The State of Programmatic Advertising: 2025-2026 Updates

The second half of 2025 presents a pivotal moment for SMEs in the UK and Europe as they navigate an advertising landscape transformed by artificial intelligence, evolving regulatory frameworks, and shifting cost dynamics. 

This report examines the critical developments that will shape marketing strategies and budget allocation for small and medium-sized enterprises through 2026.

Key Technological Developments

AI-driven advertising technologies are revolutionising how SMEs approach marketing, with Google's Performance Max (PMax) emerging as a dominant platform. 

PMax has matured significantly, now delivering consistent average ROAS while incorporating enhanced transparency features like negative keywords and placement reporting. Case studies demonstrate impressive efficiency gains.

Generative AI is changing creative production, enabling SMEs to compete with larger enterprises by automating content creation, copywriting, and visual asset development. 

Programmatic advertising continues its rapid expansion, with 90% of display ads now transacted programmatically and CTV spending projected to reach $32.6 billion in 2025.

Budget Impact and Advertising Effectiveness

While AI optimisation is driving down CPM costs—video advertising CPMs are projected to decline 15% in 2026—SMEs face countervailing pressures in other areas. Search advertising costs continue rising, with CPC up 12.88% and CPL increasing 5.13%. 

The efficiency gains from automated platforms are substantial but require minimum conversion volumes (30-60 monthly conversions) that may exclude smaller businesses.

Performance measurement complexity increases as platforms become more algorithmic. 

PMax functions primarily as a bottom-funnel conversion channel, with 90% of costs attributed to feed-driven inventory, potentially cannibalising other campaign types. Third-party measurement through marketing mix modelling becomes essential for accurate ROI assessment.

Regulatory Landscape and Compliance Requirements

The regulatory environment also needs attention. At the time of this report, the regulatory environment presents the most significant challenge for SMEs (we are here talking in H2 2025). 

The EU AI Act and strengthened GDPR enforcement require algorithmic transparency, with the CJEU ruling in February 2025 establishing legal rights to explanations for automated decisions. 

Cross-border data transfers face heightened scrutiny, with the EU-US Data Privacy Framework potentially facing legal challenges that could disrupt US-based platform usage without transition periods.

Compliance costs are rising 8-12% for typical SME operations.

Non-compliance carries substantial penalties, with fines that could potentially reach up to £185,000 for improper data transfers to US platforms. The risk is particularly acute for organisations using non-EU AI tools that may not meet European standards.

Strategic Recommendations

SMEs should adopt a balanced approach that leverages AI-driven efficiency gains while maintaining robust compliance frameworks. Key strategies include:

• Implementing hybrid advertising approaches that combine high-performance automated platforms with lower-regulatory-risk channels like programmatic digital out-of-home
• Investing in third-party measurement tools to validate true campaign incrementality
• Conducting mandatory Transfer Impact Assessments before engaging non-EU platforms
• Developing clear data governance policies that address both GDPR and AI Act requirements
• Exploring UK Data Act provisions to reduce compliance overhead where applicable

Success will require organisations that can effectively balance technological adoption with compliance rigour, leveraging AI efficiency gains while maintaining the operational resilience necessary to navigate an evolving legal environment.