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12 May 2016

US programmatic ad market approaches $9 billion

The US leads the way in the programmatic advertising industry, with 25% of all online video now sold programmatically. Publishers are beginning to embrace programmatic selling, but developed markets are stabilizing as the demand for online video exceeds supply.

The research by consulting firm MTM and Ooyala was carried out across five regions – the US, UK, Germany, France, and Sweden. It found that, overall, the US and UK are the most developed markets, with the total online video advertising market in the US is $8.9 billion, and $0.7 billion (23%) in the UK.

Both US and UK territories have experienced an impressive 42% year on year growth in online video, but are behind Sweden which has soared with 59% year on year growth – although Sweden is a far smaller market in comparison. Despite Sweden’s online video growth and renowned broadband penetration, only 12% of ads are sold programmatically, behind France with 19% and only ahead of Germany with 9%.

This has been driven by viewing behaviors of American and British consumers which watch an average of two and a half hours of online video content every day, compared to one hour and fifty minutes in France, Germany and Sweden. The report cites that figures clearly reflect the comparative sizes of the TV ad markets in each region, but that the French market isn’t taking advantage of its high TV viewership as effectively as the UK, which has a smaller adult population watching less hours of TV.

VoD content is now viewed by 40% of internet users in the US, and 30% in the UK, whereas France, Germany and Sweden are all under 20% – but the report suggests that Sweden is catching up thanks to its broadband penetration which reaches over 90% of the country.

Programmatic buying and selling allows automated bidding and dynamic pricing, so that budget and demographic decisions can be made with more up-to-date information, rather than the months in advance needed in the traditional upfront model – giving buyers and sellers more control over their inventory. This encompasses the buy-side (advertisers and agencies), and the sell-side (publishers).

Top publishers have usually been wary of programmatic advertising and real time inventory auctions, but are beginning to shift their models to monetize ad inventory across multiple channels. The report finds that technical difficulties are rated as the most important sell-side factor affecting the growth of programmatic ads, just behind control of price, volume and access. The emergence of non-broadcast publishers, and the shortage of sell-side talent and skills were rated as less important.

On the buy-side, optimization and measurement was rated as the most important factor affecting the growth of programmatic video in France, Sweden and the UK. Whereas and the most and least developed markets, the USA and Germany, accountability and transparency was rated as the most important factor.

Research participants cited several significant barriers that need to change to allow for industry-wide adoption of programmatic advertising, which includes new metrics for measuring campaigns, new publisher-led data products, holistic sell-side platforms, more training, and better partnerships.

“Buyers want to be able to marry reach and frequency, and target holistically across all broadcasters and publishers. Sellers want to be able to manage scarce inventory and data assets so they are not devalued to buyers. We need to find new ways to balance these demands,” said one survey participant.

In digital advertising, the US had a 2015 market of $50.5 billion, the highest by a long way, with the UK the closest behind at $11.4 billion. Germany was $5.2 billion, France $3.4 billion, and Sweden just $1.5 billion.

On the other hand, in the television advertising market, Sweden is the only market of the five that is not maintaining growth, with a 4% drop in broadcast TV viewing from 2013 to 2014. Although this was counterbalanced by a significant increase in online TV viewing in the same period.

The US and France are the two regions in which the broadcast TV ad market is larger than that of digital advertising, with the US reaching $78 billion in 2015, and France $3.8 billion. In the UK, broadcast TV is significantly smaller than its digital market, at $6.6 billion. Germany is just slightly less than digital at $5.1 billion, and Sweden just $0.7 billion.