2020 International Report On Programmatic In-Housing

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IAB International Report onProgrammatic In-HousingAugust 2020Sponsored by:This report was produced by IAB. The final report, findings, and recommendations were not influenced by sponsors.

AcknowledgementsThis report would not have been possible without guidance from the IAB Programmatic Data board members,the collaboration and financial support of our sponsor.The final report, findings and recommendations were not influenced by external sponsors.Board MembersSponsorsAuthorKat Van FossenFillungo, LLCIAB ContactJoe PillaDirector, Programmatic Data [email protected] OF PROGRAMMATIC REPORT - INTERNATIONAL2

About USThe Interactive Advertising Bureau (IAB) empowers the media and marketing industries to thrive inthe digital economy. It is comprised of more than 650 leading media and technology companies responsiblefor selling, delivering, and optimizing digital advertising and marketing campaigns.Working with its member companies, IAB develops technical standards and best practices, and fields criticalresearch on interactive advertising, while educating brands, agencies, and the wider business community onthe importance of digital marketing. The organization is committed to professional development by elevatingthe knowledge, skills, expertise, and diversity of the workforce across the industry. IAB advocates for itsmembers and promotes the value of the interactive advertising industry to legislators and policymakersthrough the work of its public policy office in Washington, D.C.Founded in 1996, IAB is headquartered in New York City and has a West Coast office in San Francisco.STATE OF PROGRAMMATIC REPORT - INTERNATIONAL3

About Our SponsorsThe IAB Programmatic Data Center is a unit within IAB, founded to enhance existing IAB resources, and todrive the data agenda for the digital media, marketing, and advertising industry. The Programmatic DataCenter’s mission is to expand the programmatic universe, increase the understanding of how data drivesbusiness, and make them easily accessible to all.IAB Programmatic Data Center is focused on: Gathering industry thought leaders to drive and set the data agenda Funding industry research to provide benchmarks and actionable insights on data management acrossplatforms including programmatic, mobile, and the internet of things Developing industry best practices, guidelines, and standards for privacy, data security, measurement, andconsumer data protection Creating educational materials including certification, infographics, videos, webinars, and seminars todemystify data for marketers and advertisers Hosting data-focused events that feature industry luminaries discussing data related topicsAccenture Interactive, a Strategic Partner of the Programmatic Data Center, is reimagining business throughexperience. We drive sustainable growth by creating meaningful experiences that live at the intersection ofpurpose and innovation. By connecting deep human and business insights with the possibilities of technology,we design, build, communicate and run experiences that make lives easier, more productive and rewarding.Accenture Interactive is ranked the world’s largest digital agency by Ad Age and has been named a MostInnovative Company by Fast Company. To learn more, follow us @AccentureACTIVE and visitwww.accentureinteractive.com.STATE OF PROGRAMMATIC REPORT - INTERNATIONAL4

The purpose of this report:Programmatic advertising has become a key element in most digital ad budgets for its scale and efficiencyin targeting and placing digital advertising. As a result, more brands are bringing the management ofprogrammatic in-house. This shift is changing the role that brands and agencies play in this arena and thestructure of how they are managed.With programmatic’s rise, the IAB Programmatic Data Center aims to help inform its clients howprogrammatic is evolving the digital media landscape. The purpose of this report is to discuss the rolethat programmatic plays in the broader digital media ecosystem and how it is evolving, especially with thechanging regulatory environment around data privacy. The insights from this report were gleaned from avariety of sources, including interviews with subject matter experts, a quantitative IAB survey, and additionalsecondary research from industry leaders.Countries of Focus:The IAB conducted a survey in three regions: the U.S., Europe, and Latin America. Six European countrieswere included in the survey: France, Germany, Italy, Portugal, Spain, and the UK. Two Latin American countrieswere also included: Brazil and Mexico. The report will also cite data from other sources than the survey,encompassing full international numbers (including APAC).STATE OF PROGRAMMATIC REPORT - INTERNATIONAL5

Table of ContentsExecutive Summary.7Defining Programmatic Media Buying.9The Growth of Programmatic.10Growth in Mobile and Video Boosts Programmatic.12Managing Programmatic Media Buying.14Benefits of In-Housing Programmatic.15Structuring In-House Programmatic Teams.16Managing Programmatic Functions.17The Implementation of GDPR.19The Impact of Data Regulations.21Access to Data Remains a Concern.24Predictions for Programmatic.25Future Regulatory Impact.25Expanding Programmatic Platforms.25Technology Enhancements to Programmatic.26Key Takeaways.27STATE OF PROGRAMMATIC REPORT - INTERNATIONAL6

