency trading desk is a set of services provided by media agencies. The ATD plans, buys, and manages ads on various platforms. ATDs serve as a watered-down version of demand-side platforms for advertisers who are not yet ready to invest in a DSP or set up an in-house team. 3. Demand-Side Platform (DSP) Demand-side platforms allow advertisers to buy ad placements in real time at optimized costs. DSPs are typically used for remarketing ads and allow advertisers to buy search, display, video and mobile ads. DSPs communicate with ad networks, ad exchanges, supply-side platforms or publishers to secure ad space from ad inventory. This allows marketers to access a huge ad inventory in a single window through DSP without having to contact individual publishers. Some of the major providers of DSP are: DoubleClick Bid Manager
Learn More: Top 5 Demand-side Platform Companies 4. Data Management Platform (DMP) Advertisers and marketers rely on DMPs because they centralize data from first- and third-party vendors. DMPs collect data from sources such as websites and mobile apps, CRMs, marketing automation platforms, other transactional systems, ad campaigns, social networks, and so on. DMPs use Big Data analytics and AI/ML technology to identify trends and consumer behavior, create audience segments, analyze profiles, and learn about users' buying intentions. Here are five widely used DMPs:Lotame
Adobe Audience Manager
SAS Data Management
5. Ad Networks Ad networks are the companies that work as intermediaries between advertisers and publishers. Ad networks consolidate ad inventory from multiple publishers and provide advertisers with a range of options to choose from. Advertisers can use DSPs and DMPs to gain insights about their ideal customers or buyers and select slots from an ad network's inventory to optimize their digital advertising efforts. Let us take a look at the top five ad networks:Google DoubleClick Ad Exchange
6. Ad Exchange An Ad Exchange is a platform that allows buying and selling of ad inventory from different ad networks. The transaction is done through real-time bidding (RTB), where the price of the ad space is determined by real-time supply and demand. There are two types of ad exchanges: open and private. In an open exchange, anyone can participate in the bidding process and the price for each impression is disclosed. A private exchange is an invite-only auction where the publisher can select advertisers to bid on their inventory. Here are the top five ad exchanges:Google Ad Exchange / DoubleClick
Rubicon Project Exchange
Microsoft Ad Exchange
7. Supply Side Platform (SSP) Simply put, a Supply Side Platform (SSP) is the equivalent of DSP for publishers. SSPs enable publishers to understand real-time demand for their ad space from ad networks and exchanges, manage their ad inventory, and generate revenue from ads. SSPs consolidate ad inventory and enable publishers to set a price floor (the minimum price for ad inventory), facilitate the auction process, and communicate with DSPs. Here are some widely used SSPs:AerServ
Google Ad Manager
AppNexus Publisher SSP
8. Ad Servers Ad servers are used by advertisers, publishers, ad networks, and advertising agencies to run their ad campaigns. An ad server is an application that is responsible for automating ad delivery by displaying them on websites and collecting ad performance data that helps advertisers evaluate the performance of their ad campaigns. Ad servers are hosted either on the vendor's ad server or on your local premises (your own server). Here are the five most popular ad server platforms:DoubleClick for Publishers (DFP)
OpenX ad server adColt ad server
Learn More:Ad Network vs. Ad Exchange: Key Differences and Similarities 7 Advertising Technology Trends to Watch Out for What developments can advertisers and publishers expect in the ad tech ecosystem? Here are the seven advertising technology trends to keep an eye onRepresentation of Advertising Technology Trends
- 1. The Industry Is Moving Toward Consolidation One prominent trend that has commonly been observed among martech and adtech industries is that giant corporations are acquiring promising independent companies in their respective niches to strengthen and scale their offerings. This trend enables bigger companies to aggregate multiple offerings in a single platform through which their users can pick and choose necessary features. While this poses a threat to relatively smaller players, as the industry will be dominated by 3-4 players, advertisers and publishers need to gain expertise in the leading platforms and identify how these tools can be integrated within their existing martech/adtech stacks. 2. Companies With Niche Offerings Will Be Successful While the adtech industry is moving towards consolidation, this trend shouldnt necessarily seal the fate of new entrants or existing startups. Companies that offer niche products, or that support the major companies in the adtech ecosystem, will gain an upper hand. Here are three reasons that support this:Native advertising has become an effective way for advertisers to spread their message. Apart from Facebook and Google, advertisers are also experimenting with native ad platforms such as Taboola, Outbrain, Playbuzz, etc.
