The Shift of Power in European Ad Server Selection: A Look into the Future

June 19, 2023

Executive Summary

The digital advertising landscape is undergoing profound transformations, marked by the decline of third-party identifiers and the tightening of privacy regulations worldwide. The focus of regulators has also turned to the market dominance of big tech giants, resulting in substantial fines. In this changing environment, ad servers play a crucial role in online advertising and publisher revenue generation. This report explores the key factors influencing ad server selection in Europe and how industry trends impact publishers' choice of partners. Combining original research with insights from media and advertising professionals in Europe, we examine the following: factors shaping ad server selection, the influence of industry trends on publishers, variations in publisher ad server needs based on scale, and levels of trust towards Google, Facebook, Microsoft, and Amazon.

As revealed in this report, a significant power shift is occurring, with publishers and emerging independent technology providers gaining momentum while big tech giants lose ground. Privacy has become a paramount concern for publishers, and larger publishers are particularly focused on business practices and legal compliance, leading them to explore different providers in the coming years. Publisher requirements vary greatly based on scale and market, signaling the end of one-size-fits-all strategies and opening doors for agile and adaptable solutions.

The power lies with the Open Web, and it’s time to reclaim it. UMG. team mission is to make that happen while fostering an independent and interoperable ad tech ecosystem. We develop enterprise cloud adtech solutions which are independent and always work in favour of our client. This research confirms what we’ve been hearing from publishers across Europe and beyond: they are considering factors like privacy, antitrust issues, and alignment of interests when selecting technology partners.

"A positive sign of our progress is seen in the recent announcement of Vocento, a leading media group in Spain. This trend is gaining momentum, and we eagerly anticipate what the future holds."

Key Findings The survey findings indicate a shift in power away from the walled gardens of big tech providers towards independent market participants. This shift is most evident among larger publisher businesses, but early indications suggest that smaller publishers will follow suit within the next 3−5 years. Privacy-related market trends also strongly influence publishers' choice of ad servers, and this trend is expected to continue with the introduction of further privacy-focused legislation in Europe and the United States.

Key findings include:

  • 45% of publishers are likely to switch ad servers within the next 18 months, with privacy-related changes such as identifier deprecation and legislation significantly impacting their selection.
  • Larger publishers (revenue > £100m) are considerably more inclined to switch

Shifting Dynamics in Ad Server Selection: Unveiling Key Insights

Key Findings The survey findings shed light on a noteworthy shift in power from the dominant big tech providers to independent market participants. This trend is particularly evident among larger publisher businesses, with indications suggesting that smaller publishers will also follow suit in the next 3−5 years. Privacy-related market trends have a substantial impact on publishers' choice of ad servers, and this influence is expected to continue as privacy-focused legislation takes hold across Europe and the United States.

Key findings include:

  • 45% of publishers are likely to switch ad servers within the next 18 months, with privacy-mandated changes like identifier deprecation and legislation significantly influencing their ad server selection.
  • Large publishers (revenue > £100m) are significantly more inclined to switch ad servers within the next 18 months compared to small publishers (revenue < £10m).
  • Smaller publishers demonstrate a lack of awareness regarding the surveyed industry trends/events, indicating a need for education in this area.

Varied Publisher Ad Server Needs Based on Scale Cost emerges as the primary factor driving ad server selection, with 45% of respondents highlighting its importance. In the UK (58%) and France (49%), cost is the most commonly selected factor. Privacy requirements also hold significant importance in publishers' decisions to switch to a new ad server, with 28% of respondents considering it a driving factor. Larger publishers show concerns related to poor relationships with their current provider, business practices, legal compliance, trust, and exploring new channels. Publishers with revenues between £5m and £100m aim for greater efficiency within their stack, prioritizing integration, full-stack capabilities, and cost when making decisions about ad server selection.

Google Ad Manager remains the most widely used ad server, accounting for 54% of respondents, followed by in-house ad serving operations (17%) and Adform (5%). It is crucial to understand how Google achieved such dominance in ad serving. Mikaël Hervé, Vice President of Charles River Associates, emphasizes the need to explore the reasons behind Google’s high market share. He points out that while the network effect and data are not prominent factors, Google’s dominance stems from self-preferencing within its stack. This self-preferencing favors AdX through dual ties: 1) DFS favoring AdX and 2) Google DSPs favoring AdX. Consequently, Google can offer ad server services at a lower cost.

Hannes Modes, CTO at QuarterMedia, explains the critical role of interlinking between Google products in publisher retention. Despite concerns about data privacy and policy conflicts, publishers heavily rely on revenue generated through Google AdExchange. Even if publishers switch to a more privacy-compliant ad server, they still need to use AdX to avoid significant revenue losses. Modes highlights that programmatic selling without Google does not yield the same results and that working with Google can be complex and time-consuming, but ultimately advantageous.

Time Spent with Current Ad Server The duration of working with current ad servers is evenly distributed, with roughly equal proportions of respondents having worked with their current ad server for less than four years (47%) and four years or more (53%). The rapid digital transformation during the pandemic has boosted publisher confidence in managing their ad server operations, with 44% of those who have in-housed their ad server doing so within the last 12 months.
According to recent data, European publishers, on average, do not have immediate plans to switch to a different ad server within the next 18 months. Notably, publishers who have in-housed their ad serving operations show the least inclination to switch to third-party providers, followed by those with independent ad servers, and those utilizing the Google stack. Sophie Toth, Head of Programmatic and Adtech at Dexerto, highlights the potential risks associated with changing the main ad server, emphasizing the impact it could have on revenue. She emphasizes the importance of future-proofing success and maintaining confidence in a trusted partner. Toth states, "Changing the ad-server is not the focus. Having one partner whom I can rely on, knowing their systems and tech specifications, creates confidence."

