CMO insights

A cookieless future is coming, but not yet

August 16, 2022 18:04 Comments Off

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The cookieless future has been a long time coming. Back in 2017, Apple started limiting the kinds of trackers that the iPhone would tolerate. Cookies were first in their line of fire. Apple created a program called Intelligent Tracking Prevention, which limited third-party cookies in the Safari web browser. Other browsers such as Firefox followed suit. At first, the advertising industry pushed back. They were worried that Apple’s plans would disrupt the digital ecosystem and all the content and services that it funds. However, five years later, the future looks to be inevitably cookieless – at some point.

Google has delayed the third-party cookie’s demise… again

Google first announced in January 2020 that it would be phasing out the third-party cookie in Chrome. It initially said that the phase-out would happen within two years, and confirmed this in March last year. However, in June 2021, it had pushed back the deadline to 2023. The reason they gave was a need for more time across the digital ecosystem to get the shift right.

At the end of July this year, Google announced that it was again delaying the replacement of third-party cookies. In a blog post, Anthony Chavez, Google’s VP of Privacy Sandbox, said that they had received consistent feedback that there is a ‘need for more time to evaluate and test the new Privacy Sandbox technologies before deprecating cookies in Chrome’. Privacy Sandbox is Google’s program which develops new ways of targeting and measuring ads on Chrome without the use of personally identifiable information.

This further delay has come as ad and e-commerce companies are affected by Apple’s App Tracking Transparency feature. This prevents advertisers can access an iPhone user identifier, thereby dramatically reducing targeting capabilities on iPhones. Meta announced in February that this initiative would cost it $10 billion.

Why does Google keep delaying the cookieless future?

To be fair to Google, killing off the third-party cookie is a huge, unwieldy task. Google’s dominance of the online media landscape means that any changes it makes will affect the entire ad ecosystem. Regulators therefore scrutinise Google’s every move to ensure that any changes won’t unfairly benefit Google or harm publishers and ad tech vendors. The UK’s competition regulator, the Competition and Markets Authority (CMA), for example, recently launched a fresh investigation into Google. It is assessing whether Google’s role in the ad tech industry could be having a negative impact on competition.

Those who sympathize with Google’s decision to delay phasing out the third-party cookie say that the ad industry isn’t ready for drastic changes to the marketing landscape, particularly as much of the world faces economic uncertainty. Indeed, as we collectively brace ourselves for a downturn, many companies – including Google – will be prioritizing generating and preserving revenue. It’s probable that Google has redeployed resources that might otherwise have been focused on the Privacy Sandbox.

On the other hand, cynics claim that Google is ‘finding a way to balance how they maximize revenue while minimizing privacy implications’. What’s more, can you really claim that something is a priority if, four years in, there are still no solutions? You could also argue that any confusion around timeframes and outcomes is to Google’s benefit. After all, while there is no solution, Google continues to practically monopolize the digital advertising industry. Why would it want to change a digital ad industry of which it has unrivalled hegemony?

Will marketing be worse without third-party cookies?

There is justifiable concern around the demise of the third-party cookie and what it means for the future of advertising. Millions of advertisers around the world, from start-ups to international conglomerates, rely on third-party cookies to target ads online. A future without that ability is worrying, especially if a viable alternative is not yet clear.

The cookie isn’t perfect

However, few advertisers would disagree that digital advertising is far from perfect. In fact, the ability of the cookie to target consumers is not always as efficient as is often assumed – for example, when cookies target a customer who has already purchased the item in question, or when uncontrolled frequency far exceeds optimal levels.

Consumers complain of ads following them around the internet, targeting them with products they’ve already bought, or decided against, or simply have no interest in. And that’s if it even works at all. Third-party cookies are unfortunately a key enabling factor in ad fraud. There have been great efforts across the industry for years to address the quality of online exposure and potential tools and solutions for issues such as fraud. But the problems persist because the cookie is so easily exploitable by nefarious parties.

A more human era in digital advertising

But it doesn’t have to be like that. The demise of the cookie could – and should – usher in a better, more transparent and more human era in digital advertising. First-party data will be king and many brands, especially larger ones, have already started investing in their own consumer databases. Major advertisers such as Procter & Gamble, Unilever and L’Oréal have rich consumer databases which will grow in value as they are used to target and model ad buys. Retailers who have their own treasure trove of first-party transaction data and direct consumer relationships will become very appealing to other brand marketers.

