2021 was a year of tumult for Google advertising – but not because it wasn’t a record year for revenue. It was.
For starters, Google said that its ad tech will not build its own alternative tracking methods after killing third-party cookies in Chrome. And although Google didn’t cite a specific example, it made clear it doesn’t expect industry IDs (cough … Unified ID … cough) to pass muster with new privacy rules.
But Google’s own ambition to test and launch third-party cookies alternatives in its Privacy Sandbox fizzled this year.
Origin trials of Federated Learning of Cohorts, or FLoC, for instance, Google’s proposal to replace cookie-based targeting, couldn’t run in Europe over privacy concerns. And Google tossed another wrench in the Privacy Sandbox gears in June with its announcement that Chrome would delay the deprecation of third-party cookies by almost two years, from Q2 2022 to the end of 2023.
But Google isn’t just struggling to balance government regulations with its own privacy policies. It’s also been working to adapt to Apple’s anti-tracking solutions, AppTrackingTransparency (ATT) and Intelligent Tracking Protocol, which cover apps and the web, respectively.
One major change came in September when Google abandoned last-click attribution as its default measurement standard. The new conversion default, called “data-driven attribution,” uses modeled data rather than attributing direct clicks to purchases. Last-click attribution favored search advertising – i.e., when someone searches “blue button-down shirt” and clicks to a product page – but Google now no longer has the scale of conversion data to do this on iOS and Safari.
But the most important Google news wasn’t new at all, although the world just found out about it this year.
A New York judge unsealed information from an antitrust lawsuit exposing a secret deal between Google and Facebook, whereby Facebook got unique identity data and ad volume guarantees from Google in exchange for shifting its ad network spend to Google rather than header bidding vendors.
That arrangement, called “Jedi Blue” internally, will no doubt resurface in other antitrust suits as a clear-cut example of market collusion and unfair dealing.
No company was hit more directly by privacy changes this year than Facebook.
Facebook’s edge as an ad optimization engine has always been that every website and app either carries its tracking pixel or integrates its SDK. Any clicks, page views or purchases are then connected to its user graph.
But Apple disconnected those data streams by requiring explicit tracking opt-ins from every iOS app and by disabling link tracking for Safari users between apps and the web.
Facebook Analytics, the free tool used by advertiser and business accounts on the platform, shut down in June. Scrapping the product was perhaps easier than overhauling it to meet new data privacy standards.
However, Facebook did overhaul its attribution system out of necessity.
Facebook’s new go-to measurement methodology is geo-testing. Although Facebook no longer has reliable user-level data, it can collect enough data in a market or region to model conversions.
But Apple’s ATT change means Facebook’s 28-day attribution window for ad clicks has shrunk to only one day.
Facebook is scaling down its ad product capabilities as a way to consolidate data. For example, instead of running dozens or even hundreds of creative permutations for a campaign, Facebook now recommends collapsing many-branched campaigns into one.
Last week, Facebook announced it will consolidate outcome-based campaigns from 11 to six metrics. Awareness, traffic, engagement, leads, app promotion and sales made the cut, while reach, video views and messages were among the discards.
If ad spend is channeled into fewer products, Facebook maintains statistically significant data for optimization and attribution.
At the same time, Facebook is also trying to collect its own conversion data.
Facebook Shops, an on-platform service integrated with Shopify, now offers discounts to advertisers that traffic customers back to Facebook rather than to Amazon or their own sites. But the discount hasn’t caught on yet because those merchants generally prefer sales to ad credits.
Amazon had a relatively quiet year – at least compared to the other major walled gardens.
But quiet doesn’t mean slow or insignificant.
Amazon’s ad platform wasn’t caught up in data privacy drama because Amazon is a first-party data machine.
Google and Facebook draw immense value from tracking and profiling users around the web, and tying that data to conversions on other sites or apps.
But Amazon already owns its own conversion data (i.e., sales on Amazon) and only needs to track users on its properties – across an increasing number of surfaces.
Amazon expanded its inventory pool this year.
New sponsored video units sometimes now appear in search feeds alongside high-performing or brand-name products. Big brands pay well to distinguish their items from lower-quality lookalike.
Amazon also tested Twitch ads bundled into its DSP for general programmatic video in 2021 and closed the door to third parties. This year was the first when no outside DSPs (aka, The Trade Desk) could use ad IDs to buy Fire TV ads. Now, only the Amazon DSP has that capability.
Apple is generally thought of as more of a referee than a player in the ad industry. It creates and enforces its own rules and occasionally tosses a player out of the game but doesn’t score goals for itself.
But that’s not actually the case.
Apple is a massive advertising player, even putting aside the $15 billion or so Google paid Apple in 2021 to be the default search engine on Safari and iOS – and Apple made several important changes to its own platform tech this year.
In May, Apple created a new App Store unit: Search Tab campaigns. Developers can now sponsor suggested apps that show up below the search bar while someone is entering a search term. The new product gives major advertisers a way to reach every iOS user without winning impressions one by one – similar to buying the YouTube homepage banner.
A month later, Apple expanded App Store search ads to China.
Apple has a limited scope, since its own ad platform only serves to the App Store and a few other Apple apps, such as News and Stocks. But Apple has the potential to turn its O&O into a huge ads business.
Apple earned $3 billion in ad revenue in 2021, up from $300 million in 2017, according to investment management firm AllianceBernstein. That puts Apple’s ad revenue on a similar growth track as Amazon – supporting the thesis that Apple, too, could have a $25 billion ad business in a few years’ time.
Microsoft’s biggest ad news of the year came in just under the wire. The tech giant acquired Xandr from AT&T four days before Christmas.
Microsoft knows the former AppNexus business well, since it was an early investor in the startup and a longtime client. So, perhaps it was just picking up some ad tech engineering talent and useful tech at a fire sale discount. (Terms of the deal were not disclosed.)
But Microsoft has a vast array of products and properties where it can tie ad tech into valuable media and data.
Xbox gaming users, for instance, are part of Microsoft’s Audience Network. LinkedIn is another massive ad business, surpassing a $10 billion run rate in July of this year.
To be fair, some of Microsoft’s assets may seem trivial or outdated. MSN? Not a thing. Microsoft Edge? Never heard of it. Outlook.com? Yuck. Bing? Lol.
But these are each, in fact, huge ad businesses. Microsoft earned $8.5 billion in search ad revenue between June 2020 and June 2021.
In October, Microsoft Edge’s share of the web browser market ticked above 6% in North America for the first time, according to StatCounter data. That doesn’t seem like much, but it’s up from near zero percent share two years ago – and every slice of the browser business is a huge win for Bing search ad revenue.
In other words, the Microsoft ad business is at an inflection point. Will the Xandr acquisition give Microsoft a boost and will advertising data begin to cross-pollinate products like LinkedIn, Xbox and Edge? We’ll see.
“Given the rapidly changing digital media ecosystem, our collective assets will be a powerful offset against the exposures of cookie deprecation and make this the ideal time to bring together our platforms to empower the open web,” Rik van der Kooi, head of Microsoft’s ad business for more than 10 years, wrote in a blog post last week.
But the company is also in a moment of major leadership change.
Van der Kooi recently announced that he will step down at the end of the year and hand the reins to Rob Wilk, former global head of sales for Microsoft Advertising.
Steve Sirich, the longtime GM and CMO of Microsoft’s global ad business, departed in October.