??AI, Privacy, and the Future of Advertising: Key Insights and Industry Shifts #15

Welcome back to this edition of my newsletter!

This issue covers the latest in AI, privacy, and advertising, including Meta 's new contextual ads to meet EU regulations, the rise of AI-driven solutions to tackle ad waste, and how generative AI is shaping marketing strategies. We also dive into the EDPB’s insights on GDPR and AI, privacy-first ad curation, and Scope3 ’s efforts to reduce carbon emissions in the industry.

Plus, insights on SaaS growth, the $50 billion KKR - ECP (Energy Capital Partners) partnership, and the future of traditional agency models. Let’s dive in!

?? Happy reading!

??Charts of the week

Accel (link to the report from Accel)

Key Takeaways:

The 2024 Euroscape report highlights AI as a major driver of tech recovery, with crucial takeaways for investors and founders:

• AI Investment Growth: AI and cloud funding has rebounded sharply, projected to hit $79.2B in 2024, up 27% from 2023, with generative AI (GenAI) driving 40% of this increase. Investors should note the concentration of funding in top players, particularly in the U.S.
• Cloud Sector Slowdown: Despite AI’s growth, cloud companies face slower growth due to economic pressures and shifting IT budgets. Public cloud valuations lag, and IPO activity remains minimal, though M&A remains strong, expected to reach $75.2B in 2024.
• Competitive AI Landscape: Key players fall into three tiers:
• AI Advancements: New foundational models are accelerating, with rapid cost improvements in AI processing and increased focus on automation capabilities for enterprise tasks. Founders in AI can capitalize on enterprise demand for specialized automation solutions in 2024 and beyond.

For investors, AI remains a high-growth sector, though GenAI’s heavy influence signals potential risk in over-concentration. Founders should watch for opportunities in enterprise automation as the next wave of AI-driven innovation.

??Expert insight of the week

Eric Broda (creator of the article) & Scott Brinker (who shared it)

? ?An espresso…

1. Meta Adds New 'Contextual Ads' Option to Meet EU’s Digital Markets Act Requirements
2. Belgian News Sites Pay to Sidestep GDPR Compliance; noyb.eu Files Complaints to Enforce Cookie Standards
3. The New Era of Ad Curation: Navigating Beyond Cookies in a Privacy-First World
4. Study Shows 谷歌 Chrome's PAAPI Nearly Matches Third-Party Cookies for Retargeting, But Adoption Lag Holds It Back
5. EDPB Stakeholder Event: Key Insights on GDPR, AI Models, and Legal Challenges Ahead
6. 2024 DORA Report: AI Boosts DevOps Productivity but Raises Trust and Sustainability Concerns
7. GenAI and Synthetic Data: Revolutionizing Marketing but Risking Homogenized Content and Creative Stagnation
8. KKR and ECP (Energy Capital Partners) Forge $50 Billion Partnership to Power AI and Data Center Expansion
9. Scope3 Secures $25M to Tackle Ad Waste and Carbon Emissions with AI-Driven Solutions
10. Mastering the 'Rule of 40': Key Strategies for Sustainable Growth and Profitability in SaaS
11. AI Disruption: The End of the Traditional Agency Model and the Rise of New Fee Structures

??More details??

?? ??Most relevant digital news and key take-aways

1.) To comply with the EU’s Digital Markets Act (DMA), Meta now offers a third ad option for EU users: contextual ads based only on limited data, like age, gender, location, and current browsing session. This option, alongside Meta’s existing “pay-or-consent” choices, limits personalized targeting in alignment with DMA rules. The DMA requires large “gatekeeper” platforms to offer less data-intensive ad experiences for users who decline full data tracking. Unlike GDPR, which allows most companies to use pay-or-consent models, the DMA specifically restricts how gatekeepers like Meta can leverage user data to ensure fair competition. Whether this adjustment will satisfy regulatory expectations remains to be seen. (Link to post)

Credit, Thomas H?ppner .

2.) Belgian news sites using unlawful cookie banners paid €10,000 each in a settlement with the Belgian DPA, avoiding required GDPR compliance. Privacy group noyb.eu has filed complaints against 15 major sites, urging the DPA to enforce proper cookie banner standards, including a “reject all” option. Noyb argues the settlement undermines GDPR enforcement, and continued non-compliance could result in fines up to 4% of revenue. (Link to the article of noyb.eu )

3.) With third-party (3P) cookies phasing out, curation in digital advertising has become essential for buyers aiming to reach selective audiences across the open web. The role that 3P cookies once played in targeting users and commoditizing inventory is now shifting, empowering new data and quality sources to fulfill this need. Key data types in this evolving landscape include:

1. First-Party Data (1PD) – Buyer-held user data, limited in reach but valuable for known customers.
2. Second-Party Data (2PD) – Publisher-sourced data on audience behavior, useful for targeting within specific contexts.
3. Third-Party Data (3PD) – Now mostly contextual and cohort-based signals, greatly reduced without cookies.

As cookies disappear, demand-side platforms (DSPs) lose their dominance in favor of supply-side platforms (SSPs) and other intermediaries that can leverage remaining data signals to refine targeting. However, while curation offers a path forward, there's no guarantee it will improve on the quality issues seen in the cookie-driven ad ecosystem. (Link to the post)

Thank you, Erez Levin , for all these insights. Tom Triscari , you might have some thoughts on this.

