Reflection is essential to moving into the new year, and the ad tech industry has much to reflect on from 2022. From the ad spend slowdown to potential federal privacy regulations, the ecosystem must work in overdrive to prepare for all that 2023 has to offer.
It begs the question, what do we predict will happen this year? NFT’s took the world by storm. Retail media and ID solutions revolutionized practices around privacy-centric data. How will these practices evolve further in 2023?
At the beginning of 2022, AdMonsters published our predictions for the year. With the help of industry professionals, we predicted that brands would triple down on first-party data, the changes in Google’s privacy sandbox, and the CTV boom. Will the predictions be spot on this year? Let’s look forward together to see how we predict the new year will pan out.
The walled gardens have always been a major influence on the ad tech ecosystem. In fact, Google and Meta (the duopoly) captured 85% of ad spend.
Since they’ve monopolized revenue and inventory, any significant change they implement will affect the ad tech industry. For example, the announcement of Google’s third-party cookie depreciation sent ad tech into a tailspin because Chrome dominates traffic.
This year, some experts predict a new king is in town. Amazon is gaining ground on Google’s empire and the game of thrones persists.
Amazon will 1-Up Google. “Amazon is the new (and improved) Google. While the latter holds its death grip firmly on the ad products side of the business, Amazon not so quietly builds up an ever-growing tech stack to cover all marketing needs. Talk at its Unboxed conference celebrated its clean room capabilities. As the leading Retail Media Network, there’s ample cause to celebrate. The question remains whether these moves will put it in the antitrust crosshairs or if they can keep flying under the radar of government scrutiny, unlike their compatriots at Meta, Twitter, and Google.” – Eliza Nevers, Chief Product Officer, Lotame
Economic Shifts Will Rattle Big Tech Into More Rounds of Layoffs. “Industry dynamics are seeing tectonic shifts. The pandemic created unusual dynamics and may have delayed a reckoning, but the digital giants finally got too big and overshot the surrounding market dynamics. As a result, all of the major players, with the possible exception of Amazon, are already doing layoffs – we’ve seen announcements from Amazon, Meta, Twitter, Snap, Microsoft, and even Disney. When it comes time to cut the digital fat, the first cut is rarely enough. We’d expect to see more layoffs next year, some from the same players who have already announced a first pass. In the surrounding recessionary environment, startup and growth capital is scarce and more expensive. Some young companies in the industry won’t be able to secure funding. So we also expect to see numerous close shops or seek a quick sale. How hard and how many? Hopefully, we won’t know next year until we see green shoots. One thing we can predict with relative certainty: Elon Musk will be one of the three remaining Twitter employees by the end of Q1.” – Mike Woosley, COO, Lotame
Meta will Flake on Metaverse Investments. “The handwriting is on the wall for the Metaverse based on Meta’s last earnings report. Facebook “invested” $9B on this metaverse thing – and every drop of that $9B came from its profits. Its VR service has just 200,000 users. As a digital property that puts its traffic somewhere between “Catster” and “The Fluffy Kitty” in the public interest. Advice to Meta: if you want to expand in VR, be like Microsoft and buy a gaming company for $75B. Meta will drastically curtail its investment by the middle of 2023.” – Mike Woosley, COO, Lotame
Privacy and Identity Solutions
Privacy was the talk of the town in 2022, and the ad tech industry could barely keep its name out of their mouths. Some predict the conversation around privacy will change in 2023, and others think the discussion will be less prevalent. Here’s what industry experts think:
Privacy Switches Focus. “Brands and publishers are building on their first-party data capabilities and ID alternatives. Still, these tactics alone will not solve the tightening of privacy regulations and the deprecation of third-party cookies. While personalization does not equal identification, the industry has long conflated the two. 2023 will be the year that marketers shift their strategies from ID-based personalization to creative-based personalization.” – Alistair Goodman, CEO, Emodo
Shrinking Identity Landscape: Learn to Walk the Cookieless Walk. “Despite urgency doubling around the need for identity solutions, 2023 will bring little to no progress as Google continues to kick the can down the road. As long as cookies exist, marketers will use them. Even those with mandates to target only first-party data won’t realize their identity partners rely on cookies. With zero real use cases to prove those aforementioned in-market cookieless solutions work, the most exciting development in 2023 will be far fewer companies in business. The identity landscape will continue to shrink over coming quarters from more than 100 transactable IDs to a top four or five.” – Eliza Nevers, Chief Product Officer, Lotame
Privacy Will Lose Its Importance. “Privacy, although hugely important, will become less of a focus for marketers this year. We are hearing that it is still a consideration but differs from the focal point it has been in the past. Google continues to punt changes opening up questions about when and if it will begin to deprecate cookies. Additionally, new regulations have shown exactly what limitations are on the horizon, so some uncertainty has been removed around what changes will take place and when.” – Matt Sotebeer, Chief Strategy Officer at Digital Remedy
Data Fraud and Misinformation
The industry has created systems to stop the increase of ad fraud, but that does not mean the practice has died down. Bad actors became more creative with sneaking misinformation and scams into ads.
