How the Future of Identity Will Transform the Competitive Landscape
The identity landscape is in a dramatic state of upheaval right now, and today's changes have massive implications for the reality that advertisers and publishers will be operating within the next one to three years. Suffice to say, things are going to look different.
New Challenges Will Give Way to New Tools
In the immediate term, advertisers will face the need for much more data crunching as they shift away from one-to-one measurement in the face of new privacy regulations and policy changes. They will need to level up their data science, analytics, and Excel skills, creating market demand for accompanying tools. In time, artificial intelligence (AI) and machine learning will be used to do most of the work, giving marketers more time for strategic and tactical inputs for different models, including media mix modelling.
Privacy changes and new identifiers, channels, and retail media networks will create fragmentation in the market; this will persist until some solution emerges to interconnect them. This unbundling of the media landscape occurs every few years, and the challenge creates opportunities for agencies — whose relevance increases in lockstep with marketing and advertising complexity.
Overall, the legacy ways of doing things based on third-party cookies will give way to new tactics and technologies. By 2024, media companies, especially digitally native publishers, will have a far better understanding of how to collect and use first-party data. Privacy-first technologies will become the name of the game in this period. Testing of the Privacy Sandbox proposals should be complete. Contextual, first-party data and clean room solutions will mature, with at least a few years to evolve, iterate use cases and interconnect with each other.
Tech Will Go Privacy-First
Verve Group expects a vast majority of buy side and sell side partners to adopt privacy-first technologies in the next two years; In fact, we estimate that adoption of privacy-first technologies could reach approximately 50 percent in late 2023 and climb to 80 to 90 percent by 2026. Performance should be on par with the cookie-based solutions they are replacing. Although privacy will increasingly be built into technology, identity via informed consent will continue to play an important role as a seed to test other solutions such as contextual, cohort-based approaches, and on-device tools.
We will also see consolidation during this time frame and a tightening of the supply path.
End-to-end tech stacks will increase, and intermediaries will decline as margins of the middle layer are squeezed, ultimately reducing costs. The industry will build value on top of the new tech, based on a stronger privacy-first foundation and evolution of use case effectiveness.
Expectations for User Experience Will Be Shaken Up
If third-party cookies are deprecated in the second half of 2024 in line with Google's current timeline, consumers will see an immediate impact in the form of more irrelevant ads. The open market may shrink as consumers install more ad blockers and competition for non-addressable ad inventory declines, driving prices lower.
Walled gardens will benefit, as they always do, and advertisers may start shifting budgets to different channels like DOOH or CTV, which have growing scale; CTV can also still offer some addressability through device or smart TV IDs. By 2026, the user experiences will have improved. Ad loads will decline, but units will perform better.
Consumer Privacy Demands Will Take Precedence
As consumers take greater ownership and control of their personal data, they will have higher expectations for advertisers and publishers to safeguard their data. Privacy regulations will also increase globally. Advertisers and publishers will experience some confusion and setbacks in the early years of adaptation as they search for the solutions that work for their unique needs.
For consumers, being in charge of their own data will increase their understanding of what they can gain or miss out on by consenting to the use of personal information. Education will continue playing a huge role in preventing information gaps across the industry.
We highly recommend that both advertisers and publishers test, test, and test more in the coming months. We've seen how early adopters in any channel can dominate that channel until others catch up. Many advertisers, agencies and larger publishers have experimental groups that can test and try new things. We recommend creating a longer-term plan and budget for testing privacy-first solutions such as contextual audiences and on-device measurement tools. While testing in the next 12 months should be actionable, testing in the following period (12 to 36 months) should align with a mid-term view of how companies want their products or portfolio to evolve.
Advertisers, in particular, should also continue to unify their data sources, lean into data science and elevate their tactics. They should develop and optimize their modeling techniques to suit their unique business needs. They should also test tools, including those that leverage AI and ML, to enable and automate these capabilities.
Advertisers should also prepare for worst-case scenarios where there may no longer be any addressable audiences, with measurement options that may be completely different and less precise. They should explore and invest in other strategies to influence consumer behavior, such as dynamic creative, creative testing, and creative incrementality.
Today's preparations will pay off heartily in the coming three years.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.
Anish Aravindakshan is director of product marketing at Verve Group.