Why Addressability Will Flourish In A Cookieless World

Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Scott Howe, CEO at LiveRamp.

Google’s recent announcement that Chrome will end support for third-party cookies didn’t come as a surprise to anyone who’s been paying attention. Safari and Firefox had already moved to block browser tracking, and regulations such as the General Data Protection Regulation and the California Consumer Privacy Act strongly signaled this response to growing consumer privacy concerns.

What is surprising is the irrational idea that advertisers would be willing to pack up all their gains in data-driven performance and go home. Now that the other proverbial shoe has dropped, individuals, publishers and marketers are clearly concerned about the future direction of advertising technology, but going back in time and ignoring the advantages provided by addressability now and in the future is unrealistic and naive.

Publishers look to drive logged-in users

Third-party cookies presented many problems, including massive inefficiencies in data movement and an innate lack of transparency and understanding of the value exchange with the consumer. Nevertheless, they became the legacy foundation of the modern digital ecosystem. For publishers, it’s clear that Chrome's decision will result in drastic consequences.

In Europe, when Firefox automatically blocked third-party cookies by default last fall, publishers in Germany experienced severe declines in Firefox-specific traffic across the board, seeing a 38% decline in bid rate, a 45% decrease in revenue and a 23% drop in CPMs. Last summer, a Google research report showed impression-based revenue decreased 52% without third-party cookies, with news publishers specifically seeing a 62% revenue decline.

To sustain their revenue streams and control their own destiny, publishers of all sizes are pursuing strategies to develop and activate their own audiences. Strengthening their first-party data improves their ability to provide programmatic guarantees to advertisers and transact via deal IDs, but it also importantly strengthens understanding of their readers and how to better personalize content.

When people value content and the intended data collection and use is clearly referenced, most are willing to share their identity with publishers. Just look at how successful this strategy has been for Facebook and Google. Google likely earned more than $100 billion in revenue last year from its largely authenticated owned-and-operated inventory, including search and YouTube, while Google Ad Manager only delivers a fraction of that. Publishers need only replicate those same practices to enjoy the data richness of logged-in consumers themselves.

Brands look beyond the cookie

For years, brands have benefited from people-based marketing campaigns, using third-party cookies alongside other identifiers, including mobile IDs, offline customer data, subscriber IDs, CTV household data and more. The ability to enhance lift, improve returns on media investment, measure business outcomes and make decisions based on what’s driving true conversions make addressable campaigns uniquely insightful.

To provide a layer of security and privacy protection, many marketers leverage hashed user IDs to safely move data across the ecosystem and to and from walled gardens. Controlled data environments help marketers safely connect the dots between customers, digital devices and data, moving us further along the path to delivering omnichannel experiences.

Even with the deprecation of third-party cookies, addressable spend continues to grow. The success of the walled gardens is based on their ability to accurately target audiences and measure campaigns, all thanks to their identity graphs. The digital giants already have an outsize share of advertising dollars, and Jounce Media estimates that in 2020, three companies alone will collectively net $24.1 billion of new ad spend, while ad spend on the open internet is actually expected to decline this year.

Advertisers are not walking away from addressability – just follow the money.

Finding balance in the ecosystem

Advertisers and agencies looking for performance understand that this consolidation of spend over-monetizes the walled gardens and erodes value for everyone else. Just as public roads exist for the good of all, so too should addressability be available for the entire marketing ecosystem. To engage people-based audiences on the open internet without the use of cookies, advertisers and publishers need to adopt a collaborative approach and invest in creating standards for the open web.

By safely and efficiently keeping data flowing and uncovering undervalued inventory, they will improve overall performance while simultaneously making the ecosystem stronger and more trustworthy.

Regressing to outdated practices only heightens this data and market share inequality. Smart advertisers aren’t interested in audience proxies – they are interested in their audience, which is why contextual targeting is not a solution for which the world is searching. Even when contextual works better than “spray and pray” broadcast advertising, addressable contextual performs far better than contextual alone.

Safari and Firefox have both extended their contextual targeting offerings since shutting off cookies, and those CPMs remain only a fraction of lost revenue.

The dangers of nostalgia

In recent days, the counterarguments for continuing down this data-driven path look back fondly at a time before cookies existed, when “true” marketing focused on making emotional connections and building brands. Those of us who actually lived through this history do not look back on it fondly; addressability fueled 10x increases in publisher yields and even greater improvements in advertising ROI. While the advent of digital may have pushed the industry more toward math and measurement, it did not invent one-to-one marketing, it only made it possible to do at scale.

It also ignores a fundamental truth: We are entering a new battleground. At AdExchanger’s Industry Preview last week, speaker and NYU Stern School of Business professor Anindya Ghose said in his presentation on advanced AI that “past winners acted on the known needs of their existing customers, while future winners will identify the unknown needs of their potential customers.”

The real value of addressability is that it can vastly improve your understanding of the customer – your “customer capital,” if you will. The zeitgeist of customer obsession is still alive and well, and it’s evolving in subtle and groundbreaking ways.

With a focus on experiences that meet customer expectations and a dedication to customer needs, customer-obsessed organizations were mostly limited by what they could control. People now expect a level of consistency previously unimaginable, raising the bar for what brands must do to command their loyalty. Now is not the time to revert back to old mindsets.

Follow LiveRamp (@LiveRamp) and AdExchanger (@adexchanger) on Twitter.

1 Comment

  1. Interesting perspective and certainly one way to put a band aid on the evolution our industry is going through. However, what a horrible user experience it would be to have to "Log in" every time I wanted to view content on the web. Just so brands can stitch together a form of addressability? I am eager for this change to encourage advertisers and marketers to think about what's best for their customer. Figure out a way to strategically align with relevant content/people without having to use any sort of addressability or PII.

    Reply

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