Business leaders outside of your marketing department might be forgiven for not paying close attention to the recent developments in online advertising. Why should they? For the most part, it just works. The marketing department identifies new customers that are nurtured and acquired. Existing customers are supported, cross-sold and upsold. It is a relatively predictable system with measurable inputs and outcomes.
All that will change in 2022. Reaching audiences online is going to become a lot harder, disrupting the growth plans of many organizations. If this hasn’t already been discussed at the board level in your company, it should be. This change will impact more than just marketing departments with implications across your organization, from how your finance team models growth and your legal department assesses risk to how IT prioritizes spending on technology.
All of this is due to the humble third-party cookie: a small data packet added to a consumer’s web browser as they travel across websites ("third-party" denoting a cookie that comes from an organization other than the website that the consumer lands on). This snippet of random numbers has, for decades, helped paint a picture of consumer online behavior, allowing more relevant content and advertising and underpinning the internet as we know it today.
As a result, billions of people around the world enjoy free access to information, entertainment, news, education and so on. However, that great content we enjoy online isn’t free to produce and distribute. Journalists, creators, publishers, artists and producers all need to be compensated for their work.
Today, advertising pays the bills.
And, in turn, it is advertising technology that orchestrates the complex system of information required to make ads relevant and measure their impact. This system has allowed businesses of all shapes and sizes, including quite possibly yours, to more effectively reach customers.
Third-Party Cookies Are Dying
This system is undergoing its most extensive change in decades. We have seen the introduction of stronger, and generally welcomed, consumer privacy regulations such as GDPR and CCPA. Now, the makers of the dominant web browsers and mobile operating systems, such as Google (Chrome) and Apple (Safari, iOS), are mandating changes that fundamentally alter the way digital advertising operates. By phasing out third-party cookies, the gatekeepers between consumers and the internet are now making it harder for brands to engage audiences online. Understandably, lawmakers are watching closely.
What This Means For Your Company’s Growth Options
In 2022, spending on programmatic advertising is expected to reach $95 billion. For the free and open internet to still be free tomorrow, it is vital that as much of this money as possible goes to the publishers and content creators and not just into the pockets of tech giants. Many potential solutions are emerging.
No one can say which solutions will gain traction, and while industry consolidation is inevitable, the landscape will get messier before clarity emerges. To thrive, businesses will need flexibility and a willingness to experiment. Here are some of the contending approaches which every business leader should be aware of:
Contextual: Serving ads based on the content of the webpage, the device being used, the time of day or even the weather isn’t new. Some worry that reverting to this "traditional" method of creating relevancy will be a massive step back. However, recent developments in natural language processing and machine learning have made contextual advertising very effective.
Identifiers: Numerous efforts are underway to create alternative identifiers for the cookie. Many of these are based on email addresses collected by publishers and marketers, with a prominent example being The Trade Desk’s UID2.0, which many companies have announced interoperability support for (including mine). Numerous alternatives are being developed by companies including LiveRamp, Tapad and more. It is likely that the solutions used by marketers and publishers will need to seamlessly support several identifier approaches.
Cohorts: Another proposal is to replace third-party cookies with new technologies that group consumers by similar behaviors or interests ("cohorts"). Google’s Federated Learning of Cohorts (FLoC), for example, is designed to enable behavioral targeting without third-party cookies. FLoC would collect information about consumer browsing history and habits, infer behavioral interests and then use that information to assign the user to a cohort with its own ID number. Each consumer’s browser will share that ID with websites and advertisers they visit. FLoC has raised privacy concerns and is being shunned by a growing number of companies.
Machine Learning To Help Make Sense Of Complex Signals
Undoubtedly, advertising on the open internet is about to get more complex, and new solutions to make sense of a more varied, messier set of signals are required.
Machine learning approaches can take in a multitude of signals, including the above, and combine them to understand audience patterns and create more relevant advertising.
These signals work well together. Each piece of information increases context and understanding and a multisignal approach is robust and flexible enough to adapt as new approaches emerge.
Business leaders should be alert in this time of change. If the range of options for brands to reach their audiences decreases, further power will accrue to the tech giants. More concerning are the ramifications for consumers; what may look like a privacy boon could turn into the bane of losing free access to online information, entertainment, news and education.
Respecting consumer privacy while delivering on the outcomes that brands, agencies and publishers want is key to keeping the internet free and open. I believe that technological innovation, interoperability, contributing to industry standards and collaborating with customers are all essential to building sustainable solutions. Together, we are powering a free and open internet for everyone.