However, variations arise when considering different European markets and their likelihood of switching ad servers. For instance, publishers in Germany demonstrate a significantly higher likelihood of exploring a move away from Google within the next 18 months.

Moreover, the analysis reveals that large publishers with revenues exceeding £100m are significantly more likely to switch ad servers within the next 18 months compared to small publishers with revenues below £10m. Large publishers have an average 77% more likelihood rating in comparison with small publishers.

These findings provide valuable insights into the current intentions of European publishers regarding ad server switching. While the overall likelihood of switching remains moderate, the market dynamics and publisher size play significant roles in shaping these decisions.

Factors Influencing Ad Server Selection Among European Publishers

Cost remains the primary factor in the selection of ad servers, as highlighted by 45% of respondents who consider it important. This trend is particularly evident in the UK (58%) and France (49%). Despite ad serving becoming more affordable in recent years due to Google’s shift in monetization, publishers continue to face market pressures, especially smaller organizations affected by recent layoffs, making cost a top consideration. In fact, 63.2% of small publishers cited cost as the dominant factor driving their decision to shift to a new ad server. Additionally, over 85% of publishers who have in-housed their ad serving operations view cost as an important factor in their decision-making process.

In contrast, large publishers focus on other concerns such as poor relationships with their current provider, business practices, legal and trust issues, and exploring new channels. These factors play a more significant role in their decision to switch ad servers.

Medium-sized publishers with revenues ranging from £10 million to £100 million are primarily seeking greater efficiencies within their technology stack. Their decision-making is driven by factors such as integration, full stack capabilities, and cost. Privacy requirements also hold significant importance, with 27.9% of respondents identifying it as a key factor in their choice to switch ad servers. As the deprecation of third-party cookies approaches and the proposed EU Digital Services Act introduces stricter rules on targeted advertising, including restrictions on targeting minors, privacy concerns are expected to become more prevalent among European publishers in the coming months.
There are notable differences between the German market and other European publishers. In Germany, cost is significantly less influential in the decision to switch ad servers, with only 25% of respondents considering it a driving factor. Instead, factors such as poor relationships with the current provider (41%) and legal/trust concerns (37%) take precedence.

These findings demonstrate the complex landscape of ad server selection among European publishers, where cost, relationship dynamics, legal considerations, and privacy requirements all play crucial roles in shaping their decisions.

Factors Influencing Publishers' Decision to Stick with Current Ad Servers

When it comes to ad server selection, the most common reason for not switching is ease and convenience, as cited by 33% of respondents, closely followed by expense at 29%. Resource issues continue to be a major concern for European publishers, making it crucial for ad server providers and advertising technology suppliers to prioritize easy and cost-effective transitions to new services. Furthermore, ease and convenience also play a dominant role (42%) in publishers' reluctance to switch away from Google, followed by integration challenges (28%), cost (26%), and the desire to use a full stack (25%). It's worth noting that there is no single decisive factor that universally encourages or discourages publishers from selecting a new ad server; the decision is highly specific to each publisher.

Establishing trust with the audience is a vital consideration for publishers. Regardless of the technology used, revenue and targeting capabilities can suffer if trust is compromised. Publishers value ad servers that offer an easy-to-use interface, responsive account managers, and a sense of security, which we in UMG. team strive to nurture Additionally, they would consider changing ad servers if there is a long-term assurance of capability, flexibility, efficient demand integration, constant innovation, and transparent pricing. Surprisingly, fines imposed on Google and Facebook for consent management are more likely to make publishers with independent ad servers reconsider their relationship with their current provider than those using Google Ad Manager.

As previously discussed, concerns about consent management play a significant role for publishers opting to remain with independent providers. The hypothesis is that if industry giants like Google and Facebook face penalties, smaller independents may also be subject to punitive actions and lack the resources to absorb the costs without passing them on to their partners. Regarding the lack of substantial difference between publishers on Google's stack and those with independent ad servers regarding fines imposed on Google for anti-competitive self-preferencing behavior, apathy towards anticompetitive actions by Google and the absence of corresponding punitive actions against big tech providers have been cited as possible explanatory factors. There is a general level of industry distrust resulting from Google's opaque practices, according to many regulators. Coupled with the fear of losing access to Google's demand after switching away from its stack, such incidents can actually incentivize publishers to stick with big tech providers, as seen in the previous finding on fines levied against Google and Facebook for their consent management practices.

Looking ahead, the future is uncertain with developments such as cookie deprecation, IDs, and CMPs. Publishers tend to approach change cautiously when they have invested in and become accustomed to a specific system. As the industry navigates the world of IDs and the enforcement of over 100 privacy regulations, the question of changing ad servers will become even more intriguing.

In conclusion, the decision to stick with a current ad server is influenced by factors such as ease and convenience, cost, trust, integration, and access to demand. Ad server providers and advertising technology suppliers should prioritize smooth transitions and cost-effectiveness while addressing publishers' concerns regarding trust and compliance.

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