At the IAB Australia Leadership Summit 2024 on Wednesday, Dr. Daniel Knapp, chief economist at IAB Europe, delivered a session on the evolving landscape of marketing and advertising. In his keynote, titled “Shaping the Market”, Knapp shared his insights on the economic forces and trends that are not only influencing the way the market operates but are also driving the future of advertising. He addressed everything from the consolidation of programmatic media and the role of artificial intelligence (AI) to the shifting dynamics between publishers, advertisers, and agencies.
Navigating programmatic complexity: A less is more approach
Knapp kicked off his session by addressing the increasing complexity in programmatic media. According to Knapp, despite the growth of the programmatic market, it is becoming increasingly difficult to sustain in its current fragmented form. “We’re seeing a complete change in how this market operates,” he said, highlighting that nearly 80% of open web demand is now being trafficked through only five companies. “These companies are decision-making gatekeepers controlling where budgets go, and they have limitations on the number of impressions they can see.”
A major concern raised during the talk was the inefficiency brought on by fragmentation. “If we look at the average publisher, they are working with 61 different SSPs [Supply-Side Platforms],” Knapp said. “This is a challenge. We need fewer but thicker pipes in programmatic. The world of first-party data demands better signals, and that’s where the future lies.”
Knapp highlighted that media owners are increasingly forced to use “thin pipes” to distribute programmatic monetisation across multiple channels. These SSPs, while vital, contribute small fractions of value, and as a result, the system has become unsustainable. “It’s clear that the current approach of using so many SSPs is no longer efficient. We need to consolidate and build stronger connections.”
The slow adoption of cookieless advertising
The topic of innovation — and the slow pace at which the industry embraces it — was a recurring theme in Knapp’s address. Despite years of discussions around moving away from third-party cookies, Knapp observed that the industry has been conservative in its adoption of cookieless advertising solutions. “We’ve been talking about moving away from cookies for years, but they’re still the bedrock of the advertising ecosystem,” he said.
He highlighted data from a large advertising agency showing that while cookieless targeting methods are often touted as the future, they still represent a small fraction of current industry practices. “The industry is in a state of transition, but it’s changing too slowly,” Knapp remarked. “We need to speed up the adoption of new data-driven solutions, especially in light of growing regulatory pressures.”
Mediaweek spoke with Ori Gold, CEO and co-founder of Bench Media, after the session, and he said: “More than half of digital interactions today are already cookieless, and brands that haven’t adapted are falling behind, turning a blind eye to significant wastage in their ad spend.
“We advise marketers to ensure they have the right tools, technology, and processes in place — regardless of whether Google eventually deprecates cookies or not. Embracing a cookieless approach now will not only keep brand strategies relevant but also deliver a superior media mix and better results.”
AI: The key to unlocking future potential
A significant portion of Knapp’s session focused on the role of artificial intelligence (AI) in transforming the advertising industry. He emphasised that AI is already deeply embedded within many companies’ strategies, even if the full potential of AI has yet to be realised.
“We are still in the ‘picks and shovels’ phase of AI,” Knapp explained, referencing the early days of AI infrastructure development. “While AI is being used for everything from creative optimisation to targeting, the full productivity gains we anticipate are still a long way off.”
Knapp pointed to the rapid rise of AI technologies like ChatGPT as evidence of the significant impact AI is already having on the industry. However, he was quick to note that while there is considerable investment in AI infrastructure, the transformative effects are yet to be fully seen. “We haven’t seen AI’s full impact in terms of productivity gains or transformations. It’s going to take at least a decade before we truly see the revolution AI can bring to advertising,” he predicted.
Despite this, AI is already having a profound impact on the way companies approach media buying and creative processes. From AI-driven ad targeting to Pepsi’s use of AI for campaign planning and creative insights, it is clear that AI is reshaping the way brands interact with consumers.
“AI is no longer a buzzword; it’s table stakes,” Knapp said, adding that the true value of AI will lie in its ability to aggregate signals, make decisions, and then activate those decisions at scale.
The changing role of agencies: Efficiency over creativity
As AI continues to drive efficiencies in the marketing ecosystem, questions are being raised about the future of traditional agencies. Some companies, like Klarna, have embraced AI to streamline their operations, cutting agency costs while increasing marketing efficiency. Knapp discussed how Klarna’s success with AI-driven strategies is challenging the traditional agency model.
“They implemented AI, cut agency costs, and saw their marketing efficiency soar,” Knapp noted. “This signals a broader shift where more advertisers are looking for efficiency rather than creative brilliance. The old agency model will need to adapt.”
He went on to discuss Michael Farmer’s book Madison Avenue Manslaughter, which outlines the pressures agencies face in adapting to clients who demand measurable outputs and lower fees. “The traditional agency model is in peril,” Knapp warned. “Agencies must reinvent themselves to stay relevant in an increasingly tech-driven world.”
Programmatic’s future: The rise of new channels
While the programmatic banner world may have plateaued, Knapp sees new opportunities for growth in emerging media channels, particularly audio, retail media, and social. “Programmatic 1.0, the banner world, is not growing anymore,” he said. “We’re shifting away from that, and the future is in new formats like audio and AI-driven creative solutions.”
Knapp also highlighted the potential of retail media networks as a key area of growth, particularly as they integrate programmatic solutions into e-commerce platforms. “There are massive opportunities in retail media and audio,” he said, noting that these areas represent some of the most exciting areas for programmatic advertisers moving forward.
Gold noted: “Retail media is still in its early stages, but we expect significant growth in the next 2–3 years. The current challenge is the lack of scale and automation in owned inventory. For advertisers, the current opportunity lies in leveraging retail networks’ first-party data alongside other channels to unlock rich targeting and closed-loop attribution.”
This combination of first-party data with omnichannel strategies not only enhances precision or targeting but also delivers measurable results, a critical need in today’s ROI-driven marketplace. Retail media’s rise is just starting, and savvy players are already positioning themselves to ride the wave.
Looking Ahead: The role of AI in the next decade
As the session wrapped up, Knapp painted a picture of an advertising ecosystem where AI continues to play a central role. “AI-driven tools for decisioning, activation, and optimisation are the future of programmatic advertising,” he said. “The industry needs to focus on building the right infrastructure now to take full advantage of what AI can offer in the coming decade.”
While the immediate future may be slow, Knapp’s vision for the long-term future of advertising is one where AI not only enhances the buying and selling process but also radically transforms the way advertisers and media owners work together. “We are on the verge of something big,” he concluded, “and the next decade will be critical for the industry.”
“The real transformation we’ll witness in the next few years with AI is its demystification,” Gold said. “Until recently, only the big tech giants such as Google, Meta, Amazon, Netflix, and the like, were able to create valuable AI-driven applications tailored to their needs. What OpenAI has started, followed by other AI infrastructure providers, is enabling local and emerging players to harness the power of AI for their own products, business processes, and decision-making.”
He said: “The real shift lies in this democratisation of AI, paving the way for nuanced, purpose-built applications designed to address specific needs. This is the evolution I expect to see, where AI’s potential becomes truly accessible to all.”