We saw that in our 2023 Malvertising preview, which noted that every aspect of the supply chain was affected. We also saw it with the increase in political ad fraud during the midterm elections.
The industry must work together to educate themselves and consumers on how to detect and block ad scams. The more publishers understand the origins of these attacks, the more they can do. This will allow publishers to put better security in place to protect themselves and the consumer.
Mis/disinformation. “Our research finds that 68% of consumers globally are worried that levels of mis/disinformation are growing. This poses a huge threat to brands as 3 in 5 (61%) consumers would be less likely to purchase from a brand that appears alongside mis/disinformation. In the face of economic uncertainty in 2023 and beyond, brands must ensure advertising spend is driving strong ROI. Ads appearing alongside false or misleading content is a form of wastage—with the added risk of creating reputational damage. In the year ahead, we’ll see a greater emphasis placed on solutions that ensure ads appear in brand-safe environments. AI-driven tools that leverage semantic science—such as deep learning, machine learning, and ontology—will provide confidence and clarity to advertisers and publishers looking to defund mis/disinformation and reinforce the authenticity of their brand values.” – Dan Slivjanovski, CMO of media measurement company, DoubleVerify
What does the future of mobile advertising hold? The consensus is that mobile advertising brands will expand into new partnerships and develop privacy-centric strategies.
New privacy changes and tech advances forced app publishers to re-evaluate how they drive their ad ARPDAU. AdMonsters recently hosted a webinar “The Future of Monetization,” that spoke to the future of mobile monetization. One of our panelists, TK Krishnamurthy asserted that brands should prioritize users’ needs before considering revenue. Creating a great user experience will boost revenue at the end of the day.
An opportunity for growth. “Global macroeconomic changes reshape how businesses think about growth demands and create opportunities for those who are willing to adopt. As the mobile ecosystem evolves, advertisers will continue to get pushed to experiment with new channels to remain competitive. Mobile-first businesses will go beyond mobile inventory to new forms of audience reach that are novel for mobile performance, such as Connected TV. Measurement is also evolving as it takes a broader set of tools and methods – from media mix modeling to up-to-date platform support – to have a holistic view of channel portfolio performance.”– Andrey Kazakov, VP of Demand, AppLovin
The Integration of Digital Marketplaces into Mobile Games and Apps. “The opportunity and monetization that can be unlocked by integrating digital marketplaces into mobile games and apps are vast. After all, there are already billions being spent annually on digital items across every other gaming platform. As a partner of AppLovin, Lion Studios integrated an NFT in-game event into Match 3D and saw strong engagement and an increase in Average Revenue Per Daily Active User (ARPDAU).This led to a significant increase in in-app purchases and drove a new and meaningful revenue source through royalty fees generated from users trading their assets on the marketplace. Looking at recent years, mobile game developers that invested in new monetization methods early are the ones who gained advantages in the market. For developers looking to unleash their user engagement potential in 2023, the time to invest is now.” – Rafael Vivas, General Manager of New Initiatives, AppLovin
Web3: The Digital Landscape
Many believe Web3 capabilities won’t impact how business is run in the ad tech ecosystem on a major scale but is this truly the case? Industry sentiments are mixed.
Awareness around Web3 grew immensely in 2022 with the rising popularity of NFTs and metaverse in ad campaigns. For example, TMB and Pet collective launched an NFT campaign that sold out in seconds. Their partnership proved that Web3 capabilities are profitable and a creative way to engage with your audience. The key is creating an experience that connects with your audience’s needs.
