The Problems of Identity

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There are several intersecting issues relating to identity in ad tech today, and the challenge is that many times the solutions don't match directly with the most significant problems. The single most significant problem is that browsers are blocking third-party cookies. Safari has gone the furthest and makes it difficult to do any form of cross-domain tracking. Firefox is not far behind. Chrome, on the other hand, may never block third-party cookies and is roughly the size of all other browsers combined.  

The discussions today around identity are often about solving the problem of syncing cookies across different ad tech providers. A number of the ID consortia, for example, create a single cookie that various ad tech partners can use without needing to sync each partner with each other. While this is helpful, the IDs often reside in a third-party domain and thus don't survive Safari and Firefox blocking. Alternatively, the IDs live on the publisher's first-party domain, meaning that they may provide session-level frequency caps on a particular publisher, and can be used for short-duration click-through attribution, they provide a small subset of the functionality available to cross-domain cookies. 

Alternatively, many of the ID solutions require an email or similar identifier to be entered by the user and live on a first-party domain and then use a hash of the identifier to synchronize across domains. These may work on the set of publishers that can compel users to enter this information, but ultimately their ability to scale will be tied to users' willingness to submit their emails (or other ID - or the solution's ability to somehow scrape an identifier from the HTML) on each publisher, on each device, on each browser, around once a month. I'm not particularly optimistic about this approach, despite potentially increasing use of email walls and publishers beginning to share first-party domains (to expand the scope that the ID works for). Further, GDPR makes many attempts to force users into tracking potentially (probably) illegal. There is at least one identity solution that apparently makes use of unique identifiers generated by the operating system during the SSL/TLS handshake, and while this may survive cookie blocking, it's of dubious legality and, given Apple's overall stance on privacy, unlikely to survive once Apple catches on. 

This is all to say that the set of publishers that will allow any form of persistent identity will continue to decrease. Non-Safari, non-Firefox, non-European users will be targetable, but the pool of users that can be cookied continues to shrink. But marketers have generally not changed their tactics, so the industry is trying to create solutions that persist or optimize the legacy sort of solutions. But really the problem is upstream — the old tactics will work less and less. They will continue to work for a while, albeit decreasingly, so the pressure to find new ones isn't intense yet. But really the industry needs to be thinking hard about the future of monetization. This means marketers should be thinking about the type of monetization that works well in a cookie-less world (probably more branding), and publishers need to be thinking about revenue diversification as well as monetization strategies that provide the sort of branding experiences that work in a cookie-less world.

Privacy Evolving

Digital privacy continues to be among the most important medium-term trends in digital advertising. Technical and browser-based restrictions, and regulatory changes, sit at the center of this discussion. Both of these areas saw material evolution this past week. 

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The top two browsers by a meaningful measure are Chrome (63%) and Safari (15%). Firefox is the third, and has less than 5% share. As a result, the privacy stances of Chrome and Safari are, by and large, what matters. They have taken markedly different stances, though still with an overall increased privacy disposition. 

Google released a study this week showing that when all else is held constant, monetization drops 52% when there aren't cookies. In turn, the company is moving in a direction that would preserve programmatic monetization at roughly its current level while adding certain privacy features. This includes, announcing this week, a "privacy sandbox" aimed at limiting the amount of personal information that is exposed while creating some targetability (e.g. creating less deterministic ways of identifying users, but which still allow some less-granular targeting). Similarly, Google this week released for comment a number of potential UX options for discussing privacy with users at the browser level. These are all preliminary steps in a direction that may create more control over privacy while allowing publishers to continue to monetize.

On the other end of the spectrum, Safari this week posted its official tracking prevention policy.  While it was broadly understood that Safari wanted to block tracking, this codified their position. The document states "WebKit will do its best to prevent all ... cross-site tracking" without exceptions. It acknowledges that "unintended impacts" can include "funding websites using targeted or personalized advertising" as well as "measuring the effectiveness of advertising." Safari has implemented a broad privacy hammer regardless of the impact, and doesn't seem particularly interested in the downstream impacts beyond acknowledging they exist. 

