Pubmatic, 2020 Global Digital Ad Trends

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2020 GLOBAL DIGITAL AD TRENDS Innovation is a constant force driving the evolution of the digital media ecosystem. Digital channels are expected to provide nearly all incremental spend flowing into global ad budgets through 2020, and programmatic will account for most of that growth. Publishers and media buyers must understand the nuances and key trends impacting the market in order to capitalize on the vast opportunities available.

In such a fast-evolving industry, reliable data is the foundation of good business decisions. TABLE OF CONTENT This is a compilation of the most significant US DIGITAL & PROGRAMMATIC MARKET 2 market developments in the programmatic ecosystem to inform your 2020 strategies. GLOBAL DIGITAL & PROGRAMMATIC MARKET 11 This guide includes global advertising forecasts, growth trends for emerging and MOBILE ADVERTISING 19 evolving formats, trends in header bidding, VIDEO ADVERTISING 25 private marketplaces, and more! PRIVATE MARKETPLACES 34

REVENUE GROWTH 11.8% 9.5%

IN THE UNITED STATES, 3.6% BY MEDIA TYPE 3.0% -0.4% -2.6% -3.3% -4.4%

Digital media will continue to drive a

significant amount of advertising growth -14.8% -16.3%

in 2020. The Summer Olympics and US -17.9% Presidential elections in 2020 will bring incremental advertising revenue and drive local television spending. DIGITAL NATIONAL TVNATIONAL TVLOCAL PRINT RADIO HOME OF OUT (INC. CE) (INC. CE)

2019 2020

Source: Magna Global

$50 For the first time, US digital ad spending surpassed traditional media spending in 2019. Digital is projected $0 to reach over two-thirds of total media 2019 2020 2021 2022 2023 spending by 2023. Digital ad spend % of total media ad spend

Source: eMarketer

Billions $108.9 DIGITAL DISPLAY $100 $101.1 AD SPEND $92.2 $80 $80.6 $68.6 $60 53.1% 53.2% 53.5% 53.8% 54.0%

The share of digital spend allocated $40 to display advertising is expected to

remain flat over the next four years. $20 However, as digital advertising as a whole rises, display ad spend is $0 projected to grow 59% between 2019 2019 2020 2021 2022 2023 and 2023. Digital display ad spend % of total digital ad spend

Source: eMarketer

NON-PROGRAMMATIC 2020 15.0%

2019 16.5%

PROGRAMMATIC 2020 The benefits of automation drives 85.0% nearly all digital display ads through programmatic advertising. 2019 Only a sliver of ad buys are sold 83.5% directly and manually.

Source: eMarketer

OPEN EXCHANGE 2020 49%

PMP 2020 51% Thanks to continued brand safety and ad quality issues, buyers and sellers are directing more dollars to private marketplaces (PMP) in the US. Private marketplaces will overtake open exchange ad spending for the first time in 2020.

Source: eMarketer

CONNECTED TV 7.2%

DESKTOP MOBILE 9.5% 83.3% Mobile ad spending will represent the majority of programmatic transactions in the US come 2020. While the share of desktop ad spending declines, connected TV is expected to grow and capture almost 7% of the market.

Source: eMarketer

$40 $39.4 Video ad spend

Billions $33.4

$30 $27.2

$20.7 75.1% $20 74.4% Mobile $16.2 Half of all programmatic 73.2% ad dollars in the US will 70.9% $10 come from video by 2021, 67.4% Desktop/ 9.0% with mobile accounting 11.2% Laptop 19.6% 14.4% for three-quarters of the 25.3% 15.9% 9.5% 12.5% 14.3% Connected TV spending. $0 7.3% 2017 2018 2019 2020 2021

Source: eMarketer

NOT ACTIVELY ACTIVELY IMPLEMENTING IMPLEMENTING BUT PLAN TO* 45% 28%

Transparency and efficiency have now become key considerations for marketers. Most US buyers are either actively implementing supply path optimization (SPO) or planning NO PLANS TO to start within the next year. IMPLEMENT* 27%

Source: Digiday/PubMatic *within the next 12 months

28.5% Television 31.9%

Internet Display 26.7% 21.3%

Internet Paid Search 18.8% 17.3% 6.2% Digital display ads, including Newspaper 8.1% video, is the fastest growing Outdoor 6.4% ad format. It will account for 6.5%

over a quarter of total media ad Radio 5.5% spending in 2021, up from a fifth 5.9% 3.1% in 2018. Digital as a whole will Magazines 4.4% contribute to half of total media Internet Classified 3.9% ad spending worldwide. 3.7%

Cinema 0.9% 0.7%

2018 2021

Source: Zenith

Billions $517.5 WORLDWIDE $500 $479.2 DIGITAL AD SPEND $435.8 $400 $385.0 $333.3 60.5% 58.8% $300 56.6% 53.6% 50.1% $200

