Private Ad Marketplaces Pave the Way for Post-Cookie Advertising

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At this point, the digital media industry has fully realized that consumers and governments will no longer tolerate the tracking technologies and strategies that were once standard media industry practices.

According to some, the death of third-party tracking means the beginning of the end for the open and free internet that we know today. The claim is that limiting tracking limits advertising and that, in turn, limits the ability of site operators to monetize. Lack of monetization, therefore, leads to the decline of the sites themselves. 

This conclusion makes for flashy headlines, but it couldn’t be further from the truth. Advertising as a vehicle for online monetization is not going away. In fact, by every measure, it grew in 2020, and it will grow even more in 2021. According to research from eMarketer, US programmatic digital display ad spending grew more than 10% in 2020 and will rebound to 24.1% growth in 2021. 

Solutions for Moving Forward

So, what do we as digital marketers do? There is no consensus, but two distinct trends of solutions have emerged:

  1. Fight the change, and build solutions that subvert or work around privacy-first measures (while also trying to convince consumers this is the right path)
  2. Build new, privacy-first solutions that actually protect user data

The first option, while potentially profitable in the short term, will fail in the long run. Most likely through legislation (following the pattern of GDPR and CCPA efforts), the cat and mouse game being played by some in our industry will eventually be won by privacy advocates. Fighting this eventuality will put you behind the marketers who are embracing the trends outlined above.

The second option is of mutual benefit for both consumers and advertisers. For consumers, the upside is privacy, transparency, and control. For advertisers, there are actually two parts to the equation: avoiding fines and growing (and protecting) your revenue.

According to research from DLA Piper, GDPR fines rose by nearly 40% in 2020, exceeding $190M USD. While some of the biggest fines have been levied against platform providers, seven of the 10 largest fines to date have been levied against brands, usually for exposure of consumer data. Privacy-first solutions must be leveraged not just to protect consumers but also brands.

On the revenue front, the shift is even more compelling. A 2019 Cisco survey of 2,600 adult respondents in 12 of the world’s largest economies found that 84% of consumers care about data privacy and 80% consider data privacy in purchasing decisions. Most importantly, 48% of consumers have “switched companies or providers over their data policies or data sharing practices.” Over 61% said they “won’t buy if [they] don’t trust how data is used.” On a more personal level, a majority of consumers (over 67%) said they believe “how [companies] treat data is how they treat me.” Privacy-first brands are in the best position to protect and grow their revenues and build better consumer relationships.

To meet these challenges we must change, adapt, and innovate to win. We must consider a number of things, but the two most prominent for advertisers are: where we buy media and what tactics we use.

Where We Buy Media: The Rise of Private Marketplace Ad Programs

Private marketplace ad programs (PMPs) are becoming more and more popular with advertisers. In 2020, eMarketer announced that programmatic ad spending on private marketplaces will exceed open exchanges for the foreseeable future. Let that sink in for a minute — the exchanges that have long underpinned the way we way buy digital media are no longer the most popular tactic for media buyers.

The definition of private marketplaces has evolved over time, but today they generally have the following characteristics:

  • Are managed by the site operator themselves (or more commonly, a service provider or an exclusive agent of the operator)
  • Have inventory that cannot be bought on an open exchange
  • Utilize a real-time bidding (RTB) auction
  • Are invitation-only
  • Use zero- and first-party data for targeting
  • Are built to be privacy-first programs that protect consumers’ data

The top reasons private marketplace ad programs are growing in popularity among advertisers are:

  • Private marketplaces have superior segmentation and targeting
  • Private marketplace ad programs generally deliver better results for advertisers
  • Private marketplace ad programs have incremental audiences and drive incremental conversions
  • Site operators reserve premium inventory for their private marketplace ad programs
  • Private marketplace ads generally deliver a superior ad experience to the consumer
  • Consumer data is protected in private marketplaces

What Tactics We Use: Rethinking Tactics that Use Third-Party Data

The tactics we use to achieve our objectives are also changing. In a recent discussion with a client, the topic of share shift in 2021 came up. One of the many tactics for achieving a robust share shift strategy today is retargeting (with specific targeting criteria). That tactic, while highly effective today, will likely be far less effective as soon as later this year. The consequence here is that we need a new tactic — one that has the upside of retargeting without the downside of third-party tracking prevalent in retargeting today.

Sponsored listings on private marketplaces have a high return on ad spend, have time and time again proved incremental to a media mix, and most importantly use only zero- and first-party data for targeting. We believe they are a win-win-win for consumers, advertisers, and site operators.

Winning in the Post (Third-Party) Cookie World

The natural question should be: How do I win?

If you’re a site operator with a differentiated audience relying solely on an exchange today, set up a private marketplace ad program. It’s more work than using an exchange, but you’ll be better for it. You’ll generate a much higher margin on the ad spend on your site, you’ll deliver a superior consumer experience, and you’ll forge a deeper relationship with the brands that advertise with you. The ROI is strongly positive.

If you’re an advertiser, embrace the change now before you’re forced to. Tap into private marketplace ad programs — test and learn what works. It’s more work here too (for you and your agency), but your targeting will be better, your returns will be better, and your consumers will thank you. Do not wait.

The third-party cookie is crumbling. New, innovative, privacy-first digital advertising solutions will be needed. Private marketplace ad programs provide numerous benefits over traditional exchanges and are the fastest growing digital media strategy. Now is the time to act, change for the better, and embrace the future of digital advertising.

Eric Brackman is Senior Director at Koddi.