Marketers making programmatic ad buys are still giving a significant percentage to intermediaries, but the “ad tech tax” is being cut according to new eMarketer research.
About 34% of all non-social programmatic digital spend in the U.S. went to fees in 2018, but that percentage is projected to fall to 32.7% this year and 30.9% by 2021. Total cost of fees will go up as overall spend in programmatic continues to rise, from $9.86 billion in fees in the U.S. in 2018 to $15.26 billion by 2021.
The programmatic ad buying ecosystem has long been considered overly complicated and opaque with marketers losing large chunks of their buy to middlemen—platform fees, managed service fees, demand-side platforms, supply-side platforms, measurement and attribution providers etc. In recent years these fees have become known as the ad tech tax.
Estimates vary, but WARC pegs it at 55%. With ad fraud of about 30% also factored in, less than one-third of all programmatic spend actually makes it to working media.
“Advertisers and publishers alike have known for years that a significant chunk of programmatic spending doesn’t end up in publishers’ pockets,” said Nicole Perrin, principal analyst at eMarketer, in a post about the new numbers. “We wanted to provide the market with a better sense of how much spending does go to publishers and how much is available to ad tech partners, especially as the market continues to consolidate around leading players.”
While there is less research on programmatic in the Canadian market, eMarketer estimates that Canadian marketers will spend about $8.8 billion on digital marketing this year. Zenith said that about 82% of all digital media in Canada will be bought programmatically this year, and predicts that almost all digital media (99%) will be bought programmatically by 2020.
According to eMarketer, the tech tax is going down for a number of reasons: increased competition means programmatic advertising service providers have become more transparent about their fees; attempts to improve the system overall (such as ads.txt) are having some effect, and private marketplaces have also meant less need for transactional fees associated with buys on the open web.
“Asking basic questions of vendors can bring clarity, as can speaking directly to publishers about what share of a given buy ends up as working media,” Perrin said.