The TV Industry's Ticking Time Bomb

If regulators take away the IP address - ultra-targeted TV advertising could be over before it starts

First, a few housekeeping items:

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There is one issue that nobody in TV advertising likes to talk about these days. Either because it’s too complicated, and hard to understand. Or they are hoping it goes away.

What happens if we lose the IP address?

“It’s going to be a massive shift,” said Beachfront CEO Chris Maccaro a few weeks back during an event at Cannes. “If that no longer is an an option. We start pushing TV back to an unconnected world.”

That sounds scary and backwards. But what does Chris mean exactly? What’s the big deal about the IP address?

Well, as you likely know, there is great excitement in the advertising world over the potential of advertising via connected TV. The dream is that CTV will provide the best of digital advertising’s precision targeting and measurement with TV’s storytelling power.

Since TV sets don’t use cookies, much of the TV ad tech world and third party measurement sector relies on IP addresses to connect individual TV sets to households and users - enabling a whole bunch of behind the scenes dot connecting to occur.

While it’s certainly open to interpretation, both GDPR and the California privacy law can be read as requiring that users provide consent for the use of IP addresses. That’s a big challenge, since many consumers don’t have a direct relationship with their TV manufacturers, let alone the comScores and Nielsens and vast ad tech ecosystem that may use or touch IP addresses. Since we’re in an increasing pro -rivacy environment, if there were to be a serious crackdown on IP address usage, CTV’s potency could significantly hampered just as the medium is exploding.

“It really does eliminate efficacy for advertisers,” said Maccaro.

As for how serious a threat this is, it depends on who you talk to. One ad tech insider told me that in TV, IP address usage is “1000% on very fragile ground.” Yet others wonder if this is too complicated, or too fundamental to the internet’s functionality, for regulators to seriously go after.

“People should be paying more attention to [this issue],” said James Rooke, president of Comcast Advertising, on this week’s episode of my podcast Next in Media.

According to Rooke, Comcast has tried to get out in front of this issue by prioritizing privacy in its ad tech and data policies. “I believe that yes, the environment is going to get more restrictive. But if companies focus on the topic, which many are starting to do, collectively we can design solutions that are able to reflect the realities of where state and federal regulators may go, whilst still enabling more advanced advertising use cases.”

The Interactive Advertising Bureau is working to help the industry prepare for variety of scenarios, such as if California were to start cracking down on IP addresses, viewing them as personal information.

That could hit CTV hard, explained Tony Ficarrotta, Assistant General Counsel, IAB.

“In TV, there is a relative dearth of other signals,” he explained. Unlike for example, the mobile world, which is dominated by two operating systems (iOS and Android), TV is a patchwork of devices, makers, streamers and cable systems, all with different systems and rules.

“What signal do you have to tie it all together?” he asked. “Well, whenever you use an internet connection there is an IP address. IP is the backbone for identity graphs, for attribution, etc.”

Without it, the medium becomes “less valuable to advertisers and less relevant to consumers.”

That’s if you can actually reign in its usage. According to experts, it will be exceedingly hard to stop the use of IP address entirely. As one insider explained, even if various ad tech systems are trying to avoid collecting IP addresses, “it's very hard to hide.” This person predicted that we might see a migration to the use of server side ad calls - rather than such calls coming from the buy side - leading to - gulp - stronger walled gardens.  Any company with first party log in data will get stronger.

“If your goal is to never see it,” said Ficarrotta. “It might be impossible.”

Of course, it’s possible that nothing happens. But as we’ve seen with the impending end of the cookie, it seems that hoping this issue just goes away isn’t much of a strategy.