Web3 capabilities are also a potential solution to the new privacy regulations because it promises to give consumers control of their data. In Web3, a small monopoly of owners won’t store consumer data assets. Instead, the consumer will control their own data and decide if they want to sell it or not.
NFTs Represent the Evolution of Digital Item Ownership. “Digital marketplaces are widely accepted amongst gamers worldwide, and billions of digital items are transacted through them annually already. We believe that NFTs are an evolution of digital ownership. They present a new opportunity for users to re-sell their earned or purchased digital items and drive incremental revenue for developers. Previously, if you wanted to see whether a user truly owned an item, you had to log into that game and interact with that user inside of it. Now, with NFT technology, you can easily identify someone’s digital ownership of assets on a public ledger and easily exchange that ownership. Digital marketplace monetization should be at the forefront of developers’ minds when aiming to keep users engaged with new creative games.” – Rafael Vivas, General Manager of New Initiatives, AppLovin
Web3 will Continue to Climb, but not Without Hurdles. “The recent FTX collapse has sparked a lot of uncertainty and fear within the crypto/NFT market. However, despite this, we are still seeing a lot of interest from brands to launch Web3 activations. Because the Metaverse’s focus is on community, brands will find different and new ways for consumers to interact with them and each other digitally. One of the Metaverse’s greatest strengths is its ability to build community. The rise of the Metaverse won’t occur without hurdles though. We can expect to see challenges in adoption and use cases. We will need elevated virtual reality technology and much more robust avatar standards and architecture.” – Jack Cameron and Billy Huang, the co-founders of Insomnia Labs
Web3 Breaks New Ground for Brand-Consumer Relationships. “With the recent surge in privacy laws, Web3 could be the answer brands and businesses are looking for in the future. Within Web3, we see NFTs as a brand loyalty program that could identify and curate a closer group of consumers than ever before. Also, DAOs will allow people to have a stake, enticing them to participate actively in the community. Wholistically, Web3 provides technology to build new things and empowers brands to communicate with their consumers more intimately than ever before. Consumers can now connect and interact with the brand more intimately and with other fellow consumers who share the same passions and interests. Web3 will unlock new opportunities for brands to become more “cool” and connect deep, long-lasting relationships with their consumers.” – Jack Cameron and Billy Huang, the co-founders of Insomnia Labs
Further Experimentation in the Ad Tech Space
Revenue diversification is essential in the era of the ad spend slowdown and a possible “ad recession.”
Consequently, the ecosystem is forced to evolve and experiment with new mediums to help drive revenue and user engagement. Whether that means experimenting with Web3 or augmented reality, creativity is key to standing out in the crowd.
Creative Ad Monetization. “The gaming industry has always thrived on creativity and experimentation. The current economic downturn is forcing us to double down on this even more. As launching new gaming hits has become more difficult, we are seeing more and more developers take risks and be open to changing their previously winning formula. We currently see and predict that we will continue to witness the game industry developing in its monetization strategies. Whether it’s adopting hybrid monetization, with IAP partners integrating ads and ad-based developers trying to crack IAPs or new ad formats such as app open or native, I expect to see a lot of new and creative monetization strategies emerge in 2023.” – Daniel Tchernahovsky, VP of Global Business Development, AppLovin
Augmented Reality and AI. “Augmented reality is gradually growing out of its infancy and could soon become an indispensable part of a digital marketing strategy. More and more brands have started integrating AR features into their apps and online campaigns. Consumers are trying out AR and experiencing upgraded customer journeys – think of using Google Lens to translate restaurant menus or trying on make-up and glasses virtually. Whoever scores with the most creative and intuitive implementation this new year can set new standards and secure a long-term competitive advantage.” – Florian Hübner, CEO and Founder at Uberall
“Augmented reality is already making its way into online campaigns and setting the first benchmarks in the hybrid customer experience. The beauty chain Douglas, for example, recently launched an AI-powered digital tool for analyzing customers’ skin types and offering tailored product suggestions. Personalized customer experiences like these will continue to evolve rapidly in the coming year and beyond, further changing the standards in digital marketing. Success with customers and the competition will be determined by the actual benefits of these tools and the creativity with which they are implemented.” – Florian Hübner, CEO and Founder at Uberall.