The End of Ad Targeting: What’s Next for Publishers

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The End of Ad Targeting: What’s Next for Publishers

What we now call the nearly $500 billion digital advertising business started with a small banner in 1994 on HotWired.com. From the beginning, digital advertising was embedded with three original sins: 

  • There was no identity system on the web, giving rise to tracking cookies as a proxy. 
  • The audience data was separated from the media impression. 
  • The success metric was the click. 

These three facets took the emerging publishing industry on a path to where it is today: beset with privacy regulations by governments and tech companies that are overturning how digital advertising will work, concentrated power in a handful of sprawling tech companies, and a publishing system with misaligned incentives that have led to the rise of the adversarial web and the rise of paywalls. 

The industry itself should shoulder much of the blame. User privacy has long been treated as an irritant, left to the day’s last panel at ad-tech conferences, the proverbial “last thing standing between you and cocktails.” Privacy advocates were treated like outcasts, not people to be taken seriously.

And over the years, the response I most often heard to questions about the use of the promiscuous collection and use of data: We don’t use personally identifiable information and besides the direct mail guys are sketchier.” 

This maximalist view – “Privacy is dead, get over it” – wasn’t a good bet. It allowed the mostly harmless machinations of ad tech to simply make banner ads more effective to be painted much more nefariously. Ordinary people never thought that ads were “personalized” rather than targeted. So many people are convinced Facebook or others are listening to their conversations to target ads. There’s not a ton of trust in what’s happening in the back room. 

The moves to rein in ad targeting will have a raft of winners and losers, like any change. Don’t believe those that take extremist views one way or the other. Weirdly, democracy will not collapse because the third-party cookie is going away. Still, many businesses will be hurt as the ability to target ads and count them becomes more complicated and more expensive. 

The pendulum will swing back toward context.

In a recent episode of The Rebooting Show, Audigent’s Jake Abraham pointed to retargeting as a catalyst for moves to crack down on the use of data in digital advertising. Retargeting ads replaced pop-ups as the symbol of “annoying” and “creepy” digital advertising.

The emerging solutions, including Google Topics, will shift targeting from a less granular level and rely more on the context of the environment (the original targeting technique) to match ads with prospective customers. 

Feed content will suffer

Former Bleacher Report CEO Howard Mittman used a neat “need vs. feed” framework for the publishers with real audiences that seek them out vs. those who pump out content designed to catch fleeting attention from algorithmic platforms like Google and Facebook. Indirect audiences will be harder to monetize. 

Understanding your audience will be critical.

First-party data is thrown around as a catchall, with many misunderstandings and even debates about whether there’s such a thing as zero-party data. Ultimately, publishers will need an in-depth understanding of their audience to build sustainable business models. It’s not enough to fall back on the “see a cookie, hit a cookie” approach. 

Data will continue to play a pivotal role in advertising.

There are always a group of people nostalgic for the past. But there’s no going back. Anytime I hear horror stories about the darkness that will descend on digital advertising as targeting gets more challenging, I wonder if there’s an industry in the world that will use fewer data in five years than it does now. Hard to believe that will come to pass in advertising.

The type of data, how it’s collected, and its rules will change, but data will remain the cornerstone of digital advertising. There’s a reason retailers are building these massive ad businesses: they have valuable purchase data. 

DTC just got harder.

In particular, Apple’s moves to rein in ad targeting wiped out $300 billion in market value from Facebook, which has lost 45% of its market capitalization since September. It’s no surprise that Shopify’s stock has lost 33 percent since the start of February following Facebook’s disastrous earnings. Many new brands were born on the back of cheap distribution via Facebook ads.

Taking that distribution away and DTC becomes a lot more complicated and in the short term will benefit incumbents. Acquiring customers is going to be much more expensive for many businesses

Facebook rivals will benefit.

Facebook’s most significant strategic mistake was not building its own phone, something it perhaps learned in its determination to be a leader in virtual reality hardware. Without its mobile system, Facebook was always at the mercy of Apple. For now, other platforms, including Apple, stand to benefit from Facebook’s expected loss of $10 billion in ad revenue this year. Retail media will continue to grow, as evidenced by Walmart’s ad business taking off.  

New models will gain traction.

There isn’t one ad business. There are many ad businesses. Advertising will remain a part of most publishers’ models, even if the core of many models will shift to recurring payments. The best way to make money in publishing remains several ways.

Over the long run, publishers with real connections with a highly valued (and challenging to reach) group of people will develop new ways of making money beyond the ads or subs dichotomy. New identity solutions will emerge beyond email addresses, particularly as crypto wallets expand beyond their current 100 million users

Ad-tech will evolve.

Ad- tech always finds a way to survive. Take GDPR for example. It threatened a large portion of the industry. Yet consent management platforms like Adzapier provide win-win solutions for businesses and consumers. The ad tech industry will continually evolve as privacy rules change.  

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