ATT vs. AI

The Google-Facebook online ad duopoly may be breaking up.

I was working on impact of ATT (Apple’s app tracking transparency) on digital advertising. How it has served as a headwind for digital channels and how they are coping with it, and how it has impacted social ad revenue.

After introduction of ATT in 2021, revenue for social giants like Meta and Snapchat tumbled in 2022.

It does not end here. Experts continue to predict that it will continue to impact how marketers will do advertising in the future- which includes the dilution of Google and Facebook duopoly.

“In terms of ATT, it is notable that the only part of Google’s business that fell short of Wall Street expectations was YouTube; I suspect it is not a coincidence that YouTube has a significant app-install business of its own, and ATT’s restrictions on what those installed apps can report back to Google may have hurt business a bit.”        

But what is ATT?

Restricting third-party app tracking on the iPhone as the collection of data is done through IDFA (Identifiers for Advertisers), which is a unique id assigned by Apple to a user’s device. Also, app developers will be required to submit information about the user data they collect, how it is used, and whether they will track users and send them targeted ads.

But as we have seen in recent results for big digital giants, it paints a great story and says Facebook and Google are not out of the game.

It again reconfirms my faith in why we should not rely too much on forecasting: how humans are more influenced by recent events, how we believe in herd mentality, and how the world is still too complex to summarise in an Excel sheet or Word document. I will stop ranting here and get back on topic.

So as per recent earning calls, Facebook and Google’s ad revenue has rebounded citing AI as one of the reason.

They have mostly been quoting their recent success with tools and products driven by AI, which is the talk of the town in 2023, and the year is totally dedicated to AI and its various applications and what it can do.

How are they doing this?

Given the data privacy concerns, it is impacting the ad business in two ways:

• Ad targeting
• Ad effectiveness measurement.

AI is helping to create much needed engagement, build cohorts using probabilistic models to target audiences and measure effectiveness at the same time. I think Zuckerberg’s building a family of apps and integrating users behavior across its platforms which has helped in big way as they huge amount of user behavior data. Secondly, varied way they can target with AI capabilities.

“We’re standing up infrastructure to support new AI-powered products across our services, which will give people more tools to express themselves and connect.”        

We should believe that Google, Facebook, and similar tech platforms impacted by data privacy are able to find solutions to their ad revenue stagnation via AI if it continues to be the trend for the next 2-3 years.

…Apart from the AI angle, we should also not forget that 2023 revenue growth is reported at a lower base, again a perspective. Again picture abhi bhi baaki hai..

….But discussion around ATT and digital advertising is incomplete without data privacy…

Data Privacy

Before the advent?of the internet, advertising was a rather haphazard affair. Brands sent an abundance of messages and ads into the world, hoping that a few would find their intended targets. The system worked, but it was wasteful. Then the game changed. Web-based cookies and other personal identifiers enable companies to track people online and target their advertising to specific kinds of users. ATT and third-party cookies are on their way out, and the game is about to change again. But there will also be solution around data privacy, and game will continue to change again and again.

Data privacy will continue to alter the digital scenario, but I guess Facebook and Google are best positioned to fight back, because they have been in game for quite some time and, they know how it works, what they have, and how it can be used to cope future headwinds due to privacy. For instance, ad targeting may be based on a probabilistic model rather than a deterministic model. But it will still be available.

As we are talking about data privacy, I always wonder, does common man understand what data privacy is all about? What kind of tracking is stopped if they ask not to be tracked? so on and so forth… Is it data privacy negativity is more prevalent in media and among those implementing it than among end consumers? Idea for another post. :)

I think the only and biggest gainer in this is the rise of new digital channel- retail media. Irrespective of? what outcome we have around recent tussle around data privacy, retail media is thriving and growing, and it will continue to grow, at least for the? next five years (ok, I am still left with some traces of forecaster in me ??).

I firmly believe following trends will be more true in the near future(take five years).

• Growth of retail media networks
• Ad solutions will be more and more based on probabilistic rather than deterministic models as data privacy is going nowhere.
• And yes, Apple is set to generate lots of revenue via advertising model via it platform.

In the end, you may conclude from the below depiction that digital ad revenue sources are diversifying!. But yes, Google and Facebook, the duopoly that used to dominate the space are not going anywhere, at least in the near future.

In the next iteration, I may add revenue from streaming platforms, but will wait Netflix’s performance in upcoming quarter, currently, it is too soon to conclude much about streaming platforms.