A New Digital Age Has Begun: Are You Ready for The Fourth Wave of Advertising?
I have to admit surprise at how generative AI has so quickly grabbed everyone's attention in 2023. Clearly, AI's growing importance in advertising is undeniable, and I look forward to how it will shape our industry in the coming months and years. At the same time, we are on the cusp of an important shift that I predict will have more immediate consequences for our business.
With 2024 just around the corner, in a more accelerated manner than had been anticipated, Google's long-awaited third-party cookie deprecation will kick into high gear. Reprioritizing consumer privacy — often compromised during the ID-based digital advertising era — has put cookies on the verge of extinction. Brands, online publishers, media agencies and ad tech companies are all standing at a strategic crossroads and the path they chart now will determine future sustainability and success.
All of these players now fear that AI could upend job security in digital advertising. Actually, the end of cookies and other IDs will be just as disruptive as AI, and more immediately so. I'm concerned that many pockets of our industry are not ready for this massive change: according to a global survey, only 41 percent of advertisers are moderately, if not at all, familiar with alternate targeting methods beyond cookies or IDs.
An Industry Shaped by Defining Revolutions
To fully appreciate how profound this current moment is, it would be helpful to look back at recent history to understand the different technological innovations that connect the previous three waves of digital advertising. First, Google's dominance of the search advertising wave transformed marketer optimization of consumer-intent advertising. This was followed by the second wave with the rise of social media, highlighted by Facebook's dominance in first-party consumer data collection.
Now we find ourselves squarely in the third wave of digital advertising, known as retail media. Retailers are harnessing their proprietary consented consumer data to forge additional revenue streams through the creation of retail media networks wherein brands reach customers across a range of points of purchase verticals. Retail media has swiftly become entrenched as the third-fastest growing ad channel. GroupM's 2023 Global Mid-Year Forecast expects the sector to expand 9.9 percent this year, reaching $125.7 billion.
The social and retail media waves have risen on the ability to harness troves of fully consented first-party consumer data. While the growing swath of retailers and social media walled gardens are making an outsized impact, there are still large parts of the digital ad ecosystem, including advertisers, that have not charted their journey away from third-party cookies and IDs. I'm puzzled by this as these identifiers are about to go away in 2024.
Logically, this is why the fourth wave will mark the ID-less advertising era. This wave cannot be stopped, and I sincerely hope those clinging to IDs will have a change of heart. First of all, users are overwhelmingly rejecting advertising tracking. As a result, regulators on a global level are sensitive to consumers' rights, and have in succession deployed a stream of privacy regulations, starting with the GDPR in Europe in 2018, followed by the CCPA for California. At the present time, we have a handful of discrete state regulations being rolled out, with the persistent drumbeat for U.S. federal legislation getting louder.
Procrastination Is Not an Option
Times of big change often present fresh opportunities. The current pivot point in digital advertising is one of these moments in time. There is a huge opportunity for our industry to create a new privacy-first paradigm that maintains scalability as it cleans up the sketchy practices of ID-based consumer tracking and targeting upon which our ecosystem became overly reliant. This door of positive change will not remain open for long.
Those who proactively go through it will step onto a new path that I truly believe adheres to today's consumer demands around privacy as well as aligns with all the global regulatory actions. By shifting their primary focus away from user IDs, brands have the capability to instead concentrate on where their digital content is being consumed. I am confident that this shift in perspective will deliver a scalable, privacy-first modality to replace the currently problematic ID-based methodology. In fact, I would go so far as to say that this switch is an immediate imperative for any business that wants to remain viable.
And while AI is forecast to affect half of ad revenue by the end of this year per GroupM's report, the vanishing third-party cookies will impact digital advertising in the coming months in a way that will be greater than any dominoes toppled by ChatGPT or other AI. Yes, AI will most certainly transform our industry over time and does deserve our attention, but not at the expense of not prioritizing the transition to an ID-less digital ecosystem.
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.
Anthony Flaccavento is Ogury's general manager of Americas.