"The Sell Sider" is a column written by the sell side of the digital media community.
Today's column is written by Alessandro de Zanche, an audience and data strategy consultant.
Ad tech stocks are soaring even as regulators clamp down on ad tech, especially in Europe. How can we understand this irrational behavior? Let’s backtrack.
IAB Europe recently announced that Belgium’s data protection authority (APD) will likely find it in breach of the General Data Protection Regulation (GDPR) for its role in the Transparency & Consent Framework (TCF), a consent-collection system that over 80% of European websites and apps use.
Google and Amazon have also come under fire. Luxembourg's National Commission for Data Protection has fined Amazon $886 million for alleged breach of EU regulations.
Meanwhile, the UK Information Commissioner’s Office (ICO) has restarted its investigation into the ad tech industry and real-time bidding’s (RTB) compliance with privacy regulations. And the Irish Council for Civil Liberties (ICCL) has filed a lawsuit in Germany “taking aim at Google, Facebook, Amazon, Twitter, Verizon, AT&T and the entire online advertising/tracking industry.”
But following Google’s announcement that the “end of the third-party cookie” in Chrome will be delayed, ad tech company stocks rose, with peaks close to 20%.
M&A activity has also gained momentum, even among companies whose business models are hanging by a thread because of the above-mentioned threats.
There are companies that are paying hundreds of millions for acquisitions of businesses whose models are heavily dependent on RTB being compliant, while the very existence of RTB as we know it is in doubt.
What can we learn from this paradox?
Delaying the inevitable
In some cases, denial is at play. When stocks surged following Google’s cookie-ending delay, investors were betting on media owners and advertisers to keep dancing to an old tune, prolonging a strategy that, in the last decade, has only brought them to a slow decline.
The narrative of a part of the ad tech world, companies whose survival depends on certain dynamics and approaches, is pervading the industry overall.
In the case of RTB, it’s not new to turn the other way rather than strategically steering the boat without waiting to be forced to do so.
The digital advertising and marketing ecosystem needs to be reinvented, and it’s time for true, deep changes to the industry’s foundation.
With Apple’s ATT putting an end to unauthorized app tracking and Google vowing to ban third-party cookies, ad tech companies are driving much of the change in the industry. But historically, these companies have served their own needs first, leaving advertisers, media owners and consumers to adapt.
I believe it’s time for advertisers and media brands to lead ad tech – not the other way around.
Think of advertising in the Apple ecosystem, housing some of the wealthiest online audiences. Ad tech pundits across the ecosystem are disseminating a narrative suggesting that, because of the impossibility of tracking the user across domains and apps, advertising budgets should move to Android.
Their view is that an audience, no matter how desirable and wealthy, only exists if ad tech can track (and profit from) it.
But consider how much value is left behind because it doesn’t fit old dynamics and revenue models.
Instead of future-proofing their strategies, partnerships and products, consumer and media brands are wasting time. They’re listening to ad tech players that are still anchored to the old delusion of programmatic open marketplaces built on infinite reach matched to infinite quality. They’re missing the big picture.
The quality of the advertising and marketing ecosystem depends on quality content that attracts audiences and earns their trust.
A mutually beneficial future
To create quality content, media owners must be profitable and self-sustainable.
But the programmatic open marketplace (now rebranded as “the open web”) is not the answer, and we all know that.
If we aspire to build an alternative to Big Tech’s walled gardens, we require not only a higher-quality environment, but also the revenue to build and maintain it.
Advertisers need media owners to create, grow and maintain environments that attract audiences, instill trust and stimulate engagement.
But media owners need advertisers, too. They need to know that breaking up with old dynamics and setups will not be a jump in the dark, resulting in financial collapse.
The future of advertising doesn’t rely on new ways to track consumers. Rather, it relies on advertisers and media owners together defining an audience-driven vision and determining how advertising technology will support it. The other way around will not work anymore.
Follow Alessandro De Zanche (@adzandads) and AdExchanger (@adexchanger) on Twitter.