Well, as another year and another decade wind down, it’s time to start looking forward to the changes to come. Today’s Adtech industry barely existed in 2010, and what did exist was but a shadow of today’s industry. Programmatic was still springing to life, online video was still coming into its own (and was far from profitable), and smartphones were still a sign of wealth.
So, a lot has changed over the course of the 2nd decade of the 3rd millennium. But a lot has changed in just the last year as well. Major mergers occurred, TikTok took its place at the top mobile app pack, and industry growth seems to be shining a little less brightly beyond the horizon.
No one can tell you what will happen over the next 12 months, but we here’s what we’re expecting from 2020.
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From the perspective of this author, 2020 is going to be the year of more of the same. The year is going to be, above all, dominated by trends that have been revving up over the last year.
Mobile will continue driving digital ad growth, but that growth will not be nearly as astronomical as it has been in years past.
Video will also continue to entrench itself as one of the critical aspects of the maturing generation of digital advertising tools.
The mergers and acquisitions trend will continue as established digital marketing players try to plant their stakes as overall industry growth slows. Likewise, as digital advertising takes up an ever-larger amount of total global ad spend, the old guard will continue trying to buy its way into the industry.
2020 will likely be the year of more – that is unless the entire industry is disrupted by something rather new and unpredicted – which is always a possibility.
So here’s what we mean by more of the same:
First, let’s check out mobile.
Mobile will continue to grow as a percentage of total digital ad spend as desktop shrinks further into the background. Total mobile ad spend is expected to rise, but growth will continue to decline.
As discussed in other articles, this is in large part because smartphone saturation is almost total. Smartphones have become a commodity. Further, time spent on smartphones simply can’t increase that much more since the average person already spends a considerable percentage of his time on the phone.
Naturally, this places a kind of upper-limit on mobile digital advertising. So while this segment of the industry is almost certain to continue to grow over the next year, the growth itself will likely be less spectacular in raw percentage compared to years past.
Mobile has become and will remain the dominant force in digital advertising in 2020 and for the foreseeable future.
So expect a greater focus on digital mobile advertising as the industry continues to shift away from desktop, but don’t expect earth-shattering growth – even good growth – from the mobile sector.
Video is another increasingly important facet of online marketing, and it has been for some time now. Digital video, especially digital mobile video, is playing an increasingly important role in digital advertising.
However, the days of massive growth are behind us.
While digital video consumption continues to grow as over-the-top media displaces traditional television distribution sources (over-the-air, cable, satellite, etc.), this is a very advanced process. It will continue to develop quite a bit but at slow and steady rates. Why? This is because the industry is simpling hitting up on traditional televisions primary moat: game shows, live sports, etc.
Netflix, Amazon Prime, Hulu, etc. are all already huge and driving equally huge revenues and enjoy very high penetration rates (notably Netflix and Amazon). Outside of Video-on-Demand streaming services, user-generated video sites like YouTube are also extremely well-established. For the under-30 crowd, Netflix and YouTube are the norm, and traditional TV has long ago fallen by the wayside.
But since online video is rapidly becoming a mature market and, indeed, already is in many countries, there isn’t a lot of room here for growth. Digital advertising for video is already well established and understood, but it’s not nearly so developed as the market itself. For example, programmatic advertising for video is simply less developed than it is for display and social advertising.
Improving programmatic advertising and targeted advertising in video is one of the subfields here that could allow for relatively substantial growth.
And, unlike the mobile advertising market, digital video still has quite a bit of room to grow. This is largely because traditional video is still a huge market waiting to be gobbled up by online video. And that will happen, but increasingly slowly.
Leveraging the considerable potential of programmatic advertising in digital video was one of the primary reasons that over-the-top media device manufacturer Roku acquired dataxu, a Demand-Side Platform.
While we expect more of the same in digital video (that is slowing but still significant growth).
There is a lot of potential for optimization and growth in this segment – but it won’t be coming in 2020.
More Mergers, More Acquisitions
Another big trend that came into focus in 2019 was the sharp uptick in mergers and acquisitions. The biggest headline merger of 2020 happened toward the end of the year, but there was a large number that occurred throughout 2019. That headline merger was, of course, the joining up of Taboola and Outbrain, the two giants of native advertising.
Read more about this historic merger and its implications here
In just the first three quarters of 2019, there were 86 mergers and acquisitions in the AdTech industry. To give you an idea of how significant an increase that was, in 2018 the number was barely half that. This substantial increase in mergers and acquisitions
The reason we expect this trend to continue is that the underlying market factors that are driving this trend haven’t changed.
The dominant duopoly is as strong as ever, splitting the lion’s share of the industry between themselves. Desktop digital advertising is slowly dropping off, mobile has hit saturation, video is looking at slowing growth as well, and digital continues to become a larger and larger majority of total global ad spend.
In order to improve their ability both to fight with one another and to survive in a world dominated by Facebook, many AdTech companies are starting to see a lot of value in size.
This all means that the industry is maturing and mature industries don’t post huge growth numbers. Or at least not in percentages.
Whether or not this trend will continue is less certain than those previously mentioned.
Just to show how fickle the market can be and how large a grain of salt one should take with these predictions, in 2018, many analysts expected AdTech mergers and acquisitions to slow down substantially in 2019.
In a lot of ways, mergers and acquisitions are a thinning of the herd. The weaker are absorbed by the strong in order to better compete with one another. Others are simply going out of business.
This is a trend that this likely to continue as many of the same forces that are driving companies to acquire and merge are also driving those that can’t merge, acquire, or be acquired out of business.
A lot of dropouts occurred in 2019, especially in the Ad Network realm. Previously, Ad Networks could function without having their own tech and without adding real value.
Such ad networks could survive in times of high growth – there’s simply so much to go around when annual growth in 10+% for years on end. But when growth falls to more terrestrial levels, just showing up isn’t enough. One has to add real value.
These networks, especially CPI-focused networks, have been falling off over the last couple of years, and this trend is likely to continue through 2020.
Lastly, there will likely be more regulation – something which might further restrain growth.
Digital advertising is an increasingly heavily regulated industry. As the industry continues to grow and dominate the advertising industry in general, the gaze of the great regulatory eye will fall on it increasingly often.
First, there was the CAN-SPAM Act in the United States back in DATE.
Last year there was GDPR (General Data Protection Regulation), which affects anyone who is working with or collecting consumer data in the European Union.
Then this year, CCPA, or the California Consumer Privacy Act, came into effect. This new law has higher thresholds for application but affects any business operating in California. As California is such a large, robust market and such an essential part of the US market, it may as well apply to anyone doing business in the United States.
Regulation is only going to get more intense and more in-depth from here on out. The Wild West days are long over, and the days of regulation have come. And they’re here to stay.
Luckily regulation is generally discussed at length, voted on, and slowly put into force on a set schedule. So it’s far from unpredictable, and if there are no already announced regulations to hit in the next 11 months, there probably won’t be any major new ones this year.
2020 will likely be a year or more of the same. Some years, there is a revolution in process or on the horizon; you can just tell that the industry is going to be different at the end of the year.
This year, there could be a revolution beyond the horizon, lying in wait. However, if there is, it’s approach has been silent.
2020 is looking to be a rather good year, overall. Industry growth is all but guaranteed in just about every nation on earth. Mobile and digital video will continue driving increases in ad spend – but at decreasing year-over-year growth.
Major trends that have been revving up or dying down over the course of 2019 will likely continue to do just that in 2020. Mobile and digital video will continue to drive growth, but that growth is likely to continue declining this year.
The M&A trend will likely continue in 2020 as the market factors that drove this trend in 2019 will continue or even sharpen in 2020.
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