A spotlight is shining on contextual advertising as an alternative to personalised targeting in a cookieless future. It’s not a new technology – indeed, it’s as old as advertising itself. But this privacy-first option, where ads are placed in contextually relevant environments, has been proven to be as effective as audience targeting. Furthermore, the ability for brands to understand the content that the user was consuming at the time of seeing the ad will become a new and highly effective identifier for a target audience and their preferences.

Solutions such as a greater reliance on first-party data and contextual advertising also have another key benefit – they will reduce the prevalence of ad fraud, which is largely driven by third-party cookies. A Forrester study found that 69% of brands spending $1 million per month reported losing at least 20% of their budgets to digital ad fraud. Recouping the majority of that lost budget will help assuage the pain from the demise of the cookie.

Reaching new audiences

An interesting side note is that, while Chrome is of course the world’s dominant browser, there is a significant audience that is currently harder to reach for advertisers who focus on the cookie: those people who use Apple’s products, particularly Safari and apps. These consumers often have a higher spending power on average than those who don’t use Apple products at all – an attractive prospect for advertisers. Re-orientating digital marketing strategies so they incorporate privacy-first tools will help advertisers to reach this lucrative audience.

So – how can marketers get ready for a cookieless future?

To quote Gillette CEO Gary Coombe, ‘If it’s inevitable, get enthusiastic’. In our privacy-conscious world, the demise of the third-party cookie is a certainty. You might as well embrace it and prepare, so that you aren’t caught unawares. As Coombe suggests, enthusiasm is key. Advertisers should view this as an opportunity to move on to something better and build better relationships with their consumers. Most people find personalised targeted ads at best annoying, and creepy at worst. This is a chance for the digital ad industry to focus on what matters – what the consumer wants.

A good place to start is understanding the facts. If possible, assign a team member to keep abreast of developments, educate the rest of the team and help you navigate the uncertainty. There is no doubt that your strategy will change, so this is a worthwhile investment. It will also be important to audit your technology so that you understand what will change, and how your technology partners will work without cookies.

As we’ve touched on already, first-party data is the future. Advertisers will need to get to grips with their consumer relationships and start building up smart databases. Make sure that any platforms you work with allow you to own your own first-party data. To create an effective first-party database you need to build trust, so that consumers and prospects are willing to share their data with you. First impressions are key, as are innovative experiences. Consider the value you can offer, whether that’s discounts, content, loyalty schemes or personalization.

A hard but worthwhile journey

There’s no doubting that the journey to a cookieless future will be hard, but there’s also no doubting that it will be worthwhile. Digital advertising has become murky, complex and difficult. The death of the third-party cookie will likely create a landscape that is more straightforward, transparent and, critically, more human. And who doesn’t want that?

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Podcast advertising: not just a phase

July 27, 2022 16:49 Comments Off

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There was a sharp increase in the number of people listening to podcasts during lockdowns. This opened the door to a lucrative podcast advertising sector, with brands eager to reach highly engaged listeners. Many speculated, however, that listener numbers would decrease as the world opened back up – but that hasn’t happened.

Aren’t podcasts a thing of the past?

During the pandemic, there was a sharp increase in the number of people listening to podcasts, with lockdowns highlighting the human need for 1-1 connections – something a lot of listeners feel with their chosen podcast hosts. This increase was not expected to continue, with some even suggesting that, as life began returning to normal, podcasts would see a decline in their number of listeners. However, the opposite has happened. According to the latest Statistica statistics, global listener figures in 2020 were over 330 million, and are likely to rise to 500 million by 2024, with some podcasts reaching the same listener numbers as radio shows. These encouraging numbers are leading to approximately a 40% increase in podcast advertising spend in the UK, as shown in the IAB 2020 Digital Adspend report.

Podcasts are a prime place to advertise

Listeners’ relationships with podcasts are what makes them such an integral part of a digital advertising portfolio. With a defined listening pattern that compliments their daily routine, context is more important than ever. Due to the immersive nature of podcasts, the choice of podcast is likely linked to the listener’s mood. 45% of listeners say they’re more likely to buy a product if the audio connects with them in the right way. This means that brands need to pay close attention to all contextual factors.

