Home The Sell Sider The End Of The Cookie Opens A Jar Of Opportunity

The End Of The Cookie Opens A Jar Of Opportunity

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Alex Magnin headshotThe Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Alex Magnin, founder of The Unwinder

Life is a series of natural and spontaneous changes. Don’t resist them; that only creates sorrow. Let reality be reality. Let things flow naturally forward.- Lao Tzu

A big change is coming to the digital media industry. Google is sunsetting third-party cookies in their Chrome browser, accelerating the recent privacy-driven shift in online advertising.

Third-party cookies are the backbone of advertising and monetization on the web. They are what makes open web advertising the same in kind as ads on Google and Facebook – targeted and measured based on the identity of the user. Without third-party cookies, web advertisements become more like billboards or network TV spots than the finely-tuned, highly efficient digital revolution in ad buying that’s birthed entirely new categories of advertisers and driven $FB and $GOOG sky-high.

So what’s a publisher to do? Or, what can be built to help them? Answers come from the fundamentals of value exchange between publishers, users and advertisers. Privacy is here to stay, and everyone must adapt.

Predicting industry dynamics

First, there will be negotiation (the third stage of grief). Google is sensitive to backlash. The deadline will get pushed, there will be a favorable notion of first-party sets for premium publishers that own many websites, and Google will not give its ad stack an explicit advantage.

Ad tech will push to keep things the same in kind, with an approach where the publisher collects a consent and an identifier, such as an email address, which it passes along for data matching and bidding. For some publishers this will plug the hole, while others will give away more value than they receive. Many won’t know which category they fall into.

The buy side will centralize even more. Less identity-based targeting means more probabilistic prediction, which means the best machine learning wins. And in ML, bigger is better.

Medium term, this is good news for ad agencies. Managing change, complexity and the inevitable trust issues requires people. Direct sales teams at premium publishers will also be in a better place, though their employers’ margins won’t be.

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Niche blogs that are not directly applicable to a product-category will see their ad earnings tumble. Commodity “infotainment,” such as viral sites, is in big trouble. On Safari, where third-party cookies are already blocked, CPMs are down 30-60%.

Opportunities for publishers and new startups

First, publishers need to accept the truth: Most sites today aren’t worth logging in to. Spending resources on a consent-compliant, first-party data-based login system in the service of ads is, for most publishers (those that can already have subscription businesses), a lost cause.

Instead, treat the web content as the top of a purchase funnel. Think of building your monetizable customer relationship in terms of years, not sessions. Think of the path to a subscription or login site in two years from now. Podcasts, newsletters, research and physical goods are natural adjuncts to a media brand. Startups that deploy non-cookie-based solutions for helping publishers manage long-term user relationships will find useful niches.

After the race for scale, niche is back. A headphones marketer will be more incentivized than ever to find the world’s most nerded-out niche audiophile sites. High-touch vertical ad networks may (re)form to better serve niche advertiser segments. This is a startup opportunity, as are tools and platforms that make direct agency relationships more accessible for niche publishers.

The click will matter more, so ad unit innovation may finally get the attention it deserves. As the gap between the web and the platforms widens for targeting, narrowing it through ad formats is a big opportunity.

Bigger publishers will develop their own paneling and sampling solutions, for example, by offering bonus content or reduced subscriptions for rich, regular self-reported or tracked data. This is worth developing now when you can easily check your panel’s representativeness against total audience.

Sign-on alliances will become a thing. Publishers will try to expand their first-party sets by extending sign-on to smaller sites. Google, Apple and Facebook will also fight hard for this territory.

Get closer

Web publishing, and the ad tech industry that supports it, has long been held back by the murkiness of the implicit deal between the users and the business.

It was never as simple as “you get the free content by seeing the ads.” Consumers get the free content by seeing the ads that are targeted and tracked at them personally in ways they don’t totally understand, and when they click a web link they never quite know what experience they’re in for.

To state the incredibly obvious: The more explicit a value exchange with the customer, the better, longer-lasting the business.

Big picture, this is how the industry should think of the “cookie apocalypse” and the privacy movement: the need for a more explicit relationship with the user. It’s time to say goodbye to the ecosystem that our users (and now Chrome) are clearly ready to move beyond.

For serious publishers with a passion for what we do, this is the opportunity to connect that passion to a deeper relationship with our users. There’s more than enough time to build.

Follow Alex Magnin (@alexmagnin) and AdExchanger (@adexchanger) on Twitter.

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