A new study by technology market research firm Technology Business Research (TBR), among 240 marketing and advertising professionals using programmatic ad buying technology, reveals that in 2016 only about 40% of digital advertising budgets will be spent on “working media”. Other research has put this number even lower at 20%. TBR estimates that nearly one-third (31%) of budgets will go to programmatic ad technology fees and 29% to agency services.
The TBR study concludes that almost half (48%) of programmatic ad buyers, participating in the study, are allocating budgets to “direct programmatic” ad buys at demand-side platforms (DSPs) and that 45% are spending budgets on “marketing attribution tools.”
Ad Technology and Managed Services Cost
Why is the cost of programmatic ad technology and agency management services so high? As technology solutions in the programmatic ad buying process, including ad serving, data/targeting, DSP technology, DMP technology, pre-bid and post-bid evaluations, verification and campaign management, have multiplied so has the cost. Each technology and service provider takes a cut for their programmatic and service activity. Cumulatively they add up to a significant portion of the allocated ad budgets.
The illustration below, designed by the Internet Advertising Bureau, provides a simplistic overview ‒ in a bid request/response format ‒ of the most common programmatic ad technologies and services and where each programmatic activity and execution cost fits within a standard auction-based programmatic transaction.
Programmatic Fee Transparency Calculator
To provide more insight for advertisers and media buyers on where their advertising budgets are actually spent, the Interactive Advertising Bureau has introduced a free programmatic fee calculator that shows a breakdown of the costs of each technology and service layer in the media plan and its percentage share of the effective CPM. The calculator also tabulates the total media plan and execution costs and actual earnings for the publisher. The ad technology layers that are supported in the calculator include ad serving, data/targeting, DMP technology, DSP technology, pre-bid and post-bid evaluations, verification and campaign management. The calculator also provides the option of adding additional ad technologies and services based on individual buyer implementations.
Programmatic Advertising Growth
Despite the high cost for programmatic ad technology and management services and a number of challenges in the areas of fraud, viewability, brand safety and lack of transparency in the industry, advertisers and publishers are rapidly adopting programmatic ad buying and selling tools, according to the TBR study.