Triple Your Digital Ad Research Budget Now, Despite Google's Delay

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We've done digital advertising research for a while, seeing many challenges over the years -- but none more consequential than what is coming with Apple and Google's upending the ability to link digital behaviors to a person.

We concluded that every brand marketer should re-evaluate, top-to-bottom, identity and activity graphs, and calibrate as necessary; and triple digital research investment immediately, so that you adapt and thrive amid these changes.

We started this article just before Google's announcement that they would delay the elimination of Chrome's individual tracking technology to late 2023. After deliberation, we agreed that now is still the time to begin preparation for the next generation of identity/activity/measurement unification. Do not think this initiative can take a pause: It simply means shrewd marketers now have an opportunity to research properly.

We'll outline what's at stake -- issue size, key vulnerabilities and implications for media pricing and marketing effectiveness -- and we'll wrap with what needs to happen for a marketer to maximize this transition.

Stakes are high for everyone

The degree messages can be matched to people plummets with the Google/Apple changes. Marketers will have much less information to use to either bid on the impression or predict the most relevant message to deliver.

We deliberately say "matched" versus "targeted." Targeted is a word of war, and we aren't at war with consumers. Marketers try to match their value proposition to consumers who will likely respond. We need updated language. As one of us wrote years ago (in the article "Marketers, Make Love Not War") it's a better mental model to consider marketing a relationship than as a war.

Most marketers desire new customers. When starting a relationship with that potential customer, it is helpful to know something about them before starting a dialogue through advertising. Apple and Google's moves (plus a host of legal changes) means marketers will know a lot less. We won't be completely blind to a prospect's interests: context and some profile signifiers will remain. Media owners may gain permission to share customer information, but there will undoubtedly be less information than today. And it may be siloed by publisher or platform rather than what is needed for equivalized evaluation.

Our analysis shows the typical return on investment (ROI) for digital advertising will decline as data about people is constrained. Marketers must understand their unique ROI reduction due to identity depreciation and learn what efforts can offset.

For advertisers, identity resolution changes will cost over $40 billion in profits and roughly $265 billion in revenue. Publishers will lose as well. We don't have aggregate publisher losses forecast, but some publishers have announced expectations. Unity projects $30 million in lost revenue from changes in identity availability -- equal to 20-25% less ad/in-app revenue. If publishers cannot match an impression to the marketer that will pay the most for that individual, value diminishes.

Less well-matched ads won't convert as well. As marketers figure out their lower ROI results, there will be downward pressure on CPMs to reflect this lesser value exchange. If the digital marketplace resists this reset, ad demand will decrease as placements become unprofitable.

The most extreme example of lost value is probably retargeting -- advertising to those that visited your website. Retargeting becomes more difficult, but not impossible. Marketers can ask for identity authentication and consent on product web pages, but non-customers that are browsing are unlikely to hand over their identity.

Although consumers complain about products that "follow me around the internet" (creeping some out), the reality is retargeting keeps the product visible for a while and many prospects later decide "now is a good time to buy." We have seen retargeting be the most profitable digital tactic in cases as disparate as fashion to finance to entertainment.

The No. 2 disruption to marketing from identity deprecation is research -- specifically the insight accuracy. Understanding the consumer journey will become more difficult. It is hard to predict how much revenue or profit marketers might lose due to research changes but consider a few examples in modern research recruitment alone. It won't be so easy to:

  • Advertise to recruit people that match the profile.
  • Conduct attribution analysis across devices, linked to an identity.
  • Execute digital A/B split tests across multiple impressions.
  • Pinpoint a customer journey, and fine tune the brand experience.

Panels will increase importance, and research costs will skyrocket. Once identity data becomes obscured, this is just the beginning.

We doubt the consumer wins through identity reduction, either. Clutter will rise as publishers offset the reduced value of individual impressions through volume. The odds that an ad is relevant to its audience declines, and effectiveness decreases with clutter and irrelevance. Simultaneously, cyberbullying, trolling and outsider manipulation of social media discourse gets easier as we lose authentic identity for the shadows of browser-enabled identity obscurity. Apple may be the only winner here, earning branding points by posturing around privacy.

Marketers, publishers and consumers all take a hit from identity deprecation. The critical takeaway is that marketers must deeply understand the impact and have proven solutions ready before deprecation occurs. We estimate that the typical digital research budget needs to be tripled over the next 18-24 months to prepare for this new reality. Next week's column reviews that rationale and identifies four critical initiatives for the smart marketer's learning agenda.

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