Has programmatic ad spend hit its peak in Australia?
Programmatic ad spend share has been slipping in the US for a while, and it looks like the same thing might be starting to happen in Australia, writes SMI managing director Jane Ractliffe.
Australia’s media industry has seen plenty of trends come and go, but arguably few have had such an impact on the media landscape as the programmatic trading of digital advertising.
I well remember an office discussion in 2011 when a payment code came in for a new company called Brandscreen. To create the SMI data we need to manually assign every media agency payment record a place in our data taxonomy. From the moment we began researching Brandscreen we could see it did not fit the usual digital mould.
Brandscreen became the first of many demand side platforms for which we received payment codes, and given the early growth in this market within a year a new `Exchanges’ section was added to the data taxonomy as the home for all programmatic payment codes/spend data.
And then we watched with amazement as this market grew at a rate we’d never seen for any other new form of media. The compound annual growth rate (CAGR) for programmatic ad spend between the years of 2011 and 2017 was an incredible 88%. That’s even more amazing when you consider the CAGR for all social media ad spend in the same period was 46% and for search spending was 20%.
But recent SMI data releases have shown a significant slowdown in the rate of growth in programmatic ad spend.
This year began with the SMI data reporting the usual double-digit growth in programmatic bookings with the total up 14.8% in the first six months of 2018. But that’s all changed in the September quarter, with programmatic spending back 1.2% from the same quarter last year to $97 million.
And that’s seen programmatic’s share of total digital ad spend for the quarter move back to 19.3% (from the 20.4% share in Q3 2017) which raises the questions: has programmatic ad spend peaked? Or is at least nearing its peak?
Is programmatic ad spend on thin ice?
To answer that, it’s useful to look to the birthplace of programmatic, the US market, where SMI also collects media agency spending data.
Even before the programmatic market was recently bruised by the doubtful inventory placement and questions on ROI, the US programmatic market had peaked, as a share of digital ad spend from media agencies, in 2015 when it dominated the digital media with a share of 27.2%.
But ever since its share has been in decline with the total falling to 27% in 2016, then 26% in 2017 and in the first half of this year its share is down to 24.7%.
In Australia the programmatic market is more immature and despite the recent softness, there’s presumably still room for growth.
SMI’s Australian data is so far showing programmatic’s share of total digital ad spend peaked in 2017 at 19.7% of all digital ad spend, with its 2018 share now tracking at 19.5%.
But share data is massively influenced by what the other digital sectors are also doing, and in both Australia and the US we’re seeing programmatic’s overall share stymied by larger recent increases in bookings to social media.
In the US, for example, social media’s share of all digital bookings grew from 11.8% of the total in 2017 and is so far sitting at 13.4% in 2018.
In Australia, social media accounted for 13.1% of all digital media ad spend in 2017 and so far this year is sitting at 14.3%. Looking at Q3, media agency spending to social media sites grew $10.9 million and programmatic spending fell $1.1 million compared to Q3 2017.
Key product categories recently reducing their programmatic ad spend include health insurance advertisers, online retailers, lottery providers, universities, credit card groups and the analgesics market.
However, given the flexibility of its platform the digital media has always been able to quickly innovate with new services that drive revenue, so there may yet be another catalyst that delivers a second growth spurt for programmatic trading.
But without a major change, the SMI data suggests it’s unlikely Australia’s programmatic market will reach the peaks once achieved in the US.
Jane Ractliffe is managing director at SMI Australia.
How does SMI track programmatic investment?
My understanding is that SMI takes the feed from BCC invoicing systems withing agencies.
However what is loaded into an invoicing system is usually the identity of the trading desk, not the actual publishers/media etc. for example, DSPs clear billing with an SSP and the SSP passes revenue back to publisher. and the holding group pays the DSP’s invoices.
How does SMI track this kind of spend?
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hahaha
No
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Hi Anonymous
Yes we get all the Agencies’ ad spend and therefore also their bookings onto their trading desks (which we combine) and their spend onto other DSPs. Very best, Jane
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Thanks for the insights, Jane. Curious what media channels are being tracked by SMI on this from agencies, as we’ve seen in the US & globally nothing but continued growth in TV, DOOH, Audio, Video & In-App. Display might be slipping a bit as a share & certainly on growth rate since it’s tough to keep up when 80% is now programmatic in the US & hi 60s in Western EU. Law of large numbers. For what it’s worth, our teams across various regions have also seen part of the shift, in a healthy way, from buyers and sellers moving from Open Auction transaction types to Private Exchanges, reducing fraud and increasing viewability and contextual relevance.
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revenue into agency controlled exchanges has flattened – that is what the data says. Programmatically transacted revenue is not the same thing as SMI ‘Exchanges’ calculation.
So the headline is – “agencies allocation of investment into their own TD’s has stopped growing.”
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