Executive Summary Programmatic advertising has been on a meteoric rise, with its share of digital ad spend worldwideexpected to grow to 68% this year. The U.S. and Europe are already deeply entrenched in programmaticwith the U.S. share of programmatic spend at 85% and most European countries’ share of digital ad spendgreater than 80%. Programmatic is poised for additional growth as mobile and digital video usage continues to rise.The Latin American (LatAm) market, in particular, is poised for programmatic growth as mobileusage is rising dramatically.Brands desire more control over programmatic, and we see an international trend towards brands inhousing some or all of this function. The majority of brands surveyed have moved some function ofprogrammatic buying in-house. More than a fifth (21%) of organizations have completely moved thisfunction in-house, and almost half (48%) have partially moved programmatic buying in-house. Almost three-quarters of European organizations (74%) have completely or partially movedprogrammatic in-house, which is more than organizations in either the U.S. or Latin America. In-housing of programmatic allows brands more transparency over the operation, which improvesaudience reach and increases cost efficiency and campaign effectiveness.Across brand organizations that have brought their programmatic in-house, most are taking a hybridapproach and partnering with an agency on some elements of the operation. Many organizations are either currently working with or would consider working with a partner ontechnology infrastructure and campaign analysis/optimization. However, there are some functions, like managing third-party contracts and KPI development, thatthese organizations prefer to keep in-house.As data privacy concerns have grown, Europe has been at the forefront of establishing regulations toprotect consumer privacy and data. The General Data Protection Regulation (GDPR) was implementedin the European Union (EU) in May of 2018, and as a result the EU has become the gold standard in dataprivacy regulations. The U.S. followed suit with the California Consumer Privacy Act (CCPA) in January2020, and other states are set to follow. Latin America has been slower in establishing regulations. While many organizations have noted an improvement in data quality and improved consumertrust, there are still questions on how effective GDPR has been. This is likely attributed to the factthat guidelines are nebulous, and—without a governance model—most organizations are strugglingwith what constitutes compliance. While there were concerns that regulations would negatively impact consumer trust of brandsand limit brand profitability, those concerns have been largely unfounded. In fact, an unexpectedbenefit of regulations is that brands are now working with cleaner data. While regulations haveculled down the number of customers who can be targeted, those that remain are more relevantand interested, resulting in a more effective ad spend.STATE OF PROGRAMMATIC REPORT - INTERNATIONAL7

The future of the regulatory environment continues to evolve, but the anticipated limit or disappearance ofcookies and third-party data magnifies the need for companies to manage their own first-party data. Thus,the ability to implement effective programmatic advertising hinges on an organization’s ability to obtainand manage their customer’s data.The digital ecosystem is constantly evolving through innovation and technological advancements, whichwill create new opportunities and needs within programmatic, both for brands and agencies.The COVID-19 pandemic has impacted brands across the world, with many limiting or shutting downoperations. As a result, short-term spend on advertising has decreased and/or been repurposed, though itis unclear what impact, if any, this pandemic may have on long-term advertising. Some struggling brands, like those in hospitality or travel, have almost eliminated advertising.Others that are still operating, like grocers, CPGs and telecommunications, are creating morerelevant ads to reflect the current environment.STATE OF PROGRAMMATIC REPORT - INTERNATIONAL8

Defining Programmatic Media BuyingProgrammatic allows a brand to target consumers, tailor messaging, and purchase relevant ad space moreeffectively by leveraging data through an automated process. It is, for instance, an ad for swimwear beingserved to a 19-year-old female college freshman three weeks before Spring Break, while she is reading herfavorite beauty blog.Programmatic media has had a relatively brief but illustrious history. It all started with the lowly bannerad, which ushered in the advent of ad servers, which begot ad networks, RTB ad exchanges and ultimately,programmatic. It is staggering to see how much more effective ad targeting has become in a span of 20 years.The traditional approach to buying and placing ads seems downright primitive now by comparison.Programmatic allows brands to market to different audiences by segmenting across demographics like age,gender, or geography, and behaviors like media consumption. As different segments are identified, a brandcan then tailor messaging for that particular segment while sending differentiated and relevant messagesto particular groups simultaneously. All of this is executed algorithmically through an automated process,which means that it is done in real time, without relying on human touch. As a result, brands are only payingfor relevant ad content, delivered to the right people at the right time—which results in a much more efficientand effective ad spend. One digital executive described programmatic as “buying against a target, not buyingcontent or properties. It’s a target we can measure and then quantify the impact.” It is no wonder that brandshave overwhelmingly turned to programmatic media buying over the traditional “spray and pray” approachwhere brands cast a wide net and hope for the best.STATE OF PROGRAMMATIC REPORT - INTERNATIONAL9

The Growth of ProgrammaticThe terms “customer-centric,” “authenticity,” and “personalization” are perennial marketing buzz words.Everyone is trying to market to customers in a way that feels authentic and relevant. But in order to do that,we need to know about our customers—that is, we need data! As brands started to capture more and moredata from their customers, they became capable of segmenting their customers into groups and developingmessaging to these particular groups. With this came the need to deliver these messages in an efficient way.The old process of manually buying and placing ads limited the extent to which brands could target theircommunications. But with the advent of programmatic, brands are able to deliver targeted messaging toa relevant audience by automating the transactions of media via a technology platform, in real-time, whilereducing human error.Programmatic has proven its value to the industry, and organizations are devoting more of their digital adspend to it. In fact, according to the Zenith Programmatic Marketing Forecasts 2019 Report, programmatic’sshare of digital ad spend worldwide is expected to grow to 68% this year. Worldwide, programmatic’s share ofdigital ad spend has seen a 54% increase in the last five years. More than two of every three display ad dollarsare being spent programmatically.Source: Zenith Programmatic Marketing Foreca