What is the future of AdTech? (AdPod podcast)
Last month, Wayne Blodwell, TPA’s founder, invited the TPA Digital team onto his AdTech podcast, The AdPod.
With huge amounts of technical and legislative change over the last few years, AdTech has had to adapt quickly. In this podcast episode, Wayne and the TPA Digital team discuss what change might still be to come, and what the future might hold for AdTech – especially DSPs, SSPs and Data Clean Rooms.
In the podcast, you will hear from:
Wayne Blodwell, CEO and Founder
Dani Stewart, Senior Client Partner
James Diba, Managing Partner
Dan Larden, Chief Strategy Officer
Below is the transcript of the discussion (lightly edited for clarity). If you would like to listen to the podcast instead, you can do so here.
Wayne Blodwell
"Let's start with DSPs. Dani: If somebody said to you to describe what a DSP did three years ago, what would you have said?"
Dani Stewart
"I would have said that a DSP is a piece of technology that automates the buying of digital ad inventory, which is still very much true today. But three years ago, I'd probably have called out how a DSP targets users on a hyper-targeted one-to-one level with super granular targeting and tracking capabilities and being able to put the right ad in front of the right user in the right place, and essentially continuing to be able to report on all of that and optimize towards it accurately in real-time.
"But of course, we know that a lot of those granular tracking and targeting functionalities hinge on third-party cookie-based methods. I think it was about three years ago now that Google announced the deprecation of third-party cookies on Chrome, which was obviously going to have quite a knock-on impact. Since then, DSPs, have really had to adapt and change a lot in terms of their tracking and targeting. They have shifted to alternative methods, like a focus on first-party data, probabilistic modelling, and contextual targeting, to be able to reach audiences in as much of an effective way. Comparatively, I think three years ago, a DSP's focus was data and maximizing optimization and being very granular. Whereas today, if we look forwards a bit more, a lot of those priorities have changed based on the limitations that are faced when cookies are deprecated."
Wayne Blodwell
"From what I see from meeting with DSPs, they're going through this constant change, especially in recent times.
"If we look forwards to three years in the future, what do you think will be the biggest changes in DSPs from what exists today?"
Dani Stewart
"I think it's quite a pivotal time for DSPs. At the moment, they've built out their functionality, and then they've been really heavily impacted by regulation. And now they're almost trying to reverse engineer a lot of their previous functionality in a privacy-compliant way. So I think three years from now, DSPs could actually end up looking quite different from one another with a lot of varying focuses based on how they're currently tackling that challenge.
"One scenario - and I don't think this would be the case for all DSPs, but broadly speaking - in three years' time, we might be describing DSPs as more of a centralized buying platform and a one-stop shop for broader digital media. So the potential for them to really lean into the management and the consolidation of wider digital media, rather than leaning into their original niche. We might see a shift take place where they move away from a focus on bidding and more towards genuine automation of digital media towards more of a marketplace functionality. And with that, we might also see a lot more API-based buying through those platforms. On top of that, I'd imagine they'll continue to embrace any new channels that pop up. We might see more AR and VR through these platforms as well."
Wayne Blodwell
"That makes sense. I think that it's quite an exciting time how demand side platforms used to be sort of the tool that sat with the programmatic traders and you had to be a trading expert to use them. But as they become more widely adopted within wider media, you'll see more people using them in different ways. I think that's quite an exciting time for DSPs. And the DSP market has kind of consolidated to some extent, but let's be honest, The Trade Desk and DV360 have a great share of market. But there are tons of others out there who can also add value.
"How do you think DSPs will differentiate in the coming years? How will they stand out from one another?"
Dani Stewart
"As you say, I think you'll get some of them leaning into their own ecosystem, so utilizing their own data, buying across their owned and operated inventory - like Amazon, like Google, for example, I guess their data and their inventory is going to be their differentiator and the reasons that marketers will have to engage with them directly.
"If you could get some DSPs leaning into that connected platform approach that I just spoke about they'd be differentiated with varying access to different channels, and maybe broader reporting and planning capabilities.
"And then I think the other big differentiator that we might see is sustainability. Obviously, it's a big talking point in the industry at the moment and we might see some DSPs really starting to embrace this and use it to their advantage in some ways. We know that the redirection of budgets through the supply chain can cause emissions both directly and indirectly. Any inefficiencies in that supply chain can increase the carbon footprint. DSPs might use that as the differentiator and take a stance on it. For example, leaning into more publisher-direct integrations to reduce the amount of redirects in the process. So there are a couple of different avenues that we might see. It's definitely going to be interesting to see what does happen."
