“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 Bob Walczak, CEO of MadTech Advisors.
This past summer, there was plenty of conversation swirling about whether ad tech companies had a viable future as publicly traded entities. Equity researchers might feel the end is near, but that’s shortsighted and misguided.
The advertising and ad technology industries undergo a major landscape shift every five years or so, and we’re in the middle of a seismic change with third-party signal loss. Yet, even with that massive adjustment, ad tech continues to overcome technical challenges.
Every company spends money on marketing and advertising because advertising sells their products. These budgets are in the tens of billions of dollars in aggregate, translating to trillions of dollars in revenue. No company will accept signal loss as a reason to cut their advertising and the revenue it generates.
What we’re seeing isn’t the end of ad tech but a market shift to a new, viable, future-proof signal paradigm. Third-party cookie deprecation will force tech companies to develop stronger first-party data products built around users who have opted in.
As with every exploration and monetization of a new frontier, the next era of digital advertising requires a recommitment to shoulder-to-shoulder collaboration.
Technology’s limitations
Ad tech’s present is built on unconsented data collection and behavioral tracking. Even writing that sounds a little dirty. Clean rooms have emerged as a method for companies with consented data to collaborate in a safe environment that maintains consumer privacy. But anyone looking at clean rooms as the savior of ad tech needs to look harder.
Clean rooms are enabling conversations, but it’s direct relationships that have the best chance at solving digital media’s problems.
Outsiders think the loss of the cookie as a common connector will kill the industry. What they fail to see is that this loss will force brands, publishers and platforms to interact directly. A somewhat standoffish industry is finally being called to collaborate on a level that cookies allowed us to previously avoid.
Intimacy necessitates infrastructure
The intimate nature of first-party data requires technical solutions that safeguard customer data privacy and compliance. But cold technology can’t reach the necessary level of intimacy. This requires a face-to-face, look-in-your-counterpart’s-eyes level of communication and trust.
There’s no more hiding behind an anonymized cookie. Companies have to collaborate or die, which means the relationships between brands, agencies, publishers and platforms have to be deeper and more transparent than we’ve ever seen.
Trust is now a necessary layer of industry infrastructure. Building enough scale and reach in an audience segment will take multiple groups coming together to deliver the solution. Buyers need insight into origin, accuracy and consent. Then they need to measure performance. No single organization is equipped to accomplish this alone.
What’s stopping us?
While change is afoot, roadblocks remain. Clean rooms have an interoperability issue and have yet to agree upon a clear industry standard. Clean room providers have historically given each other the cold shoulder, but there are signs the ice is melting.
Then there are alternative IDs. By mixing in unconsented IDs, there is potential danger in a privacy-sensitive climate.
Finally, there are publisher-specific challenges. The use of first-party data requires second-party networks, but US publishers have long resisted forming consortiums. While we have small networks of publishers, we need true collaboration across hundreds to scale the consented, data-enriched audience segments that brands want.
Laws and regulations are forthcoming. The future of data-driven marketing is at stake. Equity researchers analyzing ad tech will take the easy short view and trade away, which is fine. The smart money is to bet long on ad tech as it builds the relational infrastructure needed for this new frontier. The fundamentals are already in place.The end of days for this industry is nowhere in sight.
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