Global digital ad spend growth $100 rates remain strong. By 2020, digital advertising will represent $0 that majority of total media ad 2018 2019 2020 2021 2022 spend worldwide Digital ad spending (billions) % of total media ad spend

Source: eMarketer

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 13 TOP 5 DIGITAL AD SPEND MARKETS WORLDWIDE $ billions and % YOY change Digital ad spending in China and the US are expected to grow faster than the global average of 16% between 2019 and 2020—expanding their lead as the largest ad markets in the world +17% YOY CHANGE $151.3 $140

Billions $129.3 $120 +19% $100 YOY CHANGE $94.6 $80 $79.8

$60 $40 +10% YOY CHANGE +6% $20 YOY CHANGE +9% $19.6 $21.6 YOY CHANGE $14.2 $13.4 $9.4 $0 $8.6 US CHINA UK JAPAN GERMANY

Source: eMarketer 2019 2020

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 14 MAJOR DIGITAL AD SPEND MARKETS WORLDWIDE $ billions and % YOY change India is the fastest-growing digital advertising market in the world, followed by Russia. Both are home to large populations of increasingly digital and mobile users.

$8 +12.5% +7.5% Billions $7 +11.7%

$6 +13.0%

$5 +22.5% +7.5% $4 +11.5% +11.6%

$3 +9.8% +13.6% +24.0% +10.4% +12.0%

$2 +8.5% +8.2% $1

$0 ITALY INDIA SPAIN BRAZIL RUSSIA FRANCE MEXICO CANADA SWEDEN NORWAY DENMARK AUSTRALIA SOUTH KOREA SOUTH SWITZERLAND NETHERLANDS

2019 2020 Source: eMarketer

$100 $98.2

Billions $83.8 $80 $70.2

$60 $56.5 Programmatic 65% 68% transactions will $42.9 62% $40 44% 57% represent more than 51% two-thirds of digital 37% $30.6 display ad spend around $20 20% $19.9 the globe in 2020. 10% $8.6 $3.7 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Programmatic ad spend % of digital display ad spend

Source: Zenith

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 16 TOP 5 PROGRAMMATIC* DIGITAL AD SPEND MARKETS WORLDWIDE $ billions and % YOY change Double-digit YOY growth rates remain the norm among the largest programmatic advertising markets in the world. China (+19%), Japan (+18%) stand out, however, highlighting revenue growth opportunities for APAC publishers whom are prepared to offer ad inventory through automation next year. +14% $25 YOY CHANGE $22.3 Billions $20 $19.5 $16 $12 +19% YOY CHANGE $8 $8.3 $6.9 +15% +18% YOY CHANGE $4 YOY CHANGE +17% $3.8 YOY CHANGE $3.3 $2.8 $3.4 $1.7 $0 $1.4 US CHINA UK JAPAN GERMANY

Source: Magna Global; PubMatic calculations 2019 2020 *excludes search and social media

© 20182019 PUBMATIC, INC. ALL RIGHTS RESERVED 20192020 GLOBAL DIGITAL AD TRENDS / 17 MAJOR PROGRAMMATIC* DIGITAL AD SPEND MARKETS WORLDWIDE $ millions and % YOY change Indonesia, India and Brazil will be the fastest-growing programmatic digital ad markets in 2020. Brazil will become the seventh largest programmatic market to reach a billion-dollar valuation next year.

$1,600 +20%

$1,400 Millions +38% $1,200

$1,000 +18%

$800 +9% +11% +21% +8% +48% $600 +54% +18% +12% +29% $400 +36% +29% +9% $200

$0 ITALY INDIA SPAIN KOREA BRAZIL FRANCE MEXICO CANADA SWEDEN NORWAY INDONESIA AUSTRALIA ARGENTINA

Source: Magna Global; PubMatic calculations NETHERLANDS *excludes search and social media 2019 2020 SAR KONG HONG

$330.4 80.2% $330 79.2%

$286.5 77.9% $280 75.9% Mobile advertising surpassed $241.0 $200 billion worldwide in 2019. $230 It is expected reach $400 billion 73.1% by 2023, at which point mobile is projected to represent 80% of $180 global digital ad spend. 2019 2020 2021 2022 2023

Mobile ad spend % of digital ad spend

Source: eMarketer

The top 5 markets account for 85% of the worldwide mobile ad spending. The US will expand most in absolute terms, adding more than half of the incremental spending between 2019 and 2020. China is expected to grow the fastest among the five largest mobile advertising markets. +22% YOY CHANGE $120 $120.4 Billions $99.2 $90 +19% YOY CHANGE $72.2 $60 $61.4

$30 +15% YOY CHANGE +12% +17% YOY CHANGE YOY CHANGE $13.7 $15.4 $5.4 $6.2 $10.1 $11.3 $0 US CHINA UK JAPAN GERMANY

Source: eMarketer 2019 2020

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 21 MAJOR MOBILE AD SPEND MARKETS WORLDWIDE $ billions and % YOY change India and Thailand will see the fastest mobile advertising growth in 2020, with each market expected to rise over 40% year-over-year. Additionally, Denmark is projected to surpass $1 billion in mobile ad spend for the first time in 2020, coming in at 19th largest market in the world.

