One year after Google’s bombshell cookie announcement in January 2020, and the pursuit of solutions that target consumers in an effective, privacy-conscious (and compliant) manner is well underway.

With rival browsers Safari and Firefox having blocked third-party cookies ahead of Chrome, and Apple’s controversial decision to cease supporting ID for Advertisers (IDFA) on iOS, the pressure to develop and implement ways of serving relevant ads to specific audiences has been keenly felt by advertisers.

Key to these new techniques is being able to access addressable audiences — anonymised groups of consumers whose non-personally identifiable information can be used to build a profile of interests and needs. With these ‘recognisable’ audiences in place, advertisers can deliver campaigns that are likely to be of greater interest to consumers and are thus more successful for brands.

As addressability is the lynchpin behind producing efficient, tailored, optimised ad campaigns, it’s imperative that advertisers and publishers across the industry find effective ways to build and utilise addressable audiences.

PubMatic has produced this Deep Dive special in partnership with ExchangeWire. PubMatic is a leading sell-side platform that delivers superior revenue to publishers by being a sell-side platform of choice for agencies and advertisers. Programmatic tools and services are a vital facet of the entire digital advertising industry, with information sharing crucial to aligning the digital industry towards best practices and, ultimately, growth in digital advertising.

In this Deep Dive special, we will explore:

◼ What audience addressability is and the current opportunities within it

◼ The deprecation of the third-party cookie and how browsers are moving forward

◼ PubMatic’s approach to audience addressability

◼ How publishers and advertisers are creating addressable audiences

What is audience addressability?

An addressable audience refers to the total number of online consumers a media platform can reach via targeted advertising campaigns. Before digital took off, addressable targeting was mainly used by holders of postal addresses, such as newspapers and magazines, with addressable advertising taking the form of direct mail and print ads. Early online addressable audiences were powered by third party cookies, that tracked consumers’ online behaviour and acted as a proxy for identity. Ad tech platforms were able to harness the data captured by third-party cookies to create large addressable audiences that enabled brands and media owners to target and retarget specific audience segments.

Amidst growing concerns over consumer privacy, third-party cookies are disappearing from the digital advertising ecosystem. Furthermore, by January 2022, Chrome (the largest global browser with almost 70% market share) will no longer support third-party cookies. Google’s decision has accelerated the need for publishers and advertisers to develop a robust, scalable, cookieless advertising ecosystem.

Where did third-party cookies go wrong?

When the third-party cookie appeared on the scene it was intended to create a simple link between publishers’ audiences and brands’ target audiences – which is exactly what it did. However, third party cookies are capable of a lot more, and the online ad industry stretched the cookies functionality to such an extensive, pervasive extent, ultimately creating a situation that required legal intervention (hence GDPR, CCPA, et al). Today, ongoing privacy issues have led many to assume that the only solution is to remove third-party cookies entirely. But is this necessarily the case?

Who can shout the loudest?

Safari and Firefox already block third-party cookies by default, and you could be forgiven for thinking that Chrome is simply following suit. The difference between the smaller browsers’ approach and Chrome’s is that the latter is rolling out a host of technologies designed to enable publishers and brands to continue to share data, albeit in a tightly (Chrome) controlled way. At a high level, Google wants to create a “Privacy Sandbox,” where websites are able to gather some information but ultimately hit a wall where the browser cuts them off. Advertisers will have access to ‘cohorts’ — audiences built by Chrome based on users’ browsing history. Additionally, the 'TURTLEDOVE’ proposal, which will allow publishers to add their first-party audiences to cohorts when similar behaviours are identified.

Up to now, third-party cookies have been the linchpins of audience addressability: gathering the data required to dynamically optimise creative, frequency capping, and retargeting. While there’s still a year to go before Chrome’s stated deadline of January 2022, and a lot could change in that time, advertisers and publishers should act now in order to weather the inevitable storm.

