Forecast: Open exchanges will see declining share as programmatic money goes direct

According to a new eMarketer forecast, programmatic is evolving in response to broader market concerns about transparency, brand safety and data quality. The firm estimates that in two years, “more than four of every five dollars US advertisers invest in programmatic advertising will go to either programmatic direct deals or private marketplaces (PMPs)—not the open markets.”

Flight to quality. Since the inception of programmatic, there have always been concerns about quality and transparency in the open exchange market. Those concerns have only increased in the recent past.

In response, direct and private marketplaces have emerged to promise more quality control and brand safety. They will continue to see gains at the expense of open exchanges, according to eMarketer.

Direct will grab nearly 60 percent of programmatic display. This year programmatic direct will represent more than $27 billion in spending. That translates into 58 percent of all programmatic display. Beyond online and mobile, eMarketer defines “programmatic display” to incorporate video and sponsorships across platforms, including connected TV and OTT streaming devices.

According to eMarketer, total programmatic ad spending will grow to $47.4 billion in 2018 and more than $69 billion by 2020. This year the firm says that 84 percent of mobile display and 81 percent of digital video will be bought programmatically.

Another factor driving the shift is the move toward first-party data. Direct and private marketplaces provide access to data that often isn’t available in open exchanges. However some marketers are skeptical that massive quality difference exist between the two categories.

What it means for marketers. This trend is likely to continue. Direct has become a favored way to buy programmatically as concerns over fraud, brand safety and transparency on open exchanges have risen. Programmatic direct gives advertisers more control over the sites their ads run on and content their ads appear next to, limiting fraud and low-quality or unviewable inventory. There is also more transparency in pricing between publisher and advertiser when the parties transact directly.