Ignoring the dangers of opt in advertising
While federal privacy rules are still being debated, some regulation could mandate that users opt in before companies could track surfing behavior with third-party cookies. The better companies can understand user behavior the better they can target their advertising. Without the targeting, wither online advertising? So when co-moderator Ross Sandler, senior analyst for RBC Capital Market, asked about the effect any cookie rule changes could have, I was eager to hear a response. Instead, one agency executive said they would get the data some other way.
(For a summary of the event, Agency Demand Platforms: Art vs. Science in a Real-Time World, co-sponsored byContextWeb/ADSDAQ and New York’s Ad Club, you can go here.)
I emailed Sandler for his reaction, and he wrote saying that the executives either don’t know what’s coming or just chose not to answer the question. In a June note from RBC, the company said “ad networks that are “aggressive” users of behavioral advertising via cookie-based targeting need to be concerned about the changes coming in Washington. We think behavioral advertising could represent up to 15%-20% of the US display marketplace.”
AdMeld CEO Michael Barrett, who also attended the event, said it’s not just about the cookies, it’s about all data collected from users that would need to be properly opted into. It would be difficult to get any data, not just cookie data, if draconian rules were implemented. (Below is a video interview)
Another executive who has worked on both sides said it would be death for ad networks and especially publishers. Cookies are integral to advertisers and ad networks generating maximum value for publishers and guessed earnings would go down by 50 percent. Cookies are the blood of the system. Cookies are like bar codes, without them you would have to do everything manually and that doesn’t scale. It would be a disaster, this executive said.
It’s difficult to know what the rules will eventually be, but nearly everyone I talked to said there doesn’t seem to be a sense of urgency or unity in educating federal regulators on the consequence of radically altering how users are tracked. There obviously will be some changes, but the depth of the restrictions are still in play. I will talking more indepth with others as this plays out.
However, I believe the doom-and-gloom is overstated. I think that the changes will have less of an effect than others believe — and may even create a better, more open environment for targeting where consumers understand the explicit trade off they are making. For example, as a user I understand that when I type my keywords into Google, I’m allowing them to use those keywords to serve me ads based on that intent. In exchange, I get my search results for free. This value exchange is clear, and I believe the same exchange on publisher sites will simply become more explicit.
As you say above, if networks are hurt by the changes, then publishers will be also — probably even more significantly. This is the key. If publishers are going to lose much of the value they gain by providing free content in exchange for serving advertising, they will go to a “gated” model just like with paid content. With even draconian opt-in regulations, users will simply be required to click a terms of service (“I opt-in to targeting”) before accessing the site’s content. If the user doesn’t want to opt in, then many publishers will probably send them to a payment form to access the content for a fee. The vast majority of users will simply accept the terms without even reading them.
Take it a step further. If all publishers begin to require this “opt-in,” cookies will be placed on the user’s browser indicating that they have accepted the terms on site xyz.com and can go ahead to the content. This will require a browser to accept cookies. Then, if a user ever deletes their cookies, they will have to opt-in to all of those sites all over again. Thus, this requirement may actually lead to a BETTER environment for cookie targeting, where cookies aren’t deleted nearly as frequently and the user trade-off is clear.
Regardless of how this is implemented, I don’t believe publishers will simply give up 50% of their revenues. They will likely just change the usage patterns of their sites to require users to “opt-in” to the targeting in exchange for free and valuable content, making the value exchange more explicit a la Google.
And users that want to read the content will just opt-in to targeting with their eyes wide open.
Thanks for the insight. I wonder though if it would be as seamless as you imagine or the effect it would have on burgeoning aggregating business.
Who wins? The aggregators, who have a ton of links and summaries or the publisher who has created the original content?
It will be interesting to watch.
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