$6 +14% $5 +23% Billions +33% $4 +24% +14%

$3 +34% +30% +19% +15% $2 +17% +18% +42% +17% +14%

$1 +19% +46%

$0 ITALY INDIA SPAIN BRAZIL RUSSIA FRANCE MEXICO CANADA SWEDEN NORWAY THAILAND DENMARK AUSTRALIA SOUTH KOREA SOUTH NEW ZEALAND NEW NETHERLANDS

2019 2020 Source: eMarketer

Billions $5.0 $5.0 $5.1 USERS WORLDWIDE $4.8 $4.9

90% $4 89% 89%

87% $2 Mobile internet uptake has reached maturation among consumers, with 86% over 85 percent of internet users accessing the it via handheld devices. This provides advertisers and publishers $0 alike with a strong incentive to increase 2019 2020 2021 2022 2023

investment in mobile strategies. Mobile internet users % of internet users

Source: eMarketer

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 23 PROJECTED SHARE OF US MOBILE AD SPEND, BY PLATFORM MOBILE WEB 2020 15.4% In-app continues to drive incremental mobile ad spend in US. Spending will 2019 surpass $100 billion by 2020, with 85% 17.5% of mobile ad dollars being purchased in-app. Similar estimates are not yet available worldwide, but growing app uptake among global consumers is IN-APP likely to spur in-app ad spend around 2020 the globe next year. In Q3 2019 alone, 2019 82.5% 84.6% nearly 31 billion apps were downloaded worldwide, up 10% year-over-year.

Source: eMarketer; AppAnnie

WORLDWIDE $40 $37.2 $30.6 $30 $24.0 30.5% 29.0% 27.9% 26.8% $20 $17.5 26.0% 26.6% 23.2% Video will remain a key driver $10 of advertising expenditures on display, projected to account $0 for 31% of overall display ad 2015 2016 2017 2018 2019 2020 2021 spending next year. Video display ad spend % of total display

Source: Zenith; PubMatic calculations

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 26 $100 PROJECTED $110.6 Billions $97.0 DIGITAL VIDEO $80 25% $83.9 AD SPEND 26% $71.5 WORLDWIDE, $60 29% $59.6 32% BY PLATFORM $48.2 $40 35% $37.5 75% 40% 74% Two-thirds of all global video ad 46% 71% $20 68% spend is purchased on a mobile 65% 60% device. The continued shift 54% towards mobile dominance will $0 push this share to three-quarters 2018 2019 2020 2021 2022 2023 2024

of all video ad spend by 2024. Mobile Desktop

Source: Cowen and Company; PubMatic calculations

© 20182019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 27 DIGITAL VIDEO METRICS WORLDWIDE Mobile has secured a stronghold in its share of global digital video ad spending and video viewership. While its continued growth is cannibalizing from desktop viewership, ad spending on desktop continues to grow.

DESKTOP MOBILE

2019 2020 2019 2020

Video ad spend ($ billions) $19.3 $20.8 $28.9 $38.8

% YOY change 11% 8% 44% 34% % share of digital video ad spend, by device 40% 35% 60% 65%

Viewership (billions) 0.47 0.49 2.2 2.3

% YOY change -2% -3% 9% 8%

% penetration of digital video viewers 12.4% 11.6% 56.4% 58.6%

Source: eMarketer, Cowen and Company; PubMatic calculations

DIGITAL VIDEO (DESKTOP 72% 27% 1% AND MOBILE)

ADVANCED TV 59% 38% 3% Nearly three quarters of advertisers plan to increase their OTT / CONNECTED TV 50% 44% 6% digital video ad budgets between 2019 and 2020. Only 1% of advertisers reported a decrease BROADCAST / CABLE TV 40% 41% 19% in their digital video ad spending.

Increase Maintain Decrease

Source: Interactive Advertising Bureau

VERY SOMEWHAT IMPORTANT IMPORTANT 40% 43% 8 in 10 advertisers consider a cross-platform video (CTV, OTT, and digital video) buying solution to be important to them in 2019.

Source: Interactive Advertising Bureau

NON-PROGRAMMATIC 2020 24.7%

2019 32.1%

Two-thirds of digital video ad PROGRAMMATIC 2020 spend outside the walled gardens 75.3% of social media was transacted programmatically in 2019. The 2019 programmatic share worldwide 67.1% should rise above 75% in 2020.

