There is no such thing as a free lunch
This adage that it is impossible to get something for nothing holds true on the internet and social platforms. If I can access content online for free, someone has to be getting paid to either create the content or create the platforms where the content is hosted.
The two primary ways to monetize traffic are either subscriptions or advertisements. To have a positive ROI for the advertisers, there needs to be targeted ads based on personal data. I have always approached the internet with the mindset that someone is watching or collecting my data.
A Lack of Relevancy
I understand the argument for the pushback on the data harvested by the internet and social media companies. There is a lot of bad stuff on the internet and platforms such as TikTok push people towards more extreme content or potential harmful content to keep engagement rates high.
I also think there needs to be better moderation or algorithms to protect youths engaging on these platforms. However, getting rid of cookies or removing device IDs for cross-app tracking on mobile devices will result in a poor user experience.
I know that while scrolling through Instagram or surfing the web I will be served ads. This is the most basic business model to monetize audiences and we are ad tech investors after all in Connatix and DTM. If I must be served ads, I at least want them to be useful and relevant to my interests and needs.
I have already noticed a deterioration in the relevancy of ads that I am served on Instagram resulting from new privacy updates (LINK TO PRIVACY BLOG). I have received ads for baby products, which is probably due to the contextual data of my age, but I do not have a child.
Amazon specifically seems to have zero idea of the products to advertise to me, despite having all my purchase data. Wayfair seems to think I want this weird tent that attaches to my bed for a family of three. The tradeoff to owning your data is a more intrusive ad experience due to a lack of relevance.
When was the last time you clicked on a banner ad and bought something?
I am not sure I ever have. However, I regularly click on video ads or relevant Instagram ads to make purchases. The reason is banner ads seem intrusive to my user experience, so I tune them out. As ads become less relevant to my interest without the ability to track my data, I begin to tune them out and there is a lower conversion rate.
The Psychology of Owning Your Own Data
The new iOS privacy update asks users if they want to “allow an app to track your activity across other companies’ apps and websites?”. Even me, who is asking for more relevant ads often clicks “Ask App Not To Track”. However, when on my desktop using Google Chrome and asked to “Accept All Cookies” on a website, I almost always select “Accept All”.
Why the contrast? Both prompts are essentially asking me the same question. For me, Apple’s prompt of allowing an app to track all my behavior sounds much more intrusive than allowing a cookie—something that in the physical world most people enjoy eating.
Platforms Benefitting From A Shift in Ad Spend
The new privacy updates are marketed as giving users more ownership of their data and limiting the monopoly of large corporations from selling user data. However, the inverse may be true.
Apple’s focus on limiting data transfer between third parties doesn’t apply to Apple’s first-party advertising. This may actually put them in a more competitive position by accessing targeting data that other ad companies do not have. Apple will directly benefit from any shift of app advertising dollars from display ad formats to search as advertisers seek out better targeting metrics.
Google will also similarly benefit from the removal of cookies on Chrome in 2023. Google already has massive amounts of first party data on individuals and almost every site via Google Analytics, AdWords, Google Tag Manager, Google Maps, etc. Marketers on the open web outside of Google will see advertising costs spike as conversion rates decrease, which will shift more dollars to the large players like Google.
As privacy updates make it more difficult to track user data for targeting, advertisers will look for other options outside of the walled gardens. There will likely be a regression back to the top of the funnel advertising which will result in more DOOH, CTV, or branded content ads.
Ultimately, the larger platforms will continue to benefit from these privacy updates as they own the first party data. In the meantime, as online ads become more intrusive, less relevant, and feel like the old pop-up ads of the early days of the internet, will your actions change to allow cross-app tracking and accept cookies?