The expert explained how 2023 turned out for the advertising technology industry and what to expect from 2024
About the author: Gennady Nagornov, founder and CEO of Genius Group.
2023 was a very prosperous year for the advertising industry: the market grew, and more investments appeared within the country because Russian enterprises actively began to invest in their promotion and attracting clients. The e-commerce and video advertising segments have grown strongly. According to RAEC, in 2023 the online advertising and marketing sector grew by 22% and reached a volume of ₽474.8 billion.
The forecast for 2024 is also positive: industry growth will be about 20%. It is worth noting that our sphere reflects the state of the country’s economy. Therefore, growth shows that people are spending money, manufacturers are investing in promoting their products – the market is constantly evolving: technologies and tools are emerging, new players are changing the landscape, and leaders are expanding their positions.
\Dynamics of market volume, prices and budgets, and key industry events in 2023
According to Media Instinct’s forecast, the volume of the entire advertising market was expected to reach RUB 746 billion in 2023. The share of the video was 34% – this format remained the most popular for increasing brand awareness. According to the Association for the Development of Interactive Advertising (ARID), by the end of 2023, the interactive advertising segment grew by 20-22%, excluding retail media. If we include this trend in the calculation, the increase ranged from 27% to 36%.
Prices in Russia for programmatic advertising in 2023 increased by an average of 10-25%. This is primarily due to general media inflation in the country, and in the case of in-app traffic, to the volatility of exchange rates, since most of the inventory remained international. An increase in AdTech budgets was noted by 45% of Programmatic Report respondents .
According to the ARIR digital barometer , brands expect an increase in advertising costs on marketplaces (50%), mobile applications (44%) and influencer marketing (41%).
Market maturity
I would like to note that in 2023, the AdTech market in Russia has become mature: advertisers now determine the share of advertising expenses (SAR), build attribution modeling, take into account the contribution of each channel to sales growth – brand expertise has grown significantly, this is a significant step forward. Now budgets for digital placements are actively growing, but at the same time the number of various KPIs and metrics is increasing, and the requirements are becoming more stringent. Change is driving innovation and raising the bar of expectations from contractors. Such maturity in 2024 could lead to the washout of ineffective technologies from the market and the bankruptcy of a number of companies, because competition will become even fiercer.
SME activity
Another feature of AdTech development in 2023 is an increase in the number of placements by advertisers from the small and medium-sized business segment. According to Tochka Advertising, the growth of the advertising market in SMEs amounted to 25% in money and 16% in the number of clients. The study found that advertisers were investing more and taking advantage of placement opportunities more often. It is worth noting that the market is actively offering new solutions for this category of clients: self-service products that provide the necessary transparency of the process and flexibility in decision making, advertising in retail media.
Expanding the powers of the Association for the Development of Interactive Advertising
From the point of view of players in the advertising market, an important event is the formation of ARIR special structures to obtain the status of a self-regulatory organization. It will give the association the right to participate in the development and discussion of bills and regulations on advertising, as well as to submit proposals on the formation and implementation of state policy in the advertising industry to government agencies for consideration.
Demand for independent programmatic platforms
According to our Programmatic Report study , which included experts from companies such as Gazprombank, Hoff, Unilever Rus, Okko, Evalar, NSPK, Uralsib Bank, 45% of respondents noted an increase in budgets for this channel. The main reason is Western advertising platforms that left Russia. Large market players such as Yandex, VK Advertising, Digital Alliance and Sberseller cannot completely meet the needs of advertisers, so independent programmatic has become especially in demand in the past year. AdTech companies are attracting more and more budgets and offering their unique solutions as an alternative to the majors.
The global trend is that the market is growing so quickly that demand constantly exceeds supply. Advertisers lack inventory and opportunities to attract customers, which encourages market players to quickly develop the industry through new formats.
Emergence of new brands and localization of international companies
For example, there are more new and localized companies in the FMCG market , and brands producing Chinese cars have emerged in the automotive industry. In many industries, fundamental changes have occurred from the point of view of active market players, so many tasks for creating branding and naming have appeared, and the number of requests for production and creativity has increased. The demand for services to create brand awareness has increased, and there is more brand advertising.
If earlier this segment collapsed towards performance, now, thanks to the emergence of new brands, it is in demand again. According to the Programmatic Report , the key tasks of advertisers now are reach and brand performance. Media Instinct confirms this data and shares statistics according to which in 2022, companies that abandoned advertising lost an average of two to three percentage points of the market. They were taken by those who began to actively invest in the creation and development of the brand and the formation of a loyal audience. For example, Gloria Jeans has always had a small market share, but used the opportunity: it invested in rebranding, image advertising and, as a result, occupied a very large segment and continues to expand it.
Drivers and stoppers of market development
Fraud
Today this is a key barrier in the development of AdTech in Russia. This problem is being actively discussed , since now there is no uniform definition and interpretation of fraud; players lack clear rules for financial compensation: who should compensate for the presence of unwanted traffic and how.
The introduced fines for the lack of advertising labeling partially solved the problem of fraud : since it is impossible to generate reports when purchasing robotic traffic, market players strive to purchase impressions to a high-quality audience and provide correct documentation. Ad networks that used to use infected computers to emulate impressions or clicks are leaving the market because such advertising cannot be accounted for.
Advertising Labeling Law
It had other positive effects, despite initial market resistance. From September 1, 2023, fines began to appear, and players quickly began setting up integrations. Advertising labeling has become a means of monitoring all advertising turnover and advertisers. It made life more difficult for gray advertisers, who are now unable to place ads, and helped to begin to control the payment of VAT by companies.
In this regard, since the beginning of autumn 2023, everyone has stopped working with clients and platforms that are not ready to comply with labeling requirements . Respectable advertising networks and platforms managed to come out of the sleep mode they were in before the fines appeared and set up processes for transmitting labeling data.
Today the market understands who the real owner of the advertising platform is: if previously it was possible to use white labels or talk about the presence of software that the company actually does not have, then with advertising labeling everything has fallen into place. Now the advertiser sees a real chain of counterparties and understands who is the holder of the technology and who reports to the tax service and Roskomnadzor as the operator of the advertising system (ORS).
Demand for Russian AdTech developers
Separately, I note that the introduction of fines for lack of labeling required platforms to invest in improving functionality and integrating people who will deal with these tasks. Russian developers of advertising technologies have become in great demand (according to hh.ru , at the end of January, there are more than 50 vacancies. You can also find current offers in industry chats), market participants began to make more investments in developments – the market has come to life. In 2023, many new players and companies have emerged that previously did not announce themselves loudly enough. Players from other countries came to the Russian market, and all this influenced the development of local technologies. This helps develop our industry, market, and competencies.
In addition, this same factor gave impetus to Russian brands for international development. Quite a lot of local companies this year began to actively enter the markets of Asia and Latin America and try their hand there.
Question about user personal data
It became relevant again when Google again moved the abolition of third party cookies in Chrome from January 1, 2024. The problem of user identification requires a solution, and digital market experts believe that a promising way to solve the issue will be Stable ID based on telecom operators. The identifier will allow you to combine operator information with customer purchase data.
Technologies
Artificial intelligence
The introduction of AI in all areas was a key trend in 2023. It has also become a basic tool in advertising. Neural networks in the field of graphics have directly influenced the variability and speed of development of visual creatives. Companies have won many tenders using banners created by neural networks, and we at Genius Group constantly create visuals for clients using AI. This increases speed, improves quality, and allows you to test more different creatives.
Chat GPT is also actively used and makes it easy to design a website without using Tilda or other tools. This does not apply to complex pages with database integrations, but simple landing pages can be done quickly and efficiently by the neural network. In 2024, we can expect the emergence of new AI algorithms and even deeper integration with advertising platforms.
Telegram
In 2023, Telegram also took off, becoming a full-fledged media: users actively click on links, and brands use it as a communication channel. According to Cossa, 45% of users click on advertising links on Telegram.
There are many advertising solutions for Telegram, but each requires large budgets: according to Starlink, the cost of advertising increased by 35% in September-October 2023. In 2024, we expect active development of targeting functionality in Telegram and the ability to work with data based on developing platforms.
Connected TV
This is a technological trend that came to Russia in 2023. According to the NRA, Connected TV reaches 8.5 million viewers per month (6% of the population), and TV spots triple the chances of a brand being remembered by viewers. Today, the number of cable TV subscribers in Russia is declining : cable television occupies 40% of the pay TV market, satellite – 38%, IPTV – 22%. Connected TV could be the technology that reconnects audiences and TV advertising. According to the NRA, prices for TV placements will increase by an average of 27% in 2024
Tools
Advertising in retail media
Retail media ad is an explosive new product for 2023. According to Okkam, by the end of 2023, e-com advertising showed a 400% increase in volumes. There are several reasons for the growing popularity of retail media:
These are platforms with an audience that is definitely ready to make a purchase. Advertising allows you to shorten the customer journey and bring the user to payment as quickly as possible;
Retail media has a clear information policy, which becomes a guarantor of brand safety (the concept of protecting a brand from mentions and manifestations in a negative information environment) for advertisers;
Some companies had their marketing budgets cut in 2023, but trading budgets remained, so more funds were poured into marketplaces.
Key advertisers in Retail Media are pharmaceutical companies, FMCG brands, furniture companies. Ozon is a market leader due to its variety of inventory and large audience. In 2024, the popularity of this tool will continue to grow – 96% of players expect investment growth from 15% to 25%. New technologies and capabilities for advertising analytics will be introduced.
Outdoor advertising
A format that is not losing popularity and is becoming digital media. The key trends of the past year were digitalization and sales consolidation. In 2024, placements in OOH (outdoor advertising) and DOOH (digital outdoor advertising) will already be 68% digital; the most striking example of combining brands in 2023 is the purchase of Russ Gallery.
In-app and In-game formats
In-app (in-app advertising formats) and In-game (in-game advertising formats) formats continue to develop. In-app became truly significant in 2023 – back in May, Go Mobile predicted that it would take up to 50% of the media split. In-game formats are also strengthening their position: by 2026, the audience will grow from 1.8 million in 2021 to more than 2.3 million, budgets for this tool and profit per user will increase.
The rise of video popularity
There is an increase in the popularity of video formats, including on sites with unlicensed video content. The market lost a large number of licenses, so traffic flowed to pirate sites. Without a large number of pre-roll placement options, companies no longer have stereotypes. Brands are focused on results and choose the most effective placement options, turning to previously unpopular sites.
AR
Along with the trend towards the introduction of AI, the popularity of advertising videos with augmented reality is growing: both abroad and in Russia, companies are using the AR trend. For example, Avito released videos with a huge hoodie over VDNH and an iPhone near Lakhta in St. Petersburg.
Omnichannel
Another important trend of the past year that will continue in 2024 is the development of cross-platform matching and the use of omnichannel strategies. More and more advertisers are striving to build cross-device and cross-platform matching in order to reach their audience from various devices and correctly comply with the cross-frequency of displaying materials.