Collaboration: The Key to the 'Cookie Conundrum'
Post on January 24, 2020 by Ankur Srivastava
Ankur Srivastava Director, Product Management- Ad Server
Programmatic advertising as we know it relies on cookies for everything: from audience segmentation and targeting, to frequency capping and attribution. The pending death of the third-party cookie creates gaps in this existing model, considerably impacting audience addressability. This negatively impacts scale as well as programmatic effectiveness for buyers, while for publishers it can have detrimental effects on monetization.
Third-party cookies are effectually already dead for more than a third of web traffic following moves by browsers like Safari and Mozilla to block them by default. Looking at mobile web traffic in the US specifically, more than half of the third-party cookies don't work. The current regulatory environment in the light of CCPA and GDPR—both of which seek to further limit audience addressability while ensuring that users have better understanding and control around data collection and usage for various purposes—make the status quo even more challenging is. What's more, emerging media formats like CTV don't rely on third party cookies for audience addressability.
As advertisers increasingly desire omnichannel and multi-format campaigns, it's clear that third party cookies are going to become far less important. However, the absence of credible alternatives to cookies are could likely result in advertisers pulling spend from the open web, driving down publishers' programmatic ad revenues.
But the future is not necessarily all doom and gloom. The challenges presented by the deterioration of third-party cookies can be an opportunity to drive innovation and ensure that audience targeting happens within a framework that is well understood and acceptable to various stakeholders including the users. In fact, we see a few positive trends coming out as various industry participants are trying to solve the problem of user addressability.
Trend 1: Rising Importance of People-Based Identity Solutions
Identity solutions that provide a stable user ID linked to deterministic first-party user data are growing in use. The opportunity that exists if the programmatic ecosystem can have user-based targeting happen at scale across the number of publishers whose content requires user log-ins, while ensuring privacy and regulatory compliance, would be a big win. This is also one of the most promising paths to address the 'crumbling cookie' scenario.
Trend 2: Simplification of identity resolution mechanisms
Third party cookies enabled various ad-tech platforms to create an anonymous ID for the user, and then they would sync with each other to map their IDs. This solution was quite scalable in the sense that different companies could operate quite independently without requiring involvement from publishers. However, it has a few major side effects, such as a bad user experience as the page gets bombarded with pixels from various ad-tech vendors, and significant loss in addressable users as various hops in the ad-tech supply chain (SSP, DSP, DMP) try to sync with each other. Solutions like Digitrust, Trade Desk's Unified ID and ID5 are solving these issues by coming up with a standardized ID. The premise here is that if a publisher just sends standardized IDs which is used by SSPs, DSPs, and DMPs, we will then have a much cleaner and efficient user syncing process, while also helping buyers get a significantly higher scale as well.
Trend 3: Increasing Collaboration in the Industry
We can't solve for Identity resolution in the face of crumbling cookies without ensuring that various ad-tech participants (publishers, SSPs, DSPs, DMPs, advertisers and agencies) are actively collaborating to create solutions that show promise. For any identity solution to succeed, there are a number of critical requirements. It should be adopted by key industry participants in the ad-tech supply chain, such as publishers who would be deploying these solutions, SSPs and DSPs who would enable targeting on IDs, DMPs, and buyers who would have to create audience pools to target using these IDs. A successful Identity solution also needs to achieve enough scale to be able to compete with walled gardens.
Luckily, we see a lot of conversations already happening around Identity, which is a very positive sign for the industry as a whole. On the supply-side, there have been initiatives like Net ID Foundation in Germany and The Ozone Project in UK. More publishers are also participating in various forums and discussing practical strategies for providing addressable audiences to buyers and activating their first-party data.
Getting any identity solution to be adopted across the board could be a chicken and egg problem, which can only be solved when we come together to create and push out solutions that make sense for all parties involved. At the end of the day, what advertisers care about most is the value they get from a platform — which is ultimately measured by campaign ROI. They will continue to shift their budgets based on where they get the best return on ad spend (ROAS)—at scale. Only by working together to create and agree upon on a solution to improve scalable identity resolution across the ecosystem, can the industry offer a solid alternative to the walled gardens on the open web.
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