With ATS Paris just one day away, ExchangeWire speaks with Dave Hendricks (pictured below), managing director UK, LiveIntent, who will be participating in a panel discussion on the topic of 'Bridging the Cross-Device Gap'. Here, Hendricks explains how the 'freemium internet' model has fallen and paved the way for the rise of the 'login internet', fuelled by the power of the email address.

Today’s consumer internet – beset by bots and challenged by the rapid shift to mobile – is only a temporary phenomenon that we will forget as quickly as we have all forgotten the pop hits of just a couple of years ago.

This era of robots and ad-blockers heralds the end of the ‘anonymous’ internet that emerged during the ‘freemium’ era.

Freemium, you may remember, is the concept that you can give away your product – in most cases access to your content or services – for free, as long as 5% of your audience finds your service valuable enough to upgrade to the ‘paid’ version.

Whether we realise it or not, the freemium era actually ended a long time ago, but most people didn’t realise it. The freemium era started to die when brands and publishers started collecting data from their non-paying anonymous visitors and sold it as audience data to advertisers and networks.

As someone smart once said: ‘When you are getting something for free on the internet, you are the product’. The cookie data that was produced by all those free visitors was a form of tax charged to those same unsuspecting visitors. Your site data became the way to monetise your visit so that there was some exchange of value to enable the site to continue to offer its content for ‘free’. This data was very important: it enabled brands to bid for you and, more recently, it enabled brands to retarget you via cookie matching. In so doing, your anonymous visits to their commerce sites might be converted via a barrage of ads on the other sites you visited after you didn’t buy those purple patent leather shoes.

But something funny happened on the way to productising all of these anonymous visitors: some of them got fed up with the poorly targeted and repetitive ads they were being served and they stopped playing along. The ‘product’ started boycotting the sites that they were visiting and implemented ad-blockers. And the users started accessing sites on more than a single device. The cookies couldn’t keep up. And so the ad targeting got worse, and it paid the publishers less.

The rise of mobile and ad blockers breaks the freemium internet model. And as ad blockers continue to proliferate and become mainstream – while harder-to-monetise mobile traffic continues to grow – the freemium concept for publishers becomes less and less viable.

The growth of ad blockers and mobile is going to widen the divide of the internet into two distinct camps: The crappy ‘Free’ internet – domain of ad blockers, aggregated and adult content, bots, and comment trolls – and the premium Subscription Login internet where the content is higher-quality, there are few prospecting ads, and the product isn’t ‘you’, it’s the material you are willing to happily pay $9.99 a month to receive.

The premium ‘login internet’ is dominated by the healthiest brands and patronised by trusting and loyal human audiences that support these sites by providing credit card details and a willingness to receive email newsletter alerts. The combination of providing a credit card and a valid email address is the hallmark of brands like Vodafone, ASDA, PandoDaily, The New York Times, TicketMaster, Amazon, Netflix, The Financial Times, and Virgin Media. There are thousands more like Hello Fresh, Zalando, Travelzoo, Wayfair, Brad’s Deals, Groupon, and the Trainline who straddle the line between retailer and publisher. The premium login internet is Spotify on your iPhone and Netflix on your iPad, AirPlayed to your Apple TV where you subscribe to MLB.TV and SkySports.

To me, the future looks more like people that pay for Playstation Now on their logged-in Smart TV.

Publishers who follow the ‘login internet’ model look suspiciously like retail brands. And why shouldn’t they? A great article in the Financial Times – or ExchangeWire – can be more valuable to me than a pair of new trainers or a guitar pedal. I am willing to exchange currency – and I include my email address in this category – in exchange for great writing as much as for material goods like apparel.

The email address is the currency that opens up the login internet for all brands and publishers.

DSPs and SSPs are quickly adapting to the changing realities and focusing on CRM data activation as a way of improving the results for publishers and the overall experience for consumers. At the most recent Rubicon Project ‘Automation Summit’, Turn’s Maureen Little nailed it: “It’s inevitable… Marketers are trying to do a lot of things with their [CRM] data that they already have about consumers and prospects. First-party data is the crux, it is the seed that allows you to really direct that campaign on the consumers you already know.”

Facebook pioneered this value exchange in 2012 when they introduced ‘Facebook Custom Audiences’ and enabled brands to bid on logged-in users through the use of hashed email addresses. This one innovation solved the mobile advertising problem for them and Facebook was then able to then eliminate almost all bidding (FBX) that didn’t involve the use of first-party data. It worked because you log in to Facebook mostly using your email address, and you do this exact same thing on all your devices. Login eliminates cross-device problems.

The ‘login internet’ model offers publishers a viable way out of the freemium model; and I believe that in the next two years we are going to witness a sea change in the advertising and economic models offered by publishers.

Because login data based on the email address is the most common and portable version of first-party data, it is possible for all publishers who collect email data and send newsletters to implement their own versions of ‘custom audience’ selling, at least within their newsletters. However, it does not end there. As SSPs like Rubicon, DoubleClick, and Pubmatic implement capabilities that will enable bidding based on first-party login data, publishers will be able to get brand spend based on first-party data matching, that is today spent mostly on Facebook and Google. I refer to this as ‘Programmatic Identity’, and I believe it will upend digital ad buying in the near future.

Brands have been collecting first-party data for two decades to fuel their by-request, subscription-based, email newsletter marketing programmes. These brands have extensive data about their customer’s preferences – all tied to their email addresses – but have been unable to activate it outside their own newsletter products. As evidenced by Facebook’s stunning success with their Custom Audience product, it is clear that brands are quite willing to leverage this data in channels other than social.

Buying logged-in audiences via real-time matching of first-party data is often referred to as ‘People-based Marketing’. When publishers begin to consider abandoning unprofitable ‘freemium’ models, this is the first place they should look. Publishers who abandon the freemium, anonymous internet do not need to give their product away for free. Publishers who join the ‘login internet’ revolution can leave the world of robots behind, while providing a better consumer experience that reflects the individualised interests of their audience. Wouldn’t you rather see an ad from a brand that you love? Won’t brands pay more to reach known customers rather than prospects?

The era of the login internet is upon us. Embrace the concept of the subscription paywall and start developing relationships with the humans who value your content. You will not look back.

Hendricks will be participating in a panel discussion on ‘Bridging the Cross-Device Gap’ at ATS Paris on 13 April. Find more information here.