Deep Dive: Programmatic ends a strong 2020 as CTV, OTT and data privacy loom large in early 2021

Distinct patterns quickly emerged and set the direction of programmatic for the remainder of 2020. Consumers streamed more entertainment than ever, with subscriptions soaring. This shift has sparked a boom for OTT and CTV advertising. “It really has become even more fragmented than it was pre-pandemic, when you already had your Netflix and Prime Video and everything like that,” said Katie Anderson, programmatic lead at PMG. “This is just growing even further and so I think that continues to emphasize why programmatic is so important.”

Linear TV advertising slumped, mainly due to big advertisers canceling upfront contracts. There are upsides to this, however, chief of which is the growing application of programmatic concepts to the linear space. Exciting developments lie ahead in this area, with ad tech platforms getting on board and advertisers still keen to chase the linear audience.

As Google and others throttle third-party cookies and cookie-based targeting in general, advertisers are taking consumer privacy more seriously than ever. As we’ll hear, that’s not solely driven by the need to stay on the right side of regulations, but rather by a cultural shift in the industry that recognizes consumers are deeply concerned about privacy. As a result, advertisers are reframing data usage as a matter of ethics, and some are taking a more idealistic approach than has been the norm in recent years.

The decline of cookies is also forcing programmatic marketers to devise new approaches to targeting, with greater focus on first-party data collection and data sharing. Data clean rooms are one innovative solution that paves a way towards mutually beneficial data cooperation between industry players, and one we can expect to see more of in the year ahead.

Many advertisers are also experimenting with greater use of contextual targeting as the death of the cookie looms ever closer. Contextual is no substitute for behavioral targeting — instead, the two approaches will co-exist, each with their own virtues and limitations. The trick is figuring out how one best complements the other. “We’ve really leaned into our contextual approach,” said Blake Laufer, manager, performance acceleration, at Initiative. “So we know that contextual does not really rely on cookies and it’s a valuable signal on users’ online behavior. So we’ve really looked to scale that out in the past couple months.”

Here’s what you need to know

The most far-reaching development in programmatic marketing right now is the accelerated shift towards OTT and CTV. Of course, as in so many other areas, we have COVID-19 to thank for speeding this change, but the pandemic has simply facilitated a trend that was already gathering momentum.

Viewers in all demographics are embracing streaming, and the pool of providers is only growing with big-ticket offerings like Disney+ and HBO Max entering the fray in 2020. Advertisers are following the consumers, and that’s boosting CTV and OTT, often at the expense of upfront advertising.

• Adoption of programmatic advertising has grown significantly. Advertisers are recognizing the switch to CTV and OTT and they’re moving ad spend in that direction.

“We’ve seen exorbitant adoption in streaming services and hours spent in front of a television, whether that be linear or on demand or via streaming services,” said Anderson.

• Advertisers are abandoning the upfront – and that’s great news for CTV and OTT advertising. The greater flexibility afforded by programmatic advertising is a big draw for buyers wary of over-committing resources.

Persistent uncertainty regarding the pandemic and its economic fallout is helping to consolidate demand for CTV and OTT advertising. “We’ve already heard from multiple brands opting out of upfront buying moving forward and switching to this much more agile approach as things remain in flux,” said Anderson.

• With quality CTV inventory limited, buyers are turning to the private marketplace. Advertisers can achieve real results — and may be able to tap unique, otherwise hard-to-reach audience segments — by carefully selecting partnerships. The likely rewards are commensurate with the extra expense of operating in private marketplaces.

Leah Askew, svp, client results at Dentsu Programmatic, said news media is one area where private marketplace deals can be valuable for advertisers. News outlets’ mastery of audience targeting is a key factor. “This is no secret to them, so they can really help set up a deal that allows you to run and spend on all of their inventory and taking consideration of the safety that you need for your specific brand,” Askew said.

To some, programmatic advertising and linear TV may seem like contradictions in terms, but there’s growing convergence between these two worlds. The past year proved that linear TV continues to be a valuable outlet for advertisers, but with many clients ditching upfront commitments, there’s demand for less rigid buying models in the linear space.

That’s where programmatic comes in. The industry is realizing the potential for applying the programmatic model to linear inventory sales, and ad tech firms, platforms and advertisers are aligning on a path forward.

“A lot of the publishers and major providers from a linear standpoint are getting into the game of putting their inventory out there,” said Anderson

• Major players in ad tech are getting on board. The Trade Desk and Xandr are just two of the firms that are investing in advancements in programmatic linear advertising.

“Those with the connections from an inventory standpoint see the effectiveness of transacting programmatically,” said Anderson. “Programmatic isn’t a channel, it’s a way of buying.”

• Advertisers still value the linear TV audience, but welcome the flexibility of programmatic buying. Traditional linear TV advertisers may have been forced to cancel upfront contracts, but many advertisers are flocking to linear for the first time. Expanding the space for programmatic buying will be a boon to linear TV advertising.

