Digital advertising's existential crisis

Could a $600 billion industry actually be at risk?

If you know anything about marriage, one of the best ways to start a productive conversation is for one spouse to say to the other “you’re being defensive.”

Truthfully, there’s no way out of that one. Unless of course, you just bow your head and acknowledge “well I supposed I am.” Most of us react…differently.

Knowing that risk, I’ll take the chance and say, the digital ad industry is acting seriously defensive right now. Maybe for good reason?

I’m just back from the IAB Annual Leadership Meeting, and the word of the show was ‘privacy” - as in, we really need to figure out how to do our jobs and respect consumers’ privacy. But the unspoken word was more likely “paranoia.” Just to cliche this newsletter to death, as the saying goes, ‘you’re not paranoid if they’re out to get you.”

In this case, they might be.

What struck me was this year felt like the ad industry is grappling with a mid life crisis-type reckoning, along the lines of ‘what have I done with my life?’ Certainly, there were the usual conversations about growing pains and technical challenges (e.g. measurement, how best to work with creators, etc.) - but overall there was a feeling at the show that the practice of ad targeting - which fuels a nearly $600 billion industry - is teetering on the edge.

Last year, Congress came fairly close to passing a national privacy law, which IAB CEO David Cohen warned would have had the effect of nuking the entire industry, not just Big Tech. That’s because lawmakers are being far to indiscriminate in their approach to regulating digital ads, said Cohen - who called their use of terms like ‘surveillance advertising’ as “dystopian nonsense” and “insane.”

Whether or not you agree, the vibe is shifting, and not everyone is here for it.

“This industry has been used to self regulation for decades,” said Richy Glassberg, Co-Founder / CEO at SafeGuard Privacy. “This isn’t dealing with viewability standards or fraud. These are laws. So this is like going to the dentist and having to pay for it. But we did this to ourselves.”

And now leaders are trying to fix things, asap. It was beyond ironic that just as a Google executive took the stage at the IAB show to embrace privacy, news was breaking the DOJ was coming for Google - again.

That wild suit is hitting just weeks after the European Union whacked Facebook with a record fine for doing something that - in my view - could theoretically make every digital media company’s business illegal. It doesn’t stop there. Three more state privacy laws are going into effect this year, which promises to only tighten the screws. They even came for Sephora for Christ sakes.

That Meta fine - doled out by the Irish Data Protection commission, essentially said that user consent can't be baked in a company’s terms of service. The ruling is “terrifying to the digital industry," added Glassberg. "Because it could apply to so many companies in this space."

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For his part, Cohen implored members to not root against the walled gardens, because he predicted that whatever laws take effect, the whole business will take a hit.

“If ADPA [the American Data Privacy and Protection Act] had passed, we would have been f***ed,” Cohen told AdExchanger. “ It’s totally restricting even first-party data use. It’s lights out.”

I’m not so sure about the idea that Big Tech getting knocked down a peg wouldn’t be good for smaller publishers, and the open web overall. But regardless, there was an air of resignation at the IAB show, a sentiment along the lines of “all of our old tricks, thanks to cookies and Apple, may not work anymore.”

Beth Evans, vp of media and channel marketing at The North Face spoke about having to move away from precise targeting to broader cohorts, and the overaching need to be very upfront with consumers.

Because to date, when it comes to digital ad targeting “for most of us it’s felt creepy,” she said. Going forward, it’s about “getting away from the creepiness and finding the relevance.”

That’s not going to be easy, and most likely that will mean that digital ads just won’t work as well. But don’t doubt that industry leaders will try to flip the narrative. As mentioned, Sean Downey, Google’s vp of media platforms, used his time on state to talk about spoke trying to “reframe privacy as an opportunity.” He even urged Evans and the crowd to meditate while chanting the mantra, “privacy is not at odds with performance.”

We’ll see. As much as executives spend the week talking about better respecting consumers and lawmakers, they spend that much more time talking about moving consumers’ first party data all over the place using various clean room tools. Thankfully, the feds surely don’t understand that stuff, and will be tied up fighting about Hunter Biden’s laptop. “I don’t think we’re going to see anything on privacy.” said Texas (D) Congressman Marc Veasey during an IAB keynote.

Congress might be preoccupied, but the DOJ and EU are not. But in the DOJ’s case, they seem to be fighting yesterday’s war. Yes, the allegations about ‘Project Poirot’ are juicy, and the idea that Google deliberately screwed over other ad tech companies is nasty stuff. But breaking up Google’s ad tech business isn’t bringing AppNexus back from the dead.

Thus, my question is this - wouldn’t it make far more sense for Google to have to be able spin out its Chrome browser, rather than its ad tech business? If all of the anti-competitive allegations in the DOJ’s case are true, how can the industry let Google go forward with Project Sandbox and all of its offshoots? “Google already laid out plans to move their programmatic auction to Chrome,” said Chalice co-founder Adam Heimlich. “What’s to stop them from selling [their ad tech] and reviving all the same conducts in Chrome?”

Should this company play such an integral role is helping shape the very rules that will likely govern how the internet will operate over the next decade?

I mean, I hate to be paranoid, but….