"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Tom Manvydas, vice president of advertising strategy and solutions at Experian Marketing Services.
The online advertising industry is booming, becoming more sophisticated as it grows. Today’s online ecosystem evolved to address a slew of critical issues, such as Web fragmentation, interoperability, workflow efficiency and a lack of standards. While it isn’t a perfect system, the speed of evolution and growth are key characteristics of an ecosystem with healthy competition.
Now the growth of closed networks in the online ad industry threatens to upend this evolution. The trend started with Facebook, iAds, eBay and Amazon, with each establishing an ad business that was essentially gated to the rest of the online ad community. Amazon may break this trend, but so far, the force and growth of the open web has foiled many would-be oligarchs.
Recent reports indicate that Google and Microsoft are headed in a similar direction, closing off their massive advertising networks, displacing the third-party cookie and instituting their own ad tracking IDs. Google has the scale and the technology prowess to fundamentally impact the existing industry.
The real issue at stake isn’t the cookie but our business model: open networks based on industry-agreed standards vs. closed networks based on proprietary technology.
I’m not saying that the third-party cookie isn’t losing its effectiveness or that the quest for cookie-replacement technology is unwarranted. As an industry, we agree that improving the status quo is part of our growth strategy. My point is that launching cookie-replacement technology based on proprietary methods may not serve the best interests of the industry. The search for cookie-replacement technology is already happening, with the support and backing of the industry. The Interactive Advertising Bureau (IAB), which represents the interests of the online advertising community, is leading an effort to research, test and pilot cookie alternatives.
With only a few key players carving up this market, based on their proprietary technologies, the online advertising model would be adversely impacted. Without industry accepted standards for tracking and targeting, competition and innovation will decrease. A key disclaimer for this entire argument is that Google hasn’t released operating rules for executing campaigns on its network. The company could, for example, release interoperability rules that preserve some of the benefits of third-party cookies and address some of the issues.
But the lack of clarity means that there’s an opportunity to influence them in favor of a system that communicates across networks – a true replacement for the current cookie-based system. Advertisers have more influence in the industry than we’re giving them credit for but the complexities of the digital ecosystem have positioned them at a disadvantage. Advertisers and their technology partners need to work together to help influence the outcome of any major development or rules that would impact the industry. Industry standards can’t be determined by proprietary technology or the opinions of a few. The openness of the industry is an advantage for all of us. After opening its exchange to the rest of the online ad community, Facebook, for instance, quickly benefitted. The exchange now generates roughly 20% of its ad revenue.
As we head into 2014, it will be interesting to see the reaction from advertisers, publishers, regulators and eventually consumers from these proposed changes. Cookie or no cookie, a level playing field, based on industry standards, is one of the greatest strengths of the digital Web. It fosters innovation, investment and competition. It fuels the industry that drives nearly all value creation on the Internet, which is accessed by billions of people around the world. The digital Web will continue to grow and the online ad industry will evolve with any industry rule changes.
In the meantime, I keep getting lost in in my rental car with my iPhone battery dying, but Google maps won’t work when my phone is plugged into the charger. Who the heck wants more interoperability issues?