Anderson said there’s growing appetite for programmatic buying in linear and CTV alike. “We’ve already heard from multiple brands opting out of upfront buying moving forward and switching to this much more agile approach as things remain in flux,” Anderson said. “It’s a really exciting time for programmatic, so we definitely see both from a supply standpoint but also a demand standpoint.”

• Programmatic could become the norm in linear TV. Programmatic is already accounting for a growing segment of linear inventory sales. But the logical endpoint of that trend will be for linear ads to be sold programmatically as a standard.

Anderson said linear TV buying is already a hybrid model, but the balance could tilt decisively. “If we see advertisers wanting to emerge slowly in the TV space and have a little bit more control over where they’re inputting spots versus that quarterly buy or something like that, I think we will see this programmatic buying model become more of a norm versus some of those legacy buying standards that remain in place.”

Data ownership and privacy issues are occupying a lot of marketers’ headspace right now and will remain top of mind over the next couple of years. The sun is setting on the third-party cookie, and Apple is also making changes to its IDFA that will put the onus on users to opt in to targeted advertising, effectively throttling targeting for advertisers.

All this is prompting conversations around the ethical use of data that began with the arrival of the EU’s GDPR standard in 2018. In fact, many brands are taking consumer perceptions into account and setting their sights on a more progressive understanding of ethical data usage.

“We, alongside a lot of our brands, actually started to also think about is that really enough — is just getting an opt-in good enough — in terms of where we want to be from an overarching data governance perspective,” said Krystal Olivieri, svp, global data strategy & partnerships at GroupM.

• First, decide on the principles that will inform your approach to data ethics. Data ethics is subjective, and there will be tough decisions down the road for any brand. Start by laying down firm lines that the brand wants to operate within.

This exercise provides a framework to help teammates make the right call with consistency. “Set those baseline principles of where your ethical lines are,” said Olivieri. “Then create a committee or group of people that when a person on the ground doesn’t know what decision to make or feels like the principles aren’t enough to help guide them through a decision, they have a place they can go to to get that clarity.”

• Diversity matters in data ethics as elsewhere. The best way of avoiding blind spots is to include all voices on the teams developing and overseeing your data ethics activities.

“What you don’t want is ethics to only be from one person’s lens, you want it to be considering the whole,” said Olivieri.

• Some brands are aspiring to doing the right thing — even if it hurts the bottom line. Some brands and marketers are thinking about data ethics in bigger terms than mere data compliance.

Olivieri said that a number of GroupM clients have been willing to sacrifice business at least to some extent in pursuit of data ethics. “The hard conversation is if [upholding data ethics] meant that this tactic that you were deploying, which drove phenomenal performance or CPA would you be comfortable stopping it because it’s the right thing to do,” Olivieri said. “And so far the brands that we’re working with have all said yes.”

Data clean rooms provide one pathway forward for marketers figuring out targeting as we move into the post-cookie era. These safe spaces are an attempt to leverage data sharing and get beyond data protectionism to benefit all parties. More and more advertisers have been testing these partnerships in 2020, and the results are encouraging the industry to invest more into data clean rooms into the year ahead.

Critically, data clean rooms give all parties peace of mind by protecting against data leaks and ensuring that partnerships do not come at the cost of giving up competitive advantage. There are issues to be worked out, but this looks like a development that has legs. “Data clean rooms are definitely the hot topic of 2020,” said Olivieri.

• Data clean rooms offer smaller businesses a data-powered leg up. Fundamentally, clean rooms are one way of addressing the imbalance in data that exists between different companies, without forcing data-rich companies into making concessions.

“Different clients are on on different scales and maturity,” said Olivieri. Many brands don’t own much first-party data and are not in a position to invest heavily in building data ownership, Olivieri added. Clean rooms give them a seat at the table.

• Brands, agencies and platforms need to take appropriate precautions to cover themselves. Before embarking on the kind of data partnerships facilitated by data clean rooms, it’s vital for all parties to do due diligence and ensure that data remains protected.

Take the necessary steps to ensure that the only data being shared is material that your party is comfortable with sharing, and that it will only be shared with your immediate partner. Rehan Iqbal, group director at M/SIX, explained how the agency is working with clients like Electronic Arts. “The direction is set by EA, we make sure that all the precautions, the right contracts are filled out,” said Iqbal. “And then anything that is being shared is really done in a closed environment, making sure that data is anonymized … and then when that information comes back to us, it’s really done in data-safe, clean environments as well.

• Clean rooms can ensure everyone wins. Both advertisers and platforms are understandably protective of proprietary data, but clean rooms create a safe space where nobody is at risk. 

GroupM’s Olivieri said data clean rooms give businesses an opportunity to find like-minded partners that have “different but complementary understandings” of consumers. “If you can bring those two datasets together meaningfully both brands get value, but also the consumer gets value,” she said.