By taking advantage of the listener’s emotional connection with audio content, brands can make themselves heard very effectively. Listening to music releases dopamine and so creates a relaxed mental state. By contrast, podcasts require a reasonable level of concentration. Listeners have an active interest in the podcast they’re listening to, meaning the mind is most receptive to advertising information. 76% of UK listeners have taken action after listening to a podcast, whether that’s making a purchase or visiting a site.

As a result of increasing privacy and tracking restrictions, there are challenges around increased personalization. This is an important aspect of digital audio ads. Some listeners say that they would be happy to receive personalized ads – so this must become a priority. With people now listening to digital audio on connected devices, advertisers are able to obtain greater access to first-party data. This first-party data gives brands more control over who hears their ad and when, thereby enhancing targeting precision.

Dynamic or host-read podcast advertising?

Although dynamically inserted ads are on the rise in podcasts, some agencies and brands are wary of this. There is concern that more dynamic ads could give podcasts a radio feel, diminishing the value of podcast ads. Dynamic ads do however make the process quicker and easier due by avoiding a long approval process. This method is the cheaper option and ads can also be trafficked in a more targeted way than host-read.

As previously mentioned, listeners feel they have a close relationship with the host of their chosen podcast. For this reason, host-read ads are likely to see the best performance. Not only do they promote authenticity, but they also avoid the abrupt change in voice of dynamic formats. This change indicates the start of the ad and therefore reduces the listener’s attention. There are drawbacks, however. These include the long lead times for approval, as well as the inability to trial an ad within the podcast. Host-read ads are more expensive as the host is paid to endorse the product, but they often see greater returns. A Nielsen study from 2020 found that host-read ads had a recall of 71%, compared to 62% for non-host-read. The best format, though, depends on both the type of product and the target audience.

Is podcast advertising an efficient way to reach consumers?

The pricing structure of digital audio advertisements is usually calculated using the cost-per-mile (CPM) model. This means that there is a fixed rate for every 1,000 listeners. Of course, there are numerous factors which will affect this rate. Some variables include the size of the podcast audience, which section of the podcast the ad will appear in and, of course, the length of the ad. AdvertiseCast released average rates based on nearly 3,000 podcasts; the CPM for a 30-second ad is $18 and for a 60-second ad it is $25. As previously mentioned, this does of course vary from podcast to podcast, with some instances even employing different pricing structures such as flat rate and CPA (cost per acquisition), but CPM is the most common.

Although it is the most comparable advertising type, radio advertising is open to more price variation than podcasts, making it difficult to compare pricing. The disparity in radio advert costs is due to the extreme number of differing options available, with region, time of day and the number of times per week having the greatest impact on price. So whilst it is difficult to make a price comparison between radio and podcasts, it is generally accepted that podcast ads are more effective than those on the radio: if they come at a premium, this may be worth it for the greater returns.

How can advertisers improve their podcast advertising experience?

For brands to ensure their podcast advertising is successful, they need to widen their audience by reaching hitherto untapped audiences. To do this, brands should look for more niche podcast genres and smaller shows. The top-rated podcasts currently have the majority of advertising. By targeting independent creators and micro-influencers, brands will be able to reach more diverse target groups.

Context is crucial when it comes to podcast ads. The nature of digital audio requires seamless positioning, so advertisers should ensure that the podcast’s content and host’s personality compliments their brand. With so many exciting creative opportunities in digital audio, there are endless avenues to explore to benefit from the exponential growth of podcasting.

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Advertising in a recession: what’s the best approach?

July 4, 2022 10:46 Comments Off

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With economic downturns becoming a reality across much of the world, we explore what advertising in a recession in 2022 looks like for brands.

In early June, the World Bank slashed global growth forecasts to 2.9% for 2022, warning that much of the world could suffer a period of stagflation (persistent high inflation combined with stagnant demand and high unemployment) reminiscent of the 1970s. The energy crisis and the war in Ukraine have combined with prevailing negative economic conditions to create an economic downturn, and many economists are now saying that a global recession is all but inevitable.

