2023 in Ad Tech: AI Revolution and Economic Turbulence

2023 in Ad Tech: AI Revolution and Economic Turbulence

2023 has come and gone, and what a year it was. Lotame 's Chief Revenue Officer, Christopher Hogg gives his take on what happened, what it means, and what’s still to come in the ever-changing world of Ad Tech. 

Part 1: AI was inescapable — will the hype be justified?

Let’s start with the obvious. The public launch of ChatGPT at the start of the year unleashed a whirlwind of hype, sending AI technology that had previously been the domain of niche specialists straight to the top of mainstream discourse, where it has stayed ever since.

Generative AI and the natural language interfaces and asset creation tools it can power are undoubtedly impressive, but it’s worth remembering that they are the products of some of the biggest corporations on the planet, which can pour effectively unlimited funds into convincing the world that AI is the biggest thing since the internet (which it no doubt is).

Will AI make entire swathes of professions obsolete? Will it trigger a “Terminator-style” robot apocalypse? Will image, audio, and video generation cause a destructive blurring between fiction and reality? Or is it simply a continuation of the automation trend that has gradually been making work and life more efficient and convenient?

At the end of the 2023, we are no closer to a realistic sense of AI’s trajectory, and I doubt we’ll be any clearer by the end of 2024.

Within ad tech, ChatGPT’s impact has been a categorical flattening of a previously diverse array of technologies. Rather than precise and accurate labels such as machine learning or large language models — which have been utilised by ad tech companies, including Lotame, for many years now — everyone is now wearing an AI hat to jump on the bandwagon.

Hopefully, as the hysteria dies down, we will return to talking about these distinct categories of AI and how they can be used instead of lumping everything in the same AI bucket.

Big tech and social platforms were nothing but drama

Those looking for intrigue and drama this year were well-fed by the big tech and social platforms.

Elon Musk’s calamitous takeover of Twitter — now X — saw a previously steady climb in advertising spend plummet as other platforms, even the long-troubled Snapchat, have achieved growth.

TikTok, meanwhile, has faced threats of bans in the U.S. due to security concerns. One state, Montana, has followed through on this threat (effective in January 2024), while various governments around the world banned its use on government worker devices. Despite these controversies, TikTok’s meteoric user growth has kept pace, making it the new go-to platform for influencer-driven campaigns and — thanks to its built-in shopping platform — e-commerce.

Outside of the social space, it was Google that stole the headlines, with its antitrust trial in the U.S. and record-breaking $2.6 billion European Commission fine for giving preferential treatment to its own ad products, such as AdSense and Ad Manager.

This has raised the very real possibility that Alphabet will finally be broken up, and rival Amazon — which is expanding its own advertising ecosystem — will no doubt be paying close attention to the fallout.

The Amazon advertising network allows advertisers to reach millions of customers across its e-commerce, streaming, and cloud platforms, with Prime Video announced to be introducing ads in 2024.

However the scale and ubiquity of this network may draw attention from regulators in an age where governments are cracking down on outsized market share and control.

Amazon may be able to keep itself out of the crosshairs by opening its audiences and platforms to third parties — a walled garden, but with open gates — and the conclusion of Google’s case will no doubt chart the course of Amazon’s future.

As for Meta, the company birthed an entirely new platform with the launch of Threads to capitalise on Twitter’s implosion — though there is nothing to say in terms of advertising, yet.

The big ad-related news was the announcement it would actively acquire consent from EU users before displaying personalised ads. Now, the company is trialling an ad-free subscription service for Facebook and Instagram users, on the back of a surprise reversing of its many quarters of revenue decline.

Part Two: Retail media and CTV soared as ad budgets tightened

For part two of my trip down 2023’s memory lane, I’m looking at the economic forces beyond our control, how they steered the course of ad tech and the areas of the industry that thrived despite turbulent conditions.

Economic uncertainty shrank budgets and pushed performance

The cost-of-living crisis, ongoing supply chain disruption, rising interest rates and inflation, labour shortages and strikes — it’s safe to say this has been an economically tumultuous year.

Despite a string of glory years and resilience during the pandemic, the tech world has not been immune from these economic shockwaves.

At the time of writing, layoffs in the industry have almost reached a quarter of a million, and their relentless pace means that milestone — for lack of a better word — has likely been passed by now.

The struggling economy has also resulted in a sharp slowdown in ad spend growth, with knock-on effects throughout the advertising supply chain and the technology companies that keep it running.

Brands and agencies have become increasingly performance-focused as they try and squeeze as much bang as possible out of a shrinking buck. Accurate measurement and attribution, along with direct audience access, have become top priorities.

Retail media networks, with their ability to connect brands directly to exclusive and price-conscious audiences, have been the big winners in this context as consumers abandon long-standing loyalties for brands that offer value or durability.

The supply side went from strength to strength

Retail media was the star of the advertising show in 2023, and it’s hard to think of any major retailer that hasn’t launched its own platform by now. This year saw the seeds being planted for widespread off-site targeting as retailers incorporated unified ID solutions and data collaboration capabilities.

CTV has been the other winner of the year, continuing to benefit from the slow and inevitable transition from broadcast and cable infrastructure to streaming. Fragmentation remains the word of the day, dashing hopes of ubiquitous measurement, but big brands pour in regardless to capture TV audiences.

But the story we should pay attention to is not just the growth of these channels, but the ways in which they are crossing over with one another.

Streamers have the attention, but viewing history alone is a flimsy basis for audience segmentation. Purchase history, on the other hand, is gold for connecting audience and advertiser, but on-site retail media placements can’t match the big screen for attention.

Bring the two worlds together, and we see a mutually beneficial partnership that allows each platform to overcome its respective shortcomings. And as both offer services exclusively to logged-in authenticated users, it’s a best-case scenario for audience matching.

Partnerships so far have included Walmart and Roku, Kroger and Disney, and Sainsbury’s Nectar360 and Channel 4. Expect many more in 2024.

Out in the wider web, frustrations with open programmatic’s complex and leaky pipelines have seen advertiser and agency interest gradually shift to curated marketplaces and direct connections with media owners.

It’s early days, and we won’t know how far the balance in power will shift until third-party cookies are finally history (fingers crossed 2024), but it seems that it is SSPs’ time to shine.

Let Us Know Your Thoughts 

We couldn’t possibly include all the news and trends from 2023, so please let us know in the comments what stood out for you in what has been yet another challenging and exciting year for our industry.

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