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Survival Guide 2017: Ad Tech Turns Digital Duopoly Into Three-Way Brawl

By Published on .

Credit: Illustration by Tomasz Walenta for Ad Age
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Ad Age's Survival Guide maps the changes and challenges in the year ahead, from new ad-tech wars to shifting policies in Washington, D.C.

Amazon, Facebook and Google this year are set to square off in an unprecedented battle for programmatic ad dollars that's sure to send shock waves throughout the industry -- but will hopefully give marketers and publishers more options in the process.

2017
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Though the three tech titans have a combined market cap of $1.21 trillion, only Google is firmly entrenched among marketers' and publishers' automated ad deals, via its DoubleClick empire. But the meteoric rise of an ad-tech tactic called header bidding has Amazon and Facebook smelling opportunity. Each plans to appeal to advertisers and publishers differently with new offerings. And more competition among the web's greatest powers should mean only good things.

"We are entering a world where three major titans are going to be competing for ad dollars," said Tim Wolfe, VP of revenue operations at USA Today. "From a premium publisher's perspective, this is a good thing. I think the three of them bring a lot of attributes and flavor at scale."

The war won't stop at desktop and mobile screens, either. "This is a warm-up for a much bigger battle that involves a much bigger screen," said Andrew Casale, CEO of ad-tech firm Index Exchange. "Before long, this will be a fight for the screen that sits in front of the sofa -- TV."

New announcements are expected as early as the first quarter, with insiders anticipating even bigger moves by midyear.

In Amazon's case, it will offer publishers a trove of data about their readers. Google will move to levels of transparency that will be the stuff of marketers' dreams. And Facebook, meanwhile, will continue to build out its Facebook Audience Network, which reaches users when they're off the network.

Header bidding technology upended the traditional waterfall structure, which saw online publishers take bids in succession from distinct groups of buyers, starting with the most promising and taking the first acceptable offer that came along. Header bidding lets publishers take multiple offers for their ads all at once and gives advertisers a more even shot at inventory in the process.

For some, however, that's only one of the important results. Others argue that the rise of header bidding has confirmed the fears of publishers who long suspected Google of gaming its own system to its advantage.

"At the foundation of Google's programmatic business is the fact they are the sole arbitrator of deciding who gets to share an ad," said John Donahue, chief product officer at Sonobi. "Well, that went away in 2016."

Google last April introduced its header bidding alternative, called exchange bidding dynamic allocation, or EBDA. Although still in testing, the product is expected to arrive in the second quarter of this year, several people familiar with its plans told Ad Age.

During the final months of 2016, Google held a first-of-its-kind meeting that high-level executives from five or six of the leading exchanges attended. The company spent several hours with the group trying to convince them that its EBDA solution isn't a trap. Publishers saw their ad rates climb when header bidding allowed them to collect more bids than DoubleClick alone, so some are wary of going all-in with Google again.

The meeting also revealed that Google is willing to become significantly more forthcoming with marketers in a bid to maintain its foothold in the ad ecosystem, according to insiders with direct knowledge of the meeting. The final product will likely include more reporting and insights about what ad inventory marketers saw, what they won and why they won or lost when using EBDA. And Google is seriously looking at making other changes to the technical aspects of auction dynamics and how the auction works overall, according to people familiar with its plans.

Google declined to comment for this story.

Last month, Ad Age first reported Amazon's plans to announce a cloud-based header bidding solution aimed squarely at publishers. As with Google's approach, all ad requests will be handled by remote servers instead of in consumers' browsers. That often translates to less lag time when loading webpages.

The e-commerce juggernaut will also offer publishers "shopping insights," to let them see what percentage of their page views come from, for example, Amazon's "golf products" audience segment and that its users are a certain percentage more likely to be purchasing products in that category than people on the average site.

A publisher can then develop more "relevant site content" and help better align advertisers with its users, the company said.

Agencies or advertisers that want to target Amazon's audience segments programmatically, of course, can do so only through Amazon Advertising Platform.

"I think it is a very enticing carrot," an executive at a major publishing outfit said of Amazon's offering, speaking on condition of anonymity to protect industry relationships. "It gives us a lot of reach and access to more data. That's very enticing."

On the flip side, however, publishers have invested a lot in their own data management platforms. That might deter large publishers, as they and their sales teams grapple with how to make the most of their own data.

Although Facebook is entering the fight with an appealingly plug-and-play version of its header bidding API, it's early days and the company is still testing the product. Mobile ad prices are relatively low compared with desktop right now, but Facebook might try to use its Facebook Audience Network to help publishers increase those rates.

What to expect in ad tech for 2017