Source: PubMatic calculations based on Zenith and Magna Global estimates; *excludes search and social media

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 31 TOP 5 PROGRAMMATIC* VIDEO AD SPEND MARKETS WORLDWIDE $ billions and % YOY change Programmatic video ad placements are accelerating worldwide, thanks to the rapid growth in automation technology. Large markets like the US are still seeing robust double-digit growth rates. China will be the fastest-growing market in this group, rising 36% to surpassing $5 billion in 2020. +34% $15 YOY CHANGE $14.0 Billions $12

$10.1 $9 +36% $6 YOY CHANGE $5.5 $4.3 +28% +32% $3 YOY CHANGE YOY CHANGE +29% $2.6 $2.3 YOY CHANGE $2.2 $1.8 $0.9 $1.1 $0 US CHINA UK JAPAN AUSTRALIA 2019 2020 Source: Magna Global; PubMatic calculations; *excludes social media

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 32 MAJOR PROGRAMMATIC* VIDEO AD SPEND MARKETS WORLDWIDE $ millions and % YOY change Indonesia will see programmatic video ad spend almost double in 2020, making it the fastest- growing market for the format in the world. Brazil will reach $1 billion in 2020, making it the 6th largest programmatic video ad market in the world.

$1,200 +46%

Millions $1,000 +32% $800

$600 +29% +26% +21% +85% +33% $400 +37% +73% +27% +40% +26% $200 +48%

$0 ITALY INDIA SPAIN BRAZIL FRANCE MEXICO CANADA SWEDEN GERMANY INDONESIA ARGENTINA NETHERLANDS

Source: Magna Global; PubMatic calculations; *excludes social media 2019 2020 SAR KONG HONG

AD SPEND, BY $40 TRANSACTION 62% METHOD $30 65% $ billions and % of programmatic ad spend $20

Global private marketplaces (PMPs) account $10 35% 38% for a third of all programmatic spending. As concerns for fraud and brand safety persist, $0 ad budgets will increasingly swing into the 2019 2020 safe shelters of restricted auctions. PMP Open Exchange

Source: eMarketer; *excludes programmatic direct

Billions $12 US PRIVATE $10.6 51% MARKETPLACE $10 $8.6 DIGITAL DISPLAY $8 49%

AD SPEND $6

$4 46% US private marketplaces (PMPs) will be the dominant transaction method $2 in 2020. It will grow at double digit rates through 2021 as buyers and $0 sellers of digital impressions seek 2018 2019 2020 2021 more control over their transactions. PMP ad spend % of Real-Time Bidding ad spend

Source: eMarketer

Mobile will account for two-thirds 37% $2 43% 40% 31% of all US PMP ad spending by 2020. However, it will continue to trail the $0 share the device achieves of overall 2018 2019 2020 2021 programmatic ad spend. Desktop Mobile

Source: eMarketer; *excludes programmatic direct

45% UK private marketplaces (PMPs) will $0.5 reach half of all real-time ad buys in 2020. It will grow at double digit rates through 2021 as buyers and $0 sellers seek more control over their 2018 2019 2020 2021 transactions. PMP ad spend % of Real-Time Bidding ad spend

Source: eMarketer

$0.5 27 37% 29% % 27% Mobile will almost reach three-quarters of all PMP ad $0 spending in 2020, ahead of 2018 2019 2020 2021 the US market. Desktop Mobile

Source: eMarketer; *excludes programmatic direct

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 39 MONETIZED MOBILE PRIVATE MARKETPLACE MARKET SHARE, BY REGION Globally, the expansion of mobile private marketplace volume has been fueled by the Americas region; its share accounts for half of all worldwide mobile PMP ad impressions.

EMEA Q2 2019 29% AMERICAS Q2 2018 Q2 2019 56% 50% Q2 2018 APAC 15% Q2 2019 21% Q2 2018 29%

Source: PubMatic

© 2019 PUBMATIC, INC. ALL RIGHTS RESERVED 2020 GLOBAL DIGITAL AD TRENDS / 40 About PubMatic PubMatic is a digital advertising technology company for premium content an efficient, global infrastructure and remains at the forefront of programmatic creators. The PubMatic platform empowers independent app developers innovation. Headquartered in Redwood City, California, PubMatic operates 13 and publishers to control and maximize their digital advertising businesses. offices and six data centers worldwide. PubMatic’s publisher-centric approach enables advertisers to maximize ROI by reaching and engaging their target audiences in brand-safe, premium PubMatic is a registered trademark of PubMatic, Inc. Other trademarks are the environments across ad formats anddevices. Since 2006, PubMatic has created property of their respective owners.

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