From a regulatory perspective, as previously discussed, the IAB's previous Transparency and Consent Framework (TCF) was increasingly believed to be incompatible with the way GDPR was going to be enforced. As a result, the IAB has been iterating on a revised framework. The second version was announced this week — and Google is going to be joining. The revised TCF includes standardized messaging templates for consumers as well as significantly more granularity to communicate user privacy preferences. Unlike Apple, the entities enforcing the GDPR are sympathetic to the considerations of publisher monetization. It remains to be seen if the new TCF complies sufficiently with the spirit of the GDPR that it will be allowed, but it does at least appear to be an effort moving in the right direction. 

All of this is to say that privacy is among the most actively changing areas in the digital advertising ecosystem. Further, nobody knows where in particular the move towards privacy will net out. It's clear that the "anything goes" attitude will be increasingly untenable, but the final amount of user data that is tolerated and how it will be used broadly across the industry is unknown. As a company, the place to be is building a company that does not rely directly on user data and instead focuses on the best way to monetize in a world where consumers have choices about which content they consume, where and how.

The Evolution of News

It's not news that digital publishers have had more than their fair share of challenges in the shift from print to digital. In fact, journalism this year has had the most layoffs since the recession - reporters are actually losing jobs at a faster rate than coal miners under Trump. The industry is undergoing dramatic changes, but there may be a light appearing at the of the tunnel.

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To great fanfare, Apple announced Apple News Plus, a $10 / month product that would provide unlimited access to publisher content. Apple would effectively serve as a massive aggregator of subscription revenue, splitting it 50/50 between Apple and all the three hundred publishers on the platform - including WSJ, NY Magazine and Vox (notably not the NY Times and Washington Post), with the allocation determined by content consumption. The publishing industry fretted that this was an unfair revshare and that it would it spur publishers to focus even more on click-bait articles and headlines to increase their allocations. Instead, Apple News Plus has substantially failed to gain traction - performing at around 5% of the projections Apple gave to publishers. With such limited traction and with the significant constraints on their model imposed by Apple News Plus, publishers have started to seriously doubt the platform. In response, Apple appears to be listening to publishers and building a product that more directly serve their needs as well as those of their consumers.


On the other hand, Facebook historically served as a driver of referral traffic to publishers. As part of its Time Well Spent initiative, the company significantly reduced publishers' organic reach. This has had a massively negative impact on the news industry, not to mention the economics of branded content. But now Facebook is getting back into news with rumors of a dedicated News tab. The actual product is unclear, but there are expectations that publishers would keep all of the revenue from subscriptions they sell. While the economics are more enticing, Facebook will have significant trust issues to overcome with both publishers and users. But the News tab would need to actually be successful. Given the limited success of the Watch tab, many are dubious. But Facebook is actively working with publishers with a more partnerships-oriented disposition than it has in the past.


Meanwhile, Digital Content Next, a digital publisher lobbying group, released a study showing the publishers they work with have grown non-advertising revenue at a rate faster than advertising revenue - changing their share from 80/20 to 77/23 in favor of ad revenue. The numbers are similar even if you remove the top three publishers for digital subscriptions (NY Times, WSJ and Financial Times). Even without these three, the majority of the revenue growth comes from subscriptions.


Finally, one could argue that the shift towards privacy benefits publishers. This is a contentious claim, but the idea is that programmatic incentivized a shift towards audience-based buying in which marketers abandoned any concern around the nature of the publishers and simply found their audience as cheaply as possible on the open exchange. Cookies slowly crumble - either technically or through regulation - and buyers slowly pull back from unknown publishers on the open exchange due to fraud concerns, targeting those known for quality and context. Thus the pendulum is slowly swinging back to high quality digital publishers.

As the above anecdotes show, there are several outstanding issues that remain. Yet, with the appropriate rose-colored glasses, even the first three can be viewed as green shoots. Publishers are right-sizing for the digital economy and platforms that previously dismissed the interests of publishers are now consulting them closely. Publishers are working with the platforms to add subscription revenue, and are iterating in a way that enables their continued growth. If nothing else, the current administration has underscored the value of a vibrant and independent journalism industry. Platforms have come to understand their roles in sustaining this industry beyond lip service - and the industry is embracing different ideas and working to be nimble. It is likely we will continue to see stories like the above as platforms, publishers, and consumers continue to rethink their relationship with news.