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First-Party Data and the Future of Advertising

First-Party Data and the Future of Advertising

Amid growing privacy concerns and the demise of the third-party cookie, the dynamics of the digital advertising landscape are being reshaped as we speak.

Earlier this year, Google announced it would join Safari, Firefox, and other web browsers by phasing out third-party cookies and data tracking at some point in 2021. This should be on everyone’s radar because it isn’t just in-the-weeds tech stuff.

The way data is collected and ads are served online is about to be fundamentally altered.

Consider this: Google predicts that when third-party cookies disappear, 60% of programmatic ad revenue will go with them. There’s evidence to back this up: Ad revenue earned by publishers from iOS traffic (where Safari is the dominant browser, and third-party cookies are already a thing of the past extinct) is significantly lower today.

That 60% potential revenue loss is scarily realistic, but the good news is that it’s not something Google or ad management companies like Mediavine take lightly. So what do we do about it? There are two main schools of thought in terms of solutions:

One solution is the Privacy Sandbox, a series of Google-backed solutions and products with names you’ll hear a lot over the next few years, like “Turtledove.” The crux of this approach is moving data collection to the browser and out of third-party blackboxes. In short, users (not publishers) will own their own data.

However, this won’t provide advertisers with the same levels of targeting they currently enjoy, and until Safari supports these standards, it won’t get the buy-in of the entire ecosystem. The Privacy Sandbox may mitigate some financial losses, but the likelihood of keeping earnings where they are today with third-party cookies is low.

The alternative solution is First-Party Data. First-party data, or the ability for publishers to form a direct relationship with their readers and collect data themselves, has actually been touted as the solution to this problem for years. A publisher-audience relationship is ideal: Who better to collect information and consent than the publishers themselves?

Essentially, the idea is for publishers to have users log in to their website, and in the process, consent to being served personalized ads.

At that point, publishers obtain user consent and may share their data with advertisers in a privacy-protected format. This offers the same (or better) targeting and attribution capabilities as third-party cookies, allowing publishers to maintain, and likely increase, ad revenue over time.

However, it’s unrealistic for any publishers—regardless of size or the loyalty of their audience—to expect all of their readers to log in. Even the paywalls, or “freewalls” that are increasingly common on news sites don’t capture 100% of users.

Rather than choosing one or the other, the ideal solution is combining aspects of the Privacy Sandbox with the collection of first-party data. If publishers can entice a significant portion of users to authenticate and provide first-party data, those users will then become even more valuable than current programmatic users.

When third-party cookies go away, authenticated users will by definition be in short supply, forcing advertisers to pay more to reach their target audiences.

What about users who won’t log in and authenticate, a.k.a. the majority of audiences? That’s where the Privacy Sandbox comes in, to help with guests. Achieving this balance will help publishers earn programmatic ad revenue at current or even higher levels.

Currently in beta testing by over 1,000 Mediavine sites, our proprietary Grow.me product is designed for publishers to collect first-party data and authenticate users.

Grow.me is a series of user engagement tools and features designed to offer additional value to readers in exchange for those readers logging in and consenting to personalized ads.

Initial results of this first-party data solution show that ad requests containing a Unified ID (UID) 2.0-matched user show a 37.13% higher eCPM on iOS devices, where third-party cookies are already absent. This is only the beginning, as we anticipate seeing a significantly higher increase in the coming years as Chrome phases out cookies as well.

(source)