Advertisers are looking to contextual targeting to ease at least some of the pain that will come as tighter privacy regulations make targeting tougher in the coming year. Contextual has undoubted benefits and can take up some of the slack, but it won’t provide a magic bullet.

While contextual may not be a standalone solution, it will be a useful accompaniment to what remains of behavioral targeting in the post-cookie era. “Using contextual to complement that is a really strong approach,” said Laufer of Initiative.

• Contextual has its limits. Targeting contextually can be demanding in terms of the level of analysis and understanding necessary to get it right. As a result, it can be challenging to scale.

“It’s very valuable to know what people are searching, what they’re getting emailed on and even what the client’s own CRM has,” said Laufer.

• Contextual could be a game-changer for in-market audience targeting. Contextual data could be applied in transformative ways to help advertisers brands and agencies measure the volume and frequency of attention a consumer is paying to a given topic to identify how in-market they are.

“We could see how many times someone has interacted with a particular topic,” said Laufer. “If someone looked at it three months ago versus yesterday, you know that they’re more in market based on their recency.” Alternatively, prices for inventory could be set and tweaked based on contextual data about the popularity of the adjacent content.

“It’s not just an HR function, it has to do with how the agency operates and behind an environment that we create for the people that work here.”

Duff Stewart, CEO, GSD&M

Amid all of the other changes sweeping the programmatic marketing landscape, this summer’s social justice protests sparked a conversation about whether the advertising industry is doing enough to advance diversity and equality initiatives. If 2020 made anything abundantly clear, it’s that diversity and inclusion has been treated as an afterthought within many companies, for too long — and that has to stop. Diversity and inclusion initiatives have to be ongoing, sustained and reflective of a deep understanding of the communities that a given company employs, serves and does business with, and that has to be felt both across all departments and by the consumer. Duff Stewart said marketing and advertising companies need to move away from thinking of D&I merely in terms of hiring targets, incorporating employee resource groups and D&I training as part of a holistic strategy.

“This needs to be bigger than just a book of statements, it needs to be a way in which they behave as an organization which is think of an organization, it’s like a living breathing person.”

Krystal Olivieri, svp, global data strategy & partnerships, GroupM

From social movements and election security to life under lockdown, 2020 has been a rollercoaster year, and Olivieri of GroupM said these events have also impacted the ways marketers are reflecting on consumer data. Against the backdrop of moves by big tech that will afford greater protection of consumer data, marketers are thinking about data usage increasingly from the customer’s point of view. “Data ethics really started with this notion of just because you can doesn’t mean you should,” said Olivieri.

“We really looked at path to conversion and we’re seeing a lot more exposures through contextual. So we may not be getting last touch, but it’s really doing a strong job of being introducers to retargeting.”

– Blake Laufer, manager, performance acceleration, Initiative

Advertisers are learning how to integrate contextual targeting into an overarching targeting strategy. Combining contextual with sustainable approaches to behavioral targeting that will endure beyond the demise of third-party cookies and tightening privacy regulations is the way forward. Laufer said contextual targeting can help to increase conversions via an incremental cycle that starts by growing an audience via contextual targeting. The advertiser can then retarget to drive final conversions within that expanded audience.

Data Clean Rooms

Third-party cookies are on the way out, and advertisers are devising strategies that will allow them to continue to effectively target consumers. First-party data gathering is a priority for some, and major platforms like Google and Amazon enjoy an embarrassment of riches in this regard. Meanwhile, there are plenty of other players who lack the resources to build a first-party data goldmine. Data clean rooms offer a solution that allows advertisers and platforms alike to form partnerships where data can be shared and cross-referenced. These are safe spaces where one party can give a partner access to their data-rich walled gardens while retaining an edge, while data-poor partners can gain insights and context to help them bolster their targeting efforts.

Data Ethics

Privacy is bubbling up as a prime concern for many consumers, and advertisers, agencies and platforms are well advised to address anxieties around this issue with sensitivity and thoughtfulness. Although there are many lucrative ways of monetizing consumer data while staying within the bounds of regulatory compliance, many firms are deciding that “legal” does not necessarily mean “ethical.” We’re seeing companies setting their own standards for appropriate use of data that place the end user at the center of the process. As first-party data grows in importance to advertisers, expect deeper conversations around ethical usage to come.

Addressable TV Advertising

Traditional TV advertising was grounded in the logic of buying slots on specific shows to target a given audience as a bloc. This critical development turns that model on its head, allowing viewers to be served dramatically different ads while watching the same show. Addressable is foundational to the value of CTV and OTT advertising, giving advertisers a hyper-targeted outlet that enables them to isolate the viewers they are most interested in. It’s not just limited to CTV and OTT, either — addressable is increasingly being leveraged to equip linear TV advertisers with greater targeting potency.