Wayne Blodwell
"There's a lot at stake for DSPs: a lot of money goes through those platforms, and some of them are publicly listed.
"The next area we'll cover is SSPs. And, James, I'll go to you for this one. When we think about what we do at TPA, we see brands, particularly, and agencies leaning into working with SSPs.
"Why do you think it is important for a buyer to understand the role and functions of an SSP?"
James Diba
"If you think about it from a top-line level, it's important because SSPs ultimately have a critical role in facilitating access to supply for advertisers or for agencies. And ultimately, that's what all advertisers need, right? They need supply.
"But to go into a little bit more detail, I think it's important to take a step back and understand how the SSP landscape evolved in order to really appreciate why - now in particular - we're seeing advertisers and agencies lean into relationships with SSPs. If you think back before the introduction of header bidding, publishers would rank SSPs in terms of priority within their ad server, and set the order in the ad server, and that would dictate which SSPs got the opportunity to actually monetize that impression. So first SSP, then the second, and then the third. And they'd be called in a waterfall fashion.
"Now with the advent of header bidding publishers could allow numerous SSPs the opportunity to sell an individual impression at the same time. That helped publishers to maximize their fill and yield. It helped them to make more money.
"But it also had this knock-on effect where it changed the dynamic for advertisers. No longer do advertisers need to target all SSPs, for fear of missing out on impressions. Now that all SSPs are being called at the same time, there's less of a need to target so many impressions, because you're unlikely to miss out on that impression. That allows advertisers to be more strategic about how they work with SSPs. They can understand the different ways in which they could access inventory across key publishers, and they can think about negotiating take rates with SSPs to create a financial competitive advantage. They could also implement deals with particular SSPs overlay publisher data within their targeting, as well as understanding the directness of different supply paths.
"And that's something that historically, either wasn't being done or was always really difficult to do. It probably all sounds quite complex. And don't get me wrong, the supply landscape can be complex and it's certainly vast. But we're seeing advertisers are really tuning in to realizing the opportunity that getting closer to the supply can have in maximizing the potential of their campaigns."
Wayne Blodwell
"When I started in programmatic, SSPs were just something where you tick a box in the DSP and it'd just run across 50 plus of them. Whereas now the market has caught on that that's not an efficient way to do it. So let's just say the SSP is now evolving from a dumb pipe to trying to differentiate.
"What do you think will be the three biggest changes that we'll see from the SSPs over the coming years?"
James Diba
"It's probably the most interesting time since their inception, in terms of the relationship between DSPS and SSPs. We're seeing DSPs encroaching on the role of the SSPs in the form of OpenPath from The Trade Desk. That allows buyers to connect directly to publishers via the DSP, removing the need for an SSP. On the SSP side, we're seeing Magnite announcing Clearline, and PubMatic announcing Activate - all in the last couple of weeks or months. This allows advertisers to access inventory via their platforms, removing the need for a DSP.
"But I think where it's interesting for SSPs is to think about whether will they actually be able to take away some control from the DSPs? We've seen people try to serve both sides of the market over the years and inherent conflicts of interest have often kind of scuppered success in that area. Despite two notable outliers, which would be Google and Amazon. I think it's going to be really interesting to see how that plays out.
"I think purely from technological and strategical changes that we might see SSPs make, I think there are probably three things we can outline.
"The first would be around curation and data. As Dani said, as advertisers increasingly move spend away from the open market, in the context of the deprecation of third-party cookies, the ability to actually curate packages of inventory with a strategic application of data - be that publisher data or connecting advertiser first-party data - there's a lot of value there where SSPs will innovate.
"Second, would be supply quality. Again, when we think about advertisers reducing the number of SSPs, something else they're looking at is the directness of supply. And that comes down to kind of quality, transparency and sustainability reasons. SSPs will need to think about how they can prioritize direct integrations with publishers; removing inefficient hops, which removes unnecessary carbon emissions.
"As advertisers reduce the number of SSPs they're working with, we'll start to see publishers prioritize SSPs that are bringing the demand. That might lead to further consolidation in the SSP market - some of which we've seen happening this year already.