4.) Boston University research finds that 谷歌 Chrome’s PAAPI could be almost as effective as third-party cookies for retargeting—achieving 86.4% of the effectiveness for clicks and 81.8% for conversions when normalized for ad spend. However, PAAPI’s overall impact is limited by low adoption across the ad industry, as many platforms and publishers are still hesitant to fully embrace Privacy Sandbox solutions.

Key Points:

• Near-Comparable Performance: PAAPI retains much of cookies' retargeting capability when adjusted for budget.
• Adoption Challenges: Low integration across the ad ecosystem is hindering PAAPI’s potential.
• Unsustainable Alternatives: ID bridging, another cookieless solution, may not be a viable long-term replacement due to declining performance over time.

PAAPI shows promise as a privacy-friendly retargeting option, but industry-wide adoption is essential for it to be fully effective.?(Link to article in AdExchanger )

Thank you, Allison Schiff , for all these valuable insights.

5.) The EDPB stakeholder event on AI models and personal data focused solely on GDPR, not the AI Act, with no public consultation or iterations. Key takeaways include that the EDPB can only offer general observations due to the complexity of the AI value chain and evolving technology. Legitimate interest is likely the main legal basis for most AI applications, and the 8-week Article 64(2) process is seen as too short compared to the EU AI Board's 12-month guideline development. The discussions covered topics like personal data processing in the AI lifecycle, balancing legitimate interests, and handling user opt-outs, but the questions were too general for concrete answers. This will likely lead to ongoing discussions in the future. (Link to the post)

Thank you, Achim Schlosser , for sharing these insights.

6.) The 2024 DORA report highlights AI’s growing role in DevOps, with over 75% of developers using AI daily reporting productivity gains, though trust in AI-generated code remains limited, as nearly 40% feel it needs human review. While AI boosts productivity, developers have concerns about its potential societal impact, with data center energy demand projected to rise 160% by 2030. To address these issues, the report recommends ethical AI guidelines, transparency in AI use, and adherence to core DevOps practices. Balancing AI-driven efficiency with responsible use will be key as AI investments grow. (Link to the post)

Thank you, Katharina Koerner , for sharing the report.

7.) GenAI and synthetic data are transforming marketing with speed and cost efficiency, but their reliance on common data sources risks homogenizing content across brands. While useful for broad insights, AI-generated content often lacks creative depth and originality. As human input decreases, the risk of stagnation grows, raising questions about whether GenAI can provide a lasting competitive edge. (Link to post).

Thank you, Nico Neumann , for sharing the report.

8.) KKR and ECP (Energy Capital Partners) have announced a $50 billion partnership to accelerate the development of data centers and power infrastructure, addressing the critical demand driven by AI and cloud expansion. The collaboration combines KKR’s expertise in digital infrastructure with ECP’s strength in power and renewables, aiming to meet the expected $1 trillion U.S. investment need in AI and cloud infrastructure by 2030.

Key Points:

• Objective: Support AI growth by developing scalable, sustainable data center and power solutions, with KKR and ECP focusing on U.S. and global expansion.
• Power Demand: With data center power requirements projected to rise by 160% by 2030, the partnership will leverage over 100 GW of power generation assets and an extensive 8 GW data center pipeline.
• Sustainability and Efficiency: The partnership emphasizes affordable, reliable, and sustainable solutions, vital for AI’s role in productivity and global competitiveness.

This alliance between KKR and ECP represents a strategic step in building out the essential infrastructure for AI, targeting partnerships with utilities and data center developers to meet future technology needs. (Link to the article from KKR )

9.) Brian O'Kelley after selling AppNexus to AT&T, launched Scope3 in 2021 to tackle inefficiencies and carbon emissions in digital advertising. Inspired by a realization about digital carbon footprints, Scope3 helps advertisers cut costs and emissions by optimizing ad placements to reduce power consumption in data centers. Following a health scare, O’Kelley deepened his focus on AI’s role in advertising, securing $25 million from GV and others to integrate AI into Scope3’s platform. The goal is to deliver AI-driven, eco-friendly ad solutions that align both economic and environmental benefits. (Link to the article in TechCrunch )

?Kudos to, Brian O'Kelley , and his team.

10.) The “Rule of 40” in SaaS evaluates company performance by combining revenue growth rate and free cash flow margin to reach or exceed 40%. This metric highlights the challenge of sustaining growth as SaaS companies mature.?

Key Strategies:

1. Set Realistic Growth Targets: Top SaaS companies align spending with achievable growth, avoiding overly optimistic projections.
2. Focus on Net Retention: Retaining and expanding revenue from existing customers drives efficient growth, especially with a target net retention rate (NRR) of 120% or higher.
3. Optimize Sales and Marketing: Top-quartile companies recover customer acquisition costs quickly and use data to focus on high-return segments.
4. Build New Revenue Streams: Leading SaaS players develop new business lines rapidly to sustain growth beyond the initial market saturation.

Top-performing SaaS companies emphasize transparency, data-driven metrics, and efficient resource allocation, ensuring long-term growth and meeting the Rule of 40 expectations - a benchmark increasingly watched by boards and investors. (Link to the article from 麦肯锡 ).

11.) The traditional agency model, based on Full-Time Equivalents (FTEs) tied to client billing, is increasingly outdated as AI-enhanced productivity challenges its core structure. While AI can deliver more output with fewer resources, clients expect cost savings, putting pressure on agencies to adapt. Some agencies are exploring outcome-based fees linked to measurable results, but this model requires transparency and trust. As large agencies invest heavily in AI, and clients build in-house AI capabilities, the future of agencies is uncertain. Ultimately, the agency model must evolve, balancing human creativity with AI-driven execution. (Link to the article).

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