In the US, GDP fell in Q1, stocks have tumbled into a bear market and consumer sentiment has dropped off a cliff. Meanwhile, inflation and interest rates continue to rise. Consumer confidence in the US, the UK and in many countries across the world has plummeted; in the UK, it hit a historic low of -40% in May.

This economic crisis will be challenging for all industries. This is particularly true for the advertising industry which is so closely linked to consumer behavior and concerns. Furthermore, it is still recovering from the turmoil of the pandemic. So what does advertising in a recession look like?

The ad industry as bellwether

In decades past, a decline in local advertising was often one of the first signals of a looming economic downturn. Local businesses are often first to feel a decline in revenue and therefore first to cancel their ad campaigns. Now, however, it’s digital advertising that is seen as a bellwether for the economic climate, and never more so than after Snap’s CEO Evan Spiegel admitted that his company’s previous outlook of 20-25% economic growth in Q2 was no longer realistic. He blamed a number of economic factors, such as supply chain issues, inflation and interest rates. An analyst wrote that Spiegel’s announcement ‘suggests that in just a month, the environment has aggressively deteriorated further… Digital advertising is cyclical, like all advertising, and macro headwinds are very likely getting much harder’.

Responding to the downturn

Given its proximity to consumers and the brands that serve them, the advertising industry needs to respond rapidly to the downturn, both in terms of what it communicates to consumers, and how it does that. Speaking at Cannes Lions last month, WPP CEO Mark Read said he was confident that advertisers would continue to invest in marketing during the recession and that there wouldn’t be a repeat of the short, sharp shock of 2020. Indeed, he said that many brands learned during the dark days of the pandemic that the best strategy to thrive during a downturn and beyond is to invest in marketing wherever possible.

P&G’s Chief Brand Officer Marc Pritchard agreed, urging his fellow marketers to keep spending through the hard times in order to reap the benefits when the recovery starts. Many advertisers may be tempted to focus on short-term, sales-focused activity. However, there is a consensus across the industry that they should seek to maintain a balance between short-term activity and longer-term brand-building strategies. Advertising in a recession is the best way of surviving that recession.

Making the most of difficult times

When times are tough, the prospect of decreased sales and shrinking revenues hangs over CMOs and CFOs. It becomes tempting to cut advertising investment and/or focus solely on ROI solutions further down the funnel. However, there is a strong case to resist this impulse. Although brands who focus on longer-term branding activity during a downturn may see their short-term sales and revenue affected, there is ample evidence that they will reap the benefits longer term, enjoying stronger growth during the recovery and beyond. In fact, a downturn can be a good time to acquire extra share of voice. With competitors scaling back, media prices will drop, so an effective brand-building campaign could be executed more cheaply than normal. It’s a bold move, but one that is likely to pay off.

It goes without saying that it pays to be smart about media usage during times of economic uncertainty. Focusing on channels that allow for precision targeting, low wastage and high measurability is a good place to start. It will also be wise to hold back a proportion of your budget for last-minute buys. Media vendors will be eager to sell their inventory, often at lower prices than earlier on in the buying calendar. Another good place to look will be in newer channels such as CTV and digital audio. These channels have good reach but are still in an experimental phase. Vendors are likely to be more open to negotiation.

Whichever strategies an advertiser chooses, there is one that they should avoid at all costs: going dark. Research after previous recessions has shown that brands that cut their ad spend altogether suffer more long term. They are more likely to lose share of market and take longer to recover from the downturn – around five years. They are also more likely to suffer a significant loss of profit when the market returns to normality.

Experienced, impartial advice

Advertising in a recession is an intimidating prospect. Many CMOs will be facing pressure from their CFOs to find savings and cut back where possible. But experts from across the industry, as well as research following previous recessions, all point to one approach: maintain spend where possible and increase it where you can. This will help brands to maintain their share of market and return to growth more quickly when the economy stabilizes.

Ensuring that advertising investments work as hard as possible to drive higher media value is even more important during a downturn. An impartial, independent media consultant can offer forensic analysis of your media activity and give advice informed by your data and their expertise, so that you can optimize your future activity and maintain media-led growth.

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