What themes and trends might we expect in ad tech over the next 12 months? Here’s what we reckon

Today’s media and ad tech landscapes look very different from how they appeared 12 months ago. We may be further out of a global pandemic – but we’re also further into a recession.

While it looks like stability will return towards the end of the year, an uncertain economic climate and renewed environmental efforts will undoubtedly shape business practices and operations in 2023.  

So what does this mean for the ad tech landscape? Read on to see the trends SmartFrame expects to impact the industry in the year ahead.

1. Staying data-driven with contextual advertising

The recent ruling against Meta, and how it leverages personal data to target audiences on social media and beyond, signals that privacy and the responsible use of data must remain a priority for the ad tech industry.

Google may have delayed phasing out third-party cookies until 2024, but tech companies, advertisers, and publishers must continue trying to find viable, compliant alternatives that meet their need to develop personalized and effective strategies and communications.

The market has responded with a range of advertising solutions, from identity resolution to data clean rooms, as well as a shift toward focusing on first-party data.

Read more: What is first-party data? And how should you use it?

However, none of these have truly replaced the third-party cookie, with many solutions criticized for employing covert techniques such as fingerprinting and cross-site identification. The difficulties bound up with collecting enough first-party data to achieve adequate insights also presents issues for smaller companies.

It is perhaps unsurprising, then, that contextual marketing, a strategy that targets content consumed rather than the consumer themselves, is gathering momentum.

In 2021, the global market grew by $211 billion – in comparison to $157.4 billion the year before – and is set to continue to grow at a compound annual growth rate of 18%. 

As artificial intelligence (AI) and machine learning technologies evolve and the depth of page-level understanding grows, contextual targeting leverages cutting-edge technology to become more precise without infringing on individual user privacy.

2. The value of transparency within the digital advertising industry remains clear

The ad industry has long been criticized for its opacity, which leads to challenges for brands, agencies, and consumers alike. 

Last year, the cost of digital ad fraud in the US alone was estimated at $81 billion. The combined consequences of increased activity across platforms and invalid traffic – such as click farms, bots, competitor clicking, attribution fraud, SDK spoofing, and false engagement – disrupt marketing data and metrics, skew investment toward the wrong channels by artificially inflating impressions and clicks, and negatively impacts revenues. In the long term, this can severely impede business growth.

Another issue involves ad placement – specifically, how brands inadvertently fund misinformation and disinformation. Analysis by Newsguard and Comscore show that brands spent as much as $2.6 billion in a single year on misinformative news sites, indirectly supporting unhelpful claims around climate, health, elections, and democracy.

In some cases, these ads are also run on poor-quality websites with high carbon emissions but low returns, posing a risk to brand safety. Consumers hold brands responsible for where their ads are placed and view them less favorably in poor-quality settings.

Efforts to address these issues need to step up if brands, agencies, and consumers want a transparent and responsible media ecosystem. Thanks to the Content Authenticity Initiative, as well as the IAB and other organizations, it’s clear that many are already working toward change – but there is certainly more to be done in 2023.

3. Sustainability across the board

The climate emergency threatens every industry.

While conscious consumerism may have recently taken a hit along with purchasing power due to inflation, a global planet-first mindset still reigns.

Consumers are adopting more sustainable lifestyles by recycling, reducing single-use plastics, and buying only what they need, among many other habits.

Environmental awareness continuously informs choices when it comes to where individuals choose to spend their money: over a third have chosen brands that have ethical practices (37%) or stopped purchasing certain products or brands due to sustainability-related concerns (34%).

According to the UK Ad Net Zero’s review of IPA members, each agency emits roughly 84,000 tons of carbon dioxide (CO2) emissions each year, and the industry is coming under more scrutiny amidst scandals of greenwashing. Brands are increasingly having to prove their commitments to change, minimizing their carbon footprint from internal structures and business operations, as well as external advertising campaigns and production processes.

We have already seen some developments in recent years. The Ad Net Zero project, for example, has been rolling out its program beyond UK borders, and appointed a USA Director in October to further the cause abroad. Major broadcasters such as Channel 4 and the BBC are also aiming for net zero.

Sustainability is now considered a key strategic asset in protecting and growing a brand as well as attracting and retaining talent, with a large majority (78%) of investors now putting environmental, social, and governance activity before short-term profits.

4. Artificial Intelligence (AI) continues to adapt

We have discussed where AI is right now: An asset that renders targeting and programmatic advertising more precise, yet one that’s still susceptible to error and bias.

Already, AI has proved useful to businesses, processing large quantities of data to make informed decisions through the joint power of machine learning and prediction. Whereas previously, models that had finished learning remained static, and fundamentally unchanged in practice, adaptive AI binds machine learning and predictions together into one channel, allowing it to adjust its own learning methods to address real-time changes.

With the ability to revise its own systems, adaptive AI can help organizations react more quickly and effectively – in short, to be more agile in the face of change.

Gartner predicts such systems will outperform other models by 25% by 2026 – but this comes at a price. Considerable resources, as well as collaboration between business, data, and analytics – as well as AI and software engineering – is necessary to re-engineer existing processes to make the most of adaptive AI.

5. IoT gets smarter

AI is not the only sphere where progress reigns. Smart gadgets, such as watches, glasses, cars, and even entire homes, transform an increasing number of everyday tasks into digital-first experiences. One estimate even predicts that half of US households will use smart home devices by 2026.

McKinsey predicts that IoT could unlock anything between $5.5 and $12.6 trillion in economic value by 2030 by optimizing assets, production, and operations management, not only across factories and manufacturing but also in B2B and B2C settings.

Many tech giants, such as Google, Amazon, Samsung, and Apple, are all already in the process of extending their smart offerings, which can open up new avenues for brands and advertisers, with a broader range of insights to inform strategies and campaigns. 

Since the majority of consumers (nearly 60%) value transparency in how companies process and use this data, and 52% are worried about security in relation to smart home devices, these opportunities won’t be without their challenges. So the more humans use smart devices to manage their business, personal health, and simple everyday activities, the more care needs to be taken around how this data is collected, processed, and stored.

6. Optimism endures around ad spend

Although enduring uncertainty and high inflation are impacting consumer and business confidence and slowing down economic progress, inflation is reportedly due to fall by the end of 2023.

In general, predictions in ad spend are reflecting a cautious outlook, adapting expectations to meet the current financial climate. Most can expect a general slowdown in ad spend and activities, from 8.3% this year down to 2.6% in 2023. But, despite concerns, optimism endures, with more than half (53%) of brand CMOs expecting budgets to increase in 2023.

Some sectors are even expanding as consumer habits and demands change. Investment in the advertising-funded video-on-demand (AVOD) market, for example, which includes the likes of Amazon Prime Video, YouTube, and Hulu, is reported to have grown by 8.0% last year, and is predicted to grow by a further 7.6% over the next 12 months to reach a value of almost $65bn.

However the year plays out, it remains crucial that advertisers keep up to date on the latest trends and tools to drive improved ROI if they are to be prepared for whatever is waiting around the corner.