- Publishers and app developers want to break away from the oligopoly of Facebook, Apple, and Google.
- Advertisers prefer using third-party attribution tools than relying on Facebook and Googles native solutions.
3. 3. The adtech ecosystem will provide more transparency Advertisers, publishers and end users expect the components of the adtech supply chain to become more transparent. The GDPR strengthens the privacy and transparency aspect on the end-user side by requiring publishers to disclose how their data is used and giving power back to users through the eight rights for individuals. Advertisers track the placement of their ads and how each ad contributes to revenue generation. Likewise, publishers are interested in understanding how users navigate their sites, interact with ads, and how much revenue the site generates for advertisers. The companies are working to create an environment where advertisers and publishers do not have to deal with low-quality traffic and advertisers have access to high-quality ad inventory. 4. Advertisers will tell stories with their ads Advertisers have a perception that attracting more attention is more important than conveying a compelling story through ads. Over time, users have developed banner blindness that has made them immune to ads, and although advertisers get impressions, the ROI just is not the same. Advertisers today need to tell stories with ads that can lead to meaningful interactions between the consumer and the brand. So it's no longer just about the esthetics of the ad, but the content, medium, message, story and design that will determine whether users make an emotional connection with your ad. To leverage this effectively, advertisers are experimenting with simulated and immersive experiences, such as AR and VR, to better gage customer reactions. 5. The cell phone will grow The cell phone has undeniably become our first source of information because of its convenience and portability. This shift in consumer behavior has led to mobile accounting for 63% of digital advertising revenue. This is in part due to the extensive advertising opportunities available on mobile devices. You can engage a consumer in a short period of time through search, email, social media, video, games, and mobile apps, and that's enough to make an advertising impression. Video is the most common ad format, regardless of medium. To meet changing habits and attention spans, advertisers are developing vertical and short ad formats. Telling a story in less than a minute, even a few seconds, is a challenge worth taking on. 6. Advertisers will tap into new ad channels Smart TVs and over-the-top OTT platforms like Netflix, Hulu, Amazon Prime, HBO Now and Roku have amassed a huge user base. There are more than 181 million users of OTT video services in the U.S. alone, and advertisers are poised to take advantage of the opportunity. As reported by Magna, OTT advertising revenue in the U.S. is expected to grow to $5 billion by 2020. While OTT video services are just one of the new channels, advertisers are also looking at the potential of direct-to-customer (DTC) brands and digital out-of-home (DOOH) to expand their advertising efforts. 7. MAdTech: The consolidation of martech and adtech David Raab introduced the term MAdTech in 2015 to explain the growing convergence of martech and adtech. These two technologies can cross-pollinate by leveraging the common denominator of customer data. By breaking down data silos, marketers can analyze the customer insights collected by their MarTech stack and use them during the media buying process and ultimately optimize (reduce) their ad spend. David Raab sums this up perfectly by saying martech deals with known individuals. As anonymity is increasingly lost, marketers will know exactly who is receiving their advertising messages. Martech targeting techniques will therefore be used in adtech as well. Conversely, some adtech features will become standard martech practice. Adtech: the way forward According to Zenith Media, digital media advertising spend (exclusive) will reach $329 billion in 2021, but the adtech space still faces many challenges. Ad fraud, transparency and privacy have always been an Achilles heel of the industry. With the expertise that advertisers and publishers have, these challenges can certainly be effectively addressed before they are finally resolved.