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AdTech in 2021: A Look at Key Challenges for the Advertising Industry

Dmytro Kustov
24 May 2021
5 min
AdTech in 2021: A Look at Key Challenges for the Advertising Industry

There’s hardly an industry in the world that wasn’t affected by the turbulence of 2020. AdTech is no exception, and the sector now has to adjust to new advertising challenges.

The COVID-19 pandemic plunged people into lengthy lockdowns and led to an increase in time spent at home and online. Data from eMarketer shows that US adults spent 1 hour more per day on digital devices in 2020 compared to 2019, with screen time projected to surpass 8 hours a day in 2023.

These numbers point to a bright future for digital advertising. According to Statista, digital ad spending is expected to reach $398,762m in 2021 — a growth of 12.2% from the previous year.

Yet growth rarely comes without challenges, and the significant changes that marked 2020 will continue to shape the industry’s development this year. Here are just some of the major challenges that 2021 has in store for AdTech.

The death of third-party cookies 

AdTech in 2021: A Look at Key Challenges for the Advertising Industry - photo 1

The phase-out of third-party cookies is no news to the industry, but it’s certainly one of the biggest challenges to emerge for AdTech in 2021. 

While most browsers have already stopped using cookies, the market will feel the biggest impact when Google Chrome, which holds over 64% of browser market share, abandons them by early 2022.

Now, industry experts are busy looking for alternative ways to collect information about target audiences in order to remain transparent and comply with new privacy regulations. In the words of Philip Smolin, Chief Strategy Officer at Amobee, 

Regardless of what replaces the cookie, it’s time that AdTech truly thinks differently about the direction of the industry with regard to identity and personalization.”

Some browsers are already testing their own solutions to advertising problems. Google’s Privacy Sandbox project, which is researching cookie alternatives, is one example. Google claims that with the Sandbox, marketers can expect 95% more conversions per dollar spent compared to cookie-based ads. 

Another solution from Google is the Federated Learning of Cohorts (FLoC) — a technology that allows ad companies to target specific audiences based on various criteria such as age and location without exposing user identity. Though relatively new, the idea has already become a hot topic and has even led to the formation of an anti-FLoC initiative supported by many industry players.

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    A third option is identity solutions such as Unified ID 2.0 by The Trade Desk. This open-source ID framework improves consumer controls while preserving the value exchange of relevant advertising. The biggest advantage it brings is anonymization, as it allows ad companies to identify a single user across different platforms without giving out the user’s personally identifiable information.

    Yet another way forward is contextual targeting, which allows advertisers to display products only on relevant web pages based on keyword searches and user interests. This approach has already gained supporters in the industry. As Jon Kagan, VP of search at Cogniscient Media says:

    “The next best option to cookie-based behavioral targeting is anything keyword, or keyword contextual-based advertising. Years ago, everyone discounted it and we moved further and further away from keyword targeting, but now we’re going to have to go straight back to it.”

    The rise of CTV

    AdTech in 2021: A Look at Key Challenges for the Advertising Industry - photo 2

    The COVID-19 pandemic and lockdowns have led to an increase in the number of hours people spend watching connected TV (CTV). Shortly after the outbreak in the USA, time spent watching CTV on devices increased 81% year-over-year. Nielsen data shows that this equates to nearly 4bn hours of CTV use per week. What’s more, the 2020 State of Connected TV Report forecasts that the number of US households using connected TV technology will increase by 82% by 2023. 

    Triplelift is one example of a company that’s already capitalizing on the surge in CTV use. The company pioneers post-production solutions for brand integrations in contextual advertising.

    Another consideration, which could become a new advertising technology trend, is more advanced targeting of CTV audiences. Ad firm Strategus is already offering solutions that include improved contextual targeting and better timing of running ads for a target audience.

    The growth of the CTV market also creates new difficulties, such as measurement, ad fraud, and campaign planning in fragmented markets. Pixalate’s 2020 CTV Ad Supply Trends Report found that up to 24% of CTV programmatic ads in the US were invalid traffic in 2020, while eMarketer predicts that by 2023, global ad fraud will cost the industry $100bn.

    Experts say that this situation could be brought under control through the adoption of new industry standards. One successful tactic is ads.txt — a text file released by the Interactive Advertising Bureau (IAB) Tech Lab which publishers can place on their websites to give ad buyers a list of authorized vendors. Its adoption rate among publishers offering video inventory using programmatic participation has reached 80% since its launch in 2017.

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      Ad blindness

      According to Backlinko’s 2021 report on ad blocker usage and demographic statistics, some 42.7% of internet users worldwide use ad blocking tools at least once a month. Another problem is the low CTR for any type of ad. For example, SmartInsights notes that the CTR for ads on Google Search dropped from 2.5% to 1.55% in Q1 2020.

      This points to one of the biggest challenges for AdTech developers: the need to come up with new and more engaging formats for ads. Possible solutions include more innovative design, additional animations, interactive videos, and native formats that look like related articles. 

      The latter, for instance, involves natively embedding information about a product in a website’s content. This prevents ads from falling into so-called “yellow areas,” which are perceived as noise by the audience. With 70% of Internet users preferring to learn about products through content, native advertising is an important trend in modern AdTech.

      Studies also show that video ads have the highest click-through rate of any format and offer high engagement.

      Wrap-up 

      The end of the cookie era, the rise of CTV, ad fraud, and ad blindness are four of the major challenges that will keep the AdTech industry busy in 2021. The result is likely to create a plethora of innovative ideas for the market that will shape a new future for digital advertising.

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