IAB: Open Exchanges Drove 2014 Programmatic Revenue, But Private Exchanges Are Coming On Quickly

iabbOpen auctions generated 70% of total programmatic revenue in the US last year, according to the Interactive Advertising Bureau’s (IAB) first-ever Programmatic Revenue Report.

Programmatic display advertising totaled $10.1 billion last year, the study found, and made up 20% of 2014’s $49.5 billion total Internet ad revenues.

The report, prepared in partnership with PricewaterhouseCoopers US (PwC), claimed programmatic buying and selling was responsible for 52% of display-related advertising in 2014.

Though the study suggested open marketplaces are the bedrock of programmatic revenues, a change might be coming.

“Bear in mind that this is 2014 data,” said Sherrill Mane, SVP of research, analytics and measurement at the IAB. “Toward the end of 2014 and in early 2015, the industry had begun talking more about fixed rates, automated guarantees and private exchanges. Frankly, those are part of the conversation around transparency and around the capacity to plan better.”

She added more revenue is shifting into private auctions, fixed-rate and automatic guarantee methods.

One early indication of this trend was GroupM’s statement last June that it would cease buying impressions in open auctions by the end of 2014, though Xaxis CEO Brian Lesser later called that “A blanket statement.”

Nevertheless, open auctions were popular last year because they were the first way to use automation to achieve efficiencies, said Mane: “The open method was the most common, and other types of transactions are evolving and being created as the market moves.”

IAB’s study pooled data from 2014 fourth-quarter survey results, publicly available corporate and industry data and interviews with programmatic buying and selling senior executives. As defined by the study, programmatic revenues include non-search Internet and mobile ads transacted through programmatic channels. The IAB tracked both publisher and ad tech revenues.

Ad tech firms generated 55% of 2014 US programmatic revenue in 2014, whereas publishers generated 45% of programmatic revenues.

The IAB also launched Monday a project called Programmatic Fee Transparency, which the IAB Programmatic Council will oversee.

“Transparency typically brings trust,” Mane said. “When people can see how systems flow, and how a business operates, they feel better about it and it’s a more logical investment.”

The working group’s purview will be to identify the areas of programmatic exchanges that require greater levels of transparency and outline best practices for disclosing programmatic-related fees.

“When everything is instantaneous and there’s very little transparency on how it all works, it’s hard from a publisher perspective and from an advertiser perspective to understand how it’s going to turn out,” Mane said. “Creating private exchanges eliminates a small degree of uncertainty so that you can plan from a sales perspective.”

 

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