US-based ★ "Programmatic Advertising" Surpasses $10 Billion: IAB US Survey

Ad Age reports that programmatic advertising reached $10.1 billion, accounting for nearly one-fifth of the approximately $50 billion U.S. internet advertising market in 2014. This result indicates a major shift in advertising transactions. The findings come from a study conducted by accounting giant PricewaterhouseCoopers on behalf of the Interactive Advertising Bureau (IAB).

Although the definition of programmatic advertising has not yet been established within the industry, this survey refers to display and video ads shown on desktop computers and mobile devices that are bought and sold through automated programs. According to the IAB report, banner ads account for 80% of programmatic transactions. Among these, more than half of desktop banner ads were automated.

The report points out that the reason mobile banners lag behind is because it is difficult to target users and track data across apps and devices, such as "behavioral data within a single app cannot be used outside that app." Against this backdrop, social media platforms, which can obtain user login data even across multiple devices and increase the accuracy of targeting and tracking, have a relatively high proportion of programmatic mobile banners. Video advertising lags behind banner ads but shows promise for future growth.

In terms of revenue share, the top 10 programmatic-related companies alone accounted for 66% in 2014. Expanding to the top 25 companies brings this share up to 75%. Furthermore, the distribution of advertising revenue sees media companies receiving 45%, while the remaining 55% is captured by "ad tech companies" – a term encompassing advertising agency departments and automation technology firms.

By method, open auctions account for 70% of programmatic advertising, with the remaining 30% split between private auctions, fixed-price transactions for surplus inventory, and fixed-price transactions for reserved inventory. Open auctions are synonymous with traditional RTB (real-time bidding), where advertisers often bid without knowing which publishers are offering inventory. In contrast, invitation-only private auctions typically involve a limited set of publishers. Remnant fixed-price transactions and reserved fixed-price transactions are not auctions; they involve pre-agreed negotiations between publishers and advertisers. The former guarantees a fixed price, while the latter guarantees both price and inventory/duration.

The IAB report states that regarding open auctions, which currently dominate the market, "there is strong demand from advertisers to enhance management related to brand safety, verification of ad appropriateness, and effectiveness measurement." Given the demand for greater transparency, the IAB predicts that other transaction methods, including private auctions, will likely gain prominence going forward. A subcommittee of the IAB's Programmatic Advertising Transactions Council plans to launch a new project to develop guidelines for price disclosure and transparency in programmatic advertising transactions.