Cookie deprecation is changing everything. The most profound impact to marketers will be the way in which they manage their data in the absence (or major diminishment) of third-party sources. The industry is buzzing on the subject and, with our Report on Data event coming up, we wanted to set the stage and share highlights from what we learned in 2022 and a peek at what to expect for 2023.
Many of the changes this year have and will be disruptive across the entire media and advertising industry. The good news is that there has been a lot of movement in terms of trying to solve for the most pressing challenges we face as an industry. Leveraging first-party data for the purposes of addressing audiences has become the imperative. Without a plan to do so, advertisers will not be able to explore the opportunities made available through AI and machine-learning.
Earlier this year, IAB released the fifth annual State of Data 2022: The Measurement Dilemma report which looked at the industry’s awareness and readiness for change in measurement and attribution and found the industry is not moving fast enough to prepare. The joint report with Ipsos examined some of the changes we are seeing in the marketplace especially around privacy legislation, the deprecation of the third-party cookies and identifiers, cross-media addressability, and platform rules and mandates which are profoundly affecting data collection, measurement, and optimization.
This same report indicated that there is an over-confidence of being prepared for the deprecation of the cookies when considering the organizational readiness respondents to the survey demonstrated. This lack of preparedness is a call-to-action for industry to both educate and implement these imminent and ever-changing standards. On the publishing side, an IAB study with Harvard Business School and another report by McKinsey estimated that publishers are subject to losing approximately $10 billion dollars in the U.S. due to the deprecation of cookies because the data that is lost powers the addressability and measurement in programmatic buying. Their analysis suggests that publishers will need to replace this loss of ad revenue with a combination of first-party data gathered through a combination of paywalls and required registrations as well as updated contextual targeting and probabilistic audience modeling (analytics that incorporate an array of unknown elements). In general, the consensus is that most publishers will be able to monetize only 20% of their inventory towards their own first-party data. The remaining 80% will be made up by contextual, seller defined audiences and other emerging means.
The buy-side will also struggle with increased costs estimated between 29% to 200% with the pool of known audiences likely to decrease. For advertisers, it will become a question of which publishers will have enough first-party data. IAB’s report identified that 45% of publishers did think they had enough first-party data. This means the balance did not have enough to deliver meaningful matching capabilities through clean rooms that enable anonymization. 55% of publishers feel unprepared which signals there is much work to be done.
When it comes to AI and machine learning, much of the industry has faith that attribution modelling will be figured out by the big tech companies. The challenge for marketers is how aware and prepared they are for the different initiatives happening in the industry. Many brands are relying on their ad partners or agencies to help figure things out. While this is important, it is imperative for brands to understand their customers better on their own to build impactful campaigns that connect with them.
During a recent The Great Digital Debate webinar, Daniel Knapp, Chief Economist at IAB Europe and Tom Kershaw started the debate by saying that the pandemic has been an accelerant of consumer behaviour and programmatic attributing the increased migration to data-driven models to more eyeballs on CTV and OTT. Knapp highlighted that it’s important to take a step back to look at the trend more holistically. “Advertising overall is driven by cyclical and structural factors. There is the hope that the structural changes in consumption will accelerate the move towards programmatic. However, if we look at previous recessions, we need to be careful not to overestimate the pace of this cyclical change – consumer change in particular, is extremely fickle and doesn’t really change long term that quickly.” Regardless of the speed to change, programmatic is being disrupted. Kershaw points out that escalated behaviour during the pandemic is “also exposing holes and fissures that have needed to be fixed for a long time – and top of mind is the identity model.”
So where do we go from here? First, companies need to rethink the way they look at digital data across various channels including CTV, OTT, etc. as it’s going to be harder to do cross-channel or omni-channel measurement to get a wholistic view. We also need to continue to develop standards to help identify the gaps with cross-channel measurement whether from a logistical, compliance, operations, or consumer experience standpoint. Finally, we are moving towards an internet that is by default anonymous and the user has the power and choice to select what they want and care about. So, as an industry, we need to help consumers understand what the value proposition is for sharing their first-party data and then we need to know how to use that first-party data for measurement purposes.
Data readiness and measurement continue to be the industry’s biggest challenges. The topic will certainly be covered more broadly in our discussions in the coming weeks. Join the conversation and register for our upcoming Report on Data event where we will unpack some of these points in detail and in-person.