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“Informed thinking” is written by members of the media community and contains new ideas about the digital revolution in media.
Today’s column was written by Bob Walczak, CEO. MadTech Consultants.
Last summer, there was a lot of discussion about ad tech companies. A viable future as publicly traded entities. Equity researchers may feel that the end is near, but that is short-sighted and wrong.
The advertising and ad tech industries undergo a landscape change every five years or so, and we’re in the midst of a seismic shift in third-party signal loss. However, even with that massive adjustment, ad technology continues to overcome technical challenges.
Every company spends money on marketing and advertising because advertising sells their products. These budgets total tens of billions of dollars, translating into trillions of dollars in revenue. No company will accept a loss of signal that results in a cut of the advertising and revenue it generates.
What we’re witnessing is not the end of ad technology, but a signal of a market shift toward a new, viable, and uncertain future. Third-party cookie termination will force tech companies to develop robust first-party data products built around opt-in users.
As with every new frontier of exploration and monetization, the next era of digital advertising requires a renewed commitment to shoulder-to-shoulder collaboration.
Technological limitations
Current advertising technology is built on non-consensual data collection and behavioral tracking. Even writing that looks a little rubbish. Clean rooms have emerged as a way for companies with consent data to collaborate in a secure environment that protects consumer privacy. But anyone looking at clean rooms as an ad tech hunter should look harder.
Clean rooms are enabling conversations, but it’s direct communication that has the best chance of solving digital media problems.
Outsiders think the loss of the cookie as a common link will kill the industry. What they fail to see is that this loss will force brands, publishers and platforms to interact directly. To a certain extent, the mobile industry is being called to cooperate in finally allowing us to remove cookies.
Intimacy requires infrastructure
The intimate nature of first-party data requires technical solutions that protect customer data privacy and compliance. But cold technology cannot reach the necessary level of intimacy. This requires face-to-face, cross-your-part eye contact and trust.
No more hiding behind an anonymous cookie. Companies must collaborate or die, which means the relationship between brands, agencies, publishers and platforms needs to be deeper and more transparent than we’ve ever seen.
Trust is now an essential layer of industrial infrastructure. It takes many teams to build enough scale and reach in the audience segment to deliver the solution. Buyers need an understanding of origin, authenticity and consent. Then they should measure the performance. No single organization can do this alone.
What’s stopping us?
Change is coming, but roadblocks remain. Pure components have interoperability issues and have yet to agree on a clear industry standard. Clean room providers have historically given each other the cold shoulder, but there are signs that the ice is melting.
Then there are alternative IDs. By mixing identities without consent, there is a potential risk in a privacy-obsessed climate.
Finally, there are publisher-specific challenges. Using first-party data requires second-party networks, but US publishers have long resisted forming alliances. With small publisher networks, we need hundreds of real partnerships to scale the authoritative, data-rich audience segments that brands need.
Rules and regulations are coming. The future of data-driven marketing is at stake. Equity researchers take the simplistic short-sighted view of advertising technology, and that’s fine. The smart money is to bet long on ad tech as it builds the connected infrastructure needed for this new frontier. The basics are already available. The end of days of this industry is nowhere to be seen.
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