Understanding AdTech: An Industry Overview

Digital targeted advertising on data as simple as one’s birthday has proven effective in increasing sales. 

By Griffin Macary

What is the AdTech Industry?

Advertising technologies, otherwise known as adtech, is a term that is used to describe the software, tools, and methods advertisers use to deliver advertisements to their audience through the use of digital marketing campaigns. This includes measuring these interactions as a means to evaluate the effectiveness of an advertising strategy as well. With the first digital ad having been sold in 1993, the industry has been around for quite some time and has consistently been a transformative space as technology continues to advance. AdTech includes an umbrella of various technologies, some of which include demand-side platforms, supply-side platforms, agency trading desks, ad servers, ad networks, and much more as the industry continues to evolve and expand with time. 

A major trend currently in the AdTech industry is a growing focus on programmatic advertising. Programmatic advertising is the application of technology in both the purchasing and selling of digital ads, with a focus on automation in particular. We have recently seen a large number of companies apply machine learning (ML) algorithms to strategically acquire and deliver the most effective advertisements to a specified audience that has been identified through a variety of data markers, such as geographic location, shopping patterns, demographic, and website interaction. 

Potential

Given that the industry has been around for quite some time now, we see the global AdTech industry to be valued at $748.2 billion in 2021, with projections reaching as high as $2.9 trillion by 2031. This growth can be attributed to numerous factors.

Currently, the growing digital and internet penetration globally is impacting the growth of the AdTech market in a positive manner. In the last year alone, we have seen the number of internet users globally increase by 189 million, totaling about 5.3 billion total users worldwide. This number continues to rise, thus contributing to the growth of the AdTech industry as more individuals can be reached through digital advertising.

The adoption of artificial intelligence (AI), machine learning (ML), and augmented/virtual reality (AR/VR) has also helped propel the growth of the AdTech industry in recent years. These technologies help digital advertising firms in numerous ways, some of which include efficiency in synthesizing and interpreting large amounts of data, creating predictive models to analyze consumer behavior and create customer profiles based on that behavior for targeted advertising, and creating digital advertisements that flow freely with the environment around you with the help of AR/VR. These technologies have been proven to be a gamechanger when it comes to large data analysis and will continue to help scale this industry in the coming years.

It is through these growth factors that we see the AdTech industry continue to expand and evolve. The current compounded annual growth rate for the AdTech industry is 14.7% and is expected to remain steady from the current year to 2031.

Risks and Concerns

While we see continued growth in the AdTech industry, there are risk factors to keep in mind when looking at the industry.

The first concern is transparency and consent within the industry itself, as concerns grow about the intrusive profiling of website users and data privacy. Laws in terms of data privacy vary between states, which causes issues when companies motion to share leads. Users may not always be given appropriate transparency and be able to give valid consent in terms of data collection. In both 2021 and 2022, a number of regulatory enforcement actions were taken against major companies within the AdTech industry regarding data privacy, as private litigation arose over the potential misuse of cookies.

Another major concern includes the deterioration of cookies within the AdTech sector. Cookies are consumers' digital footprints which collect data that can be used for targeted digital advertising. As of recently, major search engines such as FireFox and Bing have decided to no longer allow for cookies to be used, and Google is expected to remove them as well in the near future. Without the use of these cookies, targeted digital advertising will become more difficult due to a lack of data available on users.

Conclusion

As technology continues to advance and the number of digital users globally continues to rise, we expect to see continued, steady growth in the AdTech industry. The continued improvement of artificial intelligence, machine learning, and augmented/virtual reality propels the industry to access new forms of data analysis and programmatic advertising. The continued rise in internet users globally shows an expansion of the advertising market and continues to add new consumers who can be reached through digital advertising. 

 Although growth is expected to remain strong, we see risks in the AdTech industry through various factors. Users may not always be able to give valid consent or be given reasonable transparency in terms of data collection, leading to possible issues regarding seclusion. The deterioration of cookies leads to a lack of data needed when performing targeting advertising, which could slow certain areas of this industry.

Overall, the AdTech industry is an ever-changing environment which continues to evolve with the advancement of technology. In this complex network of digital campaigns, we see AdTech stand as an exceptional example of innovation, continuously shaping and changing the world of advertising as we know it. 

Resources

“Adtech and Data Security Risks.” DWF, DWF, dwfgroup.com/en/news-and-insights/insights/2023/1/adtech-and-data-security-risks#:~:text=Transparency%20and%20consent,transparency%20and%20gaining%20valid%20consent. Accessed 26 Oct. 2023.

“Adtech Market Size, Share: Industry Forecast - 2031.” Allied Market Research, www.alliedmarketresearch.com/adtech-market-A53696. Accessed 26 Oct. 2023.

Alexander, Tom. “What Is Adtech [+types Worth Investing In].” HubSpot Blog, HubSpot, 19 Oct. 2021, blog.hubspot.com/marketing/what-is-ad-tech.

Research, Stats And. “Adtech Market Insights 2023, Analysis and Forecast to 2030.” LinkedIn, www.linkedin.com/pulse/adtech-market-insights-2023-analysis-forecast-2030/. Accessed 26 Oct. 2023.

Vrublivskyi, Roman. “Council Post: Adtech Market Is Booming: How to Benefit from This Growth.” Forbes, Forbes Magazine, 31 Aug. 2023, www.forbes.com/sites/forbestechcouncil/2023/08/29/adtech-market-is-booming-how-to-benefit-from-this-growth/?sh=390bcd9a3bd4.