Creating a fairer future

The Partnership for Responsible Addressable Media (PRAM) is a collaborative effort that involves advertising trade associations and companies representing every sector of the global advertising industry. PRAM’s stated principles center around the importance of privacy, and a healthy open internet. Furthermore, PRAM states that all marketers and publishers should have equal access to an addressable internet; and everyone must abide by applicable laws. If successful, the work of PRAM will get us as close as possible to accountable next-generation addressability solutions.

In creating a fairer future, we should consider the role third-party cookies have played in defining consumer experiences of online advertising. For the most part, third-party cookies have facilitated better experiences through frequency capping, targeting, and personalisation. However, consumers can find targeted ads ‘creepy’ or irrelevant, particularly if the data used for targeting is out of date.

To aim to ensure that any new solution optimises the consumer experience, it needs to encompass current benefits as well as new capabilities to increase addressability, all whilst protecting data privacy. That’s a significant balancing act, and success will require consumer education as well as industry collaboration and innovation.

What are the opportunities?

Advertisers and publishers need to reconsider how to identify, target, and engage audiences in a compliant, brand-safe way that does not compromise user experience. There are three main options available to do this: matched first-party data (e.g. email addresses from a publisher’s logged-in audience), universal identifiers, and browser-based audiences.  Brands and publishers need to understand and weigh up the benefits and drawbacks of each solution on a channel-by- channel basis while keeping in mind the need for omnichannel measurement and optimisation.

Matched 1^st party data

Display

In order to be effective, digital advertising (especially programmatic) requires a media owner or publisher to have an audience that can be targeted through advertising.

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This means that the media owner or publisher must have a unique identifier associated with each individual — email addresses, cookies, and mobile IDs being the most common types of identifier. Information taken from these identifiers (such as gender, age, location, and content preferences) can then be used to group users into audiences that can then be made available to brands, enabling them to send targeted messaging to specific audiences.

Providing large known (AKA addressable) audiences for advertisers to target with personalised advertising enables publishers to provide a viable alternative to the walled gardens — Facebook, Google, Apple, and Amazon — that currently take the lion’s share of digital advertising spend. Furthermore, responsibly sourced, up-to-date, cross-publisher data, housed in a trusted, accessible ecosystem, creates a further opportunity for publishers to compete with the scale and convenience of the walled gardens by allowing them to combine their inventory within a single platform.

These cross-publisher collaborative approaches enable media buyers and brands to identify synergies across multiple addressable audiences and create premium media buys at significant scale. Combined with the ability to accurately measure cross-channel performance, this gives media buyers an ideal opportunity to shift budget away from the walled gardens.

Solutions such as Net ID in Germany and Ozone in the UK have proven that trusted, cross-publisher data ecosystems work. However, it is unclear whether these publisher login alliances will work across international borders. While it is not impossible to create publisher alliances that can operate in multiple languages, with multiple currencies, and that incorporate country-specific regulations, it is more challenging compared to single-market solutions.

Matched first-party data is the most robust way of identifying consumers and creating addressable audiences because there is a unique, persistent identifier that exists between two (or more) websites. This enables, for example, an online retailer to retarget a basket abandoner on a premium publisher if the consumer logs into both sites using the same email address. Additionally, the solution lets publishers and advertisers know how ads perform in terms of yield and ROI, creating a feedback loop for optimisation.

While this approach offers near-optimal audience addressability, it’s not the most straightforward for smaller advertisers and publishers: the setting up and management of the number of partnerships and data integrations required to achieve viable scale may be too challenging for companies with fewer resources.

Mobile

Apple’s announcement in June that iOS 14 would ask app users to opt-in to their Identifier for Advertisers (IDFA) was a monumental moment for the industry.

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Previously, a user installing an app on their iPhone would have been automatically opted into IDFA. In doing so, they would be assigned a seemingly random identifier, which media buyers would use to deliver targeted ads to specific audiences (based on the data provided by Apple). On the outside, Apple’s move looked like part of the growing trend of tech providers giving consumers more control over their privacy. To the digital advertising industry, however, it was perceived as