"And then the third and final point is around identity resolution. As cookies continue to diminish, resolving identity, as well as other kinds of technological developments for targeting (like seller-defined audiences, and Fledge, which has now been renamed to Protected Audience API) will be critical for publishers to maintain their CPM levels and their overall revenue. From a yield perspective, for publishers, these are really important areas.
"So I think SSPs have an opportunity to support publishers in testing and deploying the different identity solutions that are available to them.
"And then finally, you might see SSPs start to look at creating their own identifier device graph so that they can ensure that whichever identifier is used by a publisher and advertiser, they can actually monetize against it for their publishers."
Wayne Blodwell
"Sometimes I hear from the industry that SSPs are commoditized. But if you just think about those three buckets, you said around curation, quality and identity, those things are changing aggressively. So there are huge opportunities for SSPs to differentiate, and therefore huge opportunities for buyers and publishers to create competitive advantage by working with the right ones who are going in the right direction. Thanks, James.
"The next area we'll cover is data clean rooms. Dan, it would be good to understand why does a data clean room exist? What do they do?"
Dan Larden
"Because it's fairly new, I think it's definitely first worth explaining what they do. In the simplest form, they allow for a privacy-friendly way of sharing data between two entities - without the need for a universal identifier, and without the need for the data to leave where it exists. That's the key reason why they're very popular now. With the well-trodden path of technical and legal changes within AdTech, it's definitely making it harder for people to share data between two entities. But I think, also to talk about why they exist is to talk a little bit about where they've come from. And when I was investigating this piece, what was really interesting about the different clean room providers is that they all come from very different backgrounds.
"For example, one of them comes from the pharmaceutical industry. You can imagine with pharma, all the data a company needs to allow it to make a drug which will work for most people is in very separate places, held by lots of different entities across the world. So a clean room can be used to aggregate all that data and analyse it where the data lives. And now they've realized that there's a really big use case here for advertising because we've got lots of siloed, disparate datasets, which now need connecting.
"And then another one came from Facebook originally. Advertisers that were using Facebook wanted the data on the users and the people that subscribe to the channels. So Facebook wanted to invent a way that they could give data away without it having to actually leave their ecosystem.
It's been really interesting understanding the origins of each of these companies and what it means is that they're all bringing quite different use cases and coming from different angles."
Wayne Blodwell
"I remember meeting some of the early data clean rooms and they're talking about the opportunities beyond advertising, such as the NHS (National Health Service) in the UK, having data from patients and doctors that can be shared without having to send it over emails and sending over a lot of PII data.
"I definitely agree with you that they all do different things. You don't just pick a clean room, you pick a partner who is a clean room. I find that particularly interesting.
"Let's say we're moving to version two of the clean room where use cases are established. How do you see clean rooms evolving in the coming years?"
Dan Larden
"When I was agency side, I was one of the early adopters as well - and it was definitely a 'first through the gate got the bloody nose' scenario for us, because the setup was quite difficult. The different data providers we were trying to connect together didn't really understand the process. And actually, it took quite a long time to get to where we wanted to get to. Fast forward to today, I think people within AdTech and within advertising are a little bit more comfortable with the technology and the processes are more efficient. But I think the areas where there's going to be some focus is in the setup. I think brands have found it very hard to get their data integrated with clean room solutions. I think that has probably prevented brands from jumping full on into selecting a clean room and then going fully integrating it into their advertising processes.
"There have also been some issues with quite static use cases. You go through the laborious process of putting your data into a clean room, and then you find you've only got fixed use cases to deal with. I think the more sophisticated clean rooms that we're speaking of have much more sophisticated and customizable use cases. They allow a little bit more creativity to say 'I've got this data, maybe I can add this data and we can create a new way of thinking about targeting or measurement'.
"The service layer you need to make clean rooms work is also increasing. As the knowledge increases, and people understand more about them, it's much easier to find people that can then help with very specific use cases. Now you're not starting from scratch. There are people that have tried and tested some of the processes around a new integration or perhaps MMM queries which are becoming reusable."
Wayne Blodwell
"I like the point you make about initially clean rooms just trying to solve a problem, such as match rates, or first-party data. When you think conceptually about how it will expand to be used across more and more of the ad tech stack or advertising operations, it will obviously play a pivotal role."
If you would like to listen to the full podcast instead, find the podcast wherever you get your podcasts, or simply click the link here.