US advertisers are spending about a third of their nonsocial programmatic display ad dollars on fees this year—aka the “ad tech tax.” Read on to learn more about our inaugural estimates of spending on programmatic fees.

Programmatic Fees. We expect programmatic fees paid to intermediaries to rise 26.2% this year, rebounding from slow growth of 6.2% during 2020. Programmatic fees will account for a slightly falling share of nonsocial programmatic spending over time as advertisers, publishers, and their partners continue looking for efficiencies.

Programmatic digital display advertising fees (also called programmatic fees) include the portion of programmatic display ad spend that is paid to technology and software intermediaries that execute the transaction before the publisher receives the spending as ad revenues.

The programmatic ad supply chain can be opaque, making it difficult for buy- and sell-side platforms to quantify how much money is being paid to vendors. Our new estimates on programmatic fees may shed some light for advertisers and publishers on how much share of all nonsocial programmatic display ad spending is going to fees.

Programmatic transparency has come a long way in recent years, with many supply-side platforms (SSPs) now offering an interface for buyers to get log-level data. Amanda Martin, vice president of enterprise partnerships at Goodway Group, joins eMarketer principal analyst at Insider Intelligence Nicole Perrin to discuss why buyers are interested in this information, what is still making it difficult to understand and execute on, and her hopes for the future of transparency.

Principal analyst Lauren Fisher joins guest host and fellow principal analyst Nicole Perrin to discuss Amazon’s plans to offer video ad inventory to demand-side platforms dataxu and The Trade Desk. They also talk about our new programmatic fee estimates, Microsoft’s purchase of ad-tech firm PromoteIQ and Facebook’s offer to pay for news.

In this Meet the Analyst Webinar, eMarketer principal analyst Nicole Perrin discussed how much these programmatic fees cost, explores (the lack of) programmatic transparency and dives into how advertisers are approaching the infrastructure underlying more than 80% of their display spending.

The significant fees associated with executing programmatic digital display ad transactions have long been denigrated in the industry as the “ad tech tax.”

Buys executed on Display & Video 360 come with a standard programmatic fee of 15% of a campaign’s total spend, according to a Google blog post in June. Google Ads doesn’t have advertiser fees. Some advertisers will use Google Ads to manage their YouTube buys to avoid paying fees, even if they use Display & Video 360 for other media buying.

Entities throughout the programmatic supply chain are emphasizing these practices as important points of differentiation, and industry groups like the IAB Tech Lab are continuing to release standards that make further supply path optimization possible.

A good portion of the remaining 48.7% of programmatic ad dollars spent outside social networks goes to programmatic fees also known as the “ad tech tax.” We estimate $10.35 billion, or 37.6% of all US nonsocial programmatic ad spending, goes to programmatic fees.

We are in the process of conducting research that we hope will allow us to estimate the amount advertisers are spending on programmatic fees, also known as the ad tech tax. We expect to publish this research later this summer. In the meantime, read our latest report on US programmatic ad spending for 2019.

Parties throughout the programmatic supply chain are working hard to be more transparent and accountable, too. Valérie Latronche, managing director for France and Belgium at ad tech specialist Rubicon Project, noted that transparency has been a key theme for her firm and the industry since 2018.

Programmatic buyers and sellers are no strangers to the ad tech tax—that is, the fees that are paid to the host of intermediaries involved in programmatic display buying (e.g., demand-side platforms (DSPs), supply-side platforms (SSPs), ad exchanges, verification providers, data resellers, data management platforms (DMPs), and the list goes on).

It means maintaining full control of their data and not paying an ad tech tax on the attractive profits. However, going in-house is challenging. It requires complete organizational buy-in, because investments will need to be made to build out a full ad stack. That will typically mean ad-serving, trafficking and measurement capabilities built on seamless data flows.