James Avery
In January 2020, Google announced plans to eliminate third-party cookies, heralding a massive shake-up for digital advertising and the internet itself. The end of these cookies promises the golden age of digital marketing, where the internet becomes privacy-first.
At first glance, this update seems to be a step in the right direction, and in many ways, it is. That’s not to say Google’s motives are pure, though. Banning third-party cookies positions Google a step ahead and strips power from competitors, further solidifying its control over digital advertising. The company is essentially handicapping competitors by limiting access to data under the guise of a user-first, privacy-focused update.
Banning cookies will have a lasting effect on many publishers, although not all will be affected equally. Publishers relying on programmatic advertising served through third-party ad servers, like Google Ad Manager, will be impacted dramatically. Ad exchangers, demand-side platforms and advertisers can access cookie data in real time and then use that information to determine how much to bid on inventory. Without third-party data to augment the value of their inventory, traditional publishers can expect their programmatic eCPMs (expected revenue per thousand impressions) to decline, leading to a substantial drop in ad revenue.
So how can publishers win back their ad revenue? Whatever happens next, digital advertising won’t be as simple as it is now, and publishers will soon be forced to rethink their ad strategies and implement new solutions that will enable ad monetization.
Unified IDs are unsustainable in the long term
Publishers will need to be aware of this drastic shift in digital advertising and find alternatives in order to maintain their ad revenue. One potential path is a unified ID solution, where publishers pool together first-party data in an anonymized way, creating an ID that can identify users across the supply chain. This “cookie-less” solution, for example, could use anonymized email addresses to replace third-party data.
Many companies are already building unified ID programs, such as TradeDesk’s Unified ID 2.0. Prebid, an open source header bidding platform, has already announced it will support it. Unified ID 2.0 is just one of many on the market, each slightly different in terms of functionality, implementation and privacy.
Google recently announced its own form of unified ID, which helps publishers who use Google Ad Manager. Through publisher-provided identifiers (PPIDs), publishers can share first-party data in an anonymized way with outside bidders. This seems to be Google’s middle ground to protecting privacy while not alienating advertisers and publishers. The publishers will, of course, have to hand over their first-party data, so Google is once again left with an abundance of data it could potentially use.
It seems optimistic, however, to assume that large publishers (many of whom are competitors) will agree to pool together valuable first-party data, or that the scale of such pooling would offset the deprecation of third-party cookies. After all, airlines have been trying to create a unified way of booking flights (NDC) for a decade, and cable TV tried the same (the Canoe ad platform) before abandoning it. Unified IDs are just a temporary fix.
The future of digital advertising is walled garden ad solutions
Alternatively, publishers can create a walled garden with an in-house ad platform that they can use to nurture direct advertiser relationships, harness first-party data and monetize with native ad units. This is the route Facebook, Twitter, Spotify, Walmart and many others have taken. This approach comes with risks and costs, but it also enables brands to control their revenue destiny versus being beholden to the whims of ad tech, such as Google’s cookie decision.
A walled garden allows the publisher to have full control over its ad strategy, including buying, serving, tracking and reporting. Through walled gardens, publishers can monetize with custom ad units like sponsored listings and native ads, which can draw high premium CPMs from advertisers. The publisher can also augment targeting with first-party data, further increasing the value of inventory. Since the ads fit seamlessly into the user experience, publishers don’t need to worry about ads causing user abandonment.
This approach stands in contrast to how many publishers currently monetize. These ads, for example, would be sold directly to advertisers, not sourced through ad exchanges. While direct sales come with its own set of challenges, the CPMs usually justify it: Ad exchanges often deliver $1-$2 eCPMs (or worse), while the walled ad gardens of Facebook, Walmart, LinkedIn and more average $5-$15+.
By not using a third-party ad tag, inventory is less affected by ad blockers, opening up more ad revenue. Finally, having complete advertiser control means there will be no off-brand advertisers, helping prevent any negative press or upset users.
This approach doesn’t have to completely abandon OpenRTB advertising either, with standard banner ads appearing alongside the ones sold directly. However, total reliance on programmatic ads will make revenue growth difficult once cookies are gone, and publishers will benefit from sprinkling in other forms of ad monetization.
Leveraging first-party data
First-party data is going to become immensely valuable, and publishers must start identifying how they can harness and monetize it. Publishers that do this will have an edge over competitors, but it will involve planning to launch this custom ad program. It’s important publishers act now to ensure no ad revenue hits in 2023 and beyond.
First-party data can include demographics, past website behavior, purchase history, interests and more — collected as the user interacts with you, such as their behavior in-app, on your website, in-store, etc.
Before you start collecting data, ensure you have the right infrastructure in place to leverage it for your ad strategy, likely through a customer data platform (CDP) or data management platform (DMP). You’ll then need to connect these data sources with your ad server. This is why many large brands are taking the walled garden approach: It’s easier to integrate third-party data tools with your own ad server rather than a less customizable, out-of-the-box ad server.
The future of advertising
It’s time for a forced analysis of user privacy in digital advertising. More people are talking about the usage of third-party cookies, and more people are concerned with how their data is being used. Nevertheless, many international privacy laws have already addressed these issues: GDPR in Europe, CCPA in California, LGPD in Brazil and POPI in South Africa.
When cookies finally disappear, companies will have to evolve how they drive ad revenue. It will no longer be as easy as plugging into an exchange and watching revenue skyrocket. Publishers will have to decide how to proceed in a world where their turnkey eCPMs drop, and they’ll be forced to put together savvier ad strategies to survive, such as figuring out how to monetize first-party data. There are plenty of options out there, but they will take resources, time and effort. The ones who jump on board first will be the ones that come out on top.
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