The decline of third-party tracking is not new; it’s been well documented over the last several years.
NB: This is an article from Koddi
At this point, the digital media industry has fully realized that consumers and governments will no longer tolerate the tracking technologies and strategies that were once standard media industry practices.
According to some, the death of third-party tracking means the beginning of the end for the open and free internet that we know today. The claim is that limiting tracking limits advertising and that, in turn, limits the ability of site operators to monetize. Lack of monetization, therefore, leads to the declines of the sites themselves. This conclusion makes for flashy headlines, but it couldn’t be further from the truth. Advertising as a vehicle for online monetization is not going away. In fact, by every measure, it grew in 2020 and it will grow even more in 2021.
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Solutions for Moving Forward
So then, what can digital marketers do? There is no consensus, but two distinct trends of solutions have emerged:
- Fight the change and build solutions that subvert or work around privacy-first measures (while also trying to convince consumers that this is the right path)
- Build new, privacy-first solutions that actually protect user data
The first option, while potentially profitable in the short term, will fail in the long run. The cat-and-mouse game being played by some in our industry will eventually be won by privacy advocates, most likely through legislation (in the pattern of the GDPR and CCPA efforts). Fighting this eventuality will put you behind the marketers who are embracing the trends outlined above.
The second option is the better path, a win-win for consumers and advertisers. For consumers, the upsides of privacy, transparency, and control are clear wins. For advertisers, there are actually two parts to the equation: avoiding fines and growing (and protecting) your revenue.
According to research from DLA Piper, GDPR fines rose by nearly 40% in 2020, exceeding $190M USD. While some of the biggest fines have been levied against platform providers, 7 of the 10 largest fines to date have been levied against brands, usually for exposing consumer data. Privacy-first solutions must be leveraged not just to protect consumers, but also brands.
On the revenue front, the shift is even more compelling. A 2019 Cisco survey of 2,600 adult respondents in 12 of the world’s largest economies found that:
- 84% care about data privacy
- 80% consider data privacy in purchasing decisions
- 48% have switched companies or providers over their data policies or data sharing practices
- 61% said they won’t buy if they don’t trust how data is used
- Over 67% believed the statement: “how companies treat data is how they treat me”
Privacy-first brands are in the best position to protect/grow their revenues and build better relationships with their consumers. To meet these challenges and win, we must change, adapt, and innovate. We must consider a number of things, but the two most prominent for advertisers are: where we buy media and what tactics we use.
Where We Buy Media: The Rise of Private Marketplace Ad Programs
Private marketplace ad programs (PMPs) are becoming more and more popular with advertisers. In 2020, eMarketer announced that programmatic ad spending on private marketplaces will exceed open exchanges for the foreseeable future.
The definition of private marketplaces have evolved, but today, they generally have the following characteristics:
- Managed by the site operator themselves (or more commonly, a service provider for or an exclusive agent of the operator)
- Have inventory that cannot be bought on an open exchange
- Utilize a real-time bidding (RTB) auction
- Open by invitation only
- Use zero and first-party data for targeting
- Built to be privacy-first programs that protect consumers’ data
The reason private marketplace ad programs are growing in popularity among advertisers is multifaceted, but the top reasons include:
- Private marketplaces have superior segmentation and targeting.
- Private marketplace ad programs generally deliver better results for advertisers.
- Private marketplace ad programs have incremental audiences and drive incremental conversions.
- Site operators reserve premium inventory for their private marketplace ad programs.
- Private marketplace ads generally deliver a superior ad experience to the consumer.
- Consumer data is protected in private marketplaces.
What Tactics We Use: Rethinking Tactics that Use Third-Party Data
The tactics we use to achieve our objectives are also changing. For example, one of the many tactics for achieving a robust share shift strategy today is retargeting (with specific targeting criteria). That tactic, while highly effective today, will likely be far less effective as soon as later this year. Therefore, we need to use a new tactic – one that has the upsides of retargeting without the downside of third-party tracking, which is prevalent in retargeting today.
For Koddi, that solution is sponsored listings on private marketplaces. In both 2019 and 2020 (before and during the COVID-19 pandemic), sponsored listings on private marketplaces have been the fastest-growing tactic on our platform across all industries and customer sizes (enterprises and SMBs). Sponsored listings on private marketplaces have a high return on ad spend, have consistently proven incremental to a media mix, and most importantly to this discussion, use only zero and first-party data for targeting. We truly believe that this ad type presents a win-win-win for consumers, advertisers, and site operators.
Winning in the Post (Third-Party) Cookie World
The natural question that comes next is: how do I win?
If you’re a site operator with a differentiated audience solely relying on an exchange today, set up a private marketplace ad program. It’s more work than using an exchange, but you’ll be better for it. You’ll generate a much higher margin on the ad spend on your site, you’ll deliver a superior consumer experience, and you’ll forge a deeper relationship with the brands that advertise with you. The ROI is strongly positive.
If you’re an advertiser, embrace the change now before you’re forced to. Tap into private marketplace ad programs, and test and learn what works. Although this creates more upfront work (for you and for your agency), your targeting will be more effective, your returns will be higher, and your consumers will thank you. This cannot be understated — do not wait.
The third-party cookie is crumbling. New, innovative, privacy-first digital advertising solutions will be needed. Private marketplace ad programs provide numerous benefits over traditional exchanges and are the fastest-growing digital media strategy. Now is the time to act, change for the better, and embrace the future of digital advertising.
