Advertisers' Path Forward to Post-Cookie, Post-RTB Digital Advertising

After more than 2 decades of "more of the same," it's time to move forward and grow up. Digital advertising is not a video game where higher scores, higher numbers of impressions, and more clicks win. Mature digital advertising is efficiently using the investment of dollars in digital channels to drive more business outcomes, ideally incremental to what would have happened anyway. In some cases, reducing spending is the most efficient way to drive the "bottom line" upward. Every dollar saved is a dollar that flows straight to the "profit" line. Unfortunately, mindset and corporate incentive structures have hindered this for decades -- i.e. marketers fear that if they "don't spend it all, they won't get as much budget next year." This fear has driven irrational behavior in the stewardship of those investment dollars, especially in digital advertising. Time to grow up.

Never before has it been as clear as it is today, at least to me, the path forward for advertisers spending billions in digital channels. How do we move forward into the post-cookie and post-RTB world of digital advertising without fear? Let me offer some advice and some examples from advertisers who are already along this path.

Path to the post-cookie world

All advertisers have known for years now that the enforcement of existing privacy regulations (like GDPR and CCPA), upcoming privacy regulations, and moves by Apple and Google will mean the end of cookies, the primary mechanism of targeting users with digital ads. Some advertisers realize that the loss of cookies for ad targeting may not be a bad thing. In fact, they may even realize that the loss of cookies is a very good thing for the rate of outcomes of their digital ad spending. This is because the targeting parameters and audience segments derived from anonymous website visitation patterns are SO INACCURATE that spending more money on such targeting actually made their campaign outcomes worse [1]. We haven't even taken into account the fraud aspects, where bots pretend to be certain desirable audience segments in order to earn higher CPMs from retargeting and remarketing. Bots do this by visiting select sites ahead of time, to trick the data brokers into thinking they are part of certain audience segments. For example, bots deliberately visit medical journal sites in order to appear to be doctors, a highly coveted target that pharmaceutical advertisers pay far higher CPMs to target.

Once advertisers realize the lack of utility of cookies, they shift back to much simpler targeting, based on just a handful of parameters, instead of dozens or hundreds of parameters. For example, by using just three parameters -- gender, age, and geographical location -- they can avoid obvious waste like 1) ads for male shaving products shown to women, 2) adult diaper ads shown to 22-35 yr olds, or 3) ads for fast food restaurants in cities where they have no stores, respectively. Going back to the basics works very well for outcomes, not to mention the cost savings from not having to pay for those expensive audience segments. Furthermore, showing ads to humans should be the first priority of digital advertising; ads shown to bots obviously will not drive business outcomes, no matter how many impressions you buy or clicks you get. Both the quantity of ads and the high click rates are driven by bot activity. In other words, high clicks do not mean your ad targeting was working better; it just means that there were more bots clicking on your ads.

Savvy advertisers have already added "challenger" campaign lines where they simply target iOS devices, for example, with no other targeting parameters. This first ensures that their ads are shown to real humans (lots of humans use iPhones, as you all know). They have already seen dramatic upticks in business outcomes -- they saved money AND got more outcomes. For one of the largest advertisers, they saw almost a 6X increase in effectiveness after the first 3 months; this came from a combination of a 3X increase in the number of subscriptions to their premium streaming service and a 2X decrease (halving) of the cost per acquisition at the same time. The analytics team reported this by comparing two campaigns: A, the old way of running digital campaigns, and B, the challenger campaign line. The advertiser has continued to shift budget allocation from A to B to reliably get more business outcomes and save more costs (on a cost per acquisition basis).

Path to the post-RTB world

All advertisers know that buying ads through programmatic channels means they are paying at least 50% adtech tax, even if it is hidden from view. Whether you think of it as "only 50 cents of every dollar goes to the publisher for showing ads" or as "advertisers need to spend 2X more money to get the same number of ads" it's still a significant waste of money. Did the 50% tax paid to adtech middlemen drive better outcomes for your campaign? Keep in mind what we already mentioned above -- higher clicks didn't come from better targeting, they came from bots. Adtech companies relied on gullible advertisers that believed higher clicks meant greater effectiveness, so they could keep taking your money.

After five industry-led studies that all showed the same thing -- at best 50 cents on the dollar goes to "working media" -- some advertisers are starting to shift back to buying direct from real publishers. Of course, there are very few real publishers with real human audiences. But showing ads to humans is your top priority, right? There are hundreds of millions of sites that run ads, and tens of millions of mobile apps that make money via digital ads. How many humans visit those sites or use those apps, or even know they exist? Even if legacy fraud verification vendors failed to mark those sites and apps as fraudulent or "invalid" what does common sense tell you? Right, it's mostly an illusion, smoke and mirrors [2], [3], [4] and fraud is more like a 90% problem not a 9% problem.

Savvy advertisers have already added "challenger" campaign lines where they buy media with an inclusion list of sites and apps. A super simple litmus test for this is whether you've heard of the site or app before, or ever seen anyone visit (the site) or use (the app) before. I run this experiment in class with my marketing students -- "name10 sites that you visit every day" and "name 10 mobile apps you use every day." Most of them slow down by 5 - 7, and many cannot even get to 10 sites they use every day and 10 apps they use every day. Humans use a finite number of sites and apps. Bots and other forms of fraud supply the other 100 million sites with traffic and 10 million apps with fake users. There's not enough room on a block list to block all of them. The campaign line that uses an inclusion list will help you avoid 90% of the fraud, and show ads to humans. Showing ads to humans means your digital campaigns can actually drive more business outcomes, not vanity metrics. In fact, the metrics you used to use will all change. The number of impressions to buy will go down. The number of clicks and click through rates will go down. And the average CPM prices will go up. Savvy advertisers that look at real business outcomes won't get hung up on those legacy, quantity metrics. When they see the challenger campaign line that uses an inclusion list driving more outcomes, they increase budget allocation to it, and reduce budget to the legacy campaign lines. This is how they are making the transition to the post-RTB world. I assume you can infer that RTB ("real time bidding") is entirely unnecessary, contributed to carbon emissions and global warming, and didn't do anything except line the pockets of adtech snake-oil salesmen. If you need more convincing about "The Economics of Buying Better Digital Ads" see this article: https://www.dhirubhai.net/pulse/economics-buying-better-digital-ads-you-can-too-dr-augustine-fou

So what?

As you can see, both the path to the post-cookie world and post-RTB world involve setting up a challenger campaign line. The challenger campaign line plays by different rules -- e.g. 1) dispense with the useless audience segments and targeting parameters sold by data brokers (that violate privacy and were not collected with consent anyway), and 2) change from a block list approach to an inclusion list approach to avoid 90% of the fraud that is not marked as fraud by legacy fraud verification vendors. Both paths change the KPI from quantity metrics to business outcomes. If the challenger campaign drives more outcomes than the legacy campaign lines, allocate more budget to it. Start with 1% of the budget; then shift another 1%, then another, then another. Do this progressively as long as the new campaign lines continue to drive incremental sales and business outcomes. Like the savvy advertisers before you, this will help you make the transition to the post-cookie and post-RTB world of digital marketing. This is part of growing up beyond the petulant "teenage years" of digital marketing. Time to be grown up adults doing impactful and effective digital marketing.

Are you with me?

Feel free to share this post with others you think will benefit from the nudge. If they need some shock and awe to help them, send them my way. ;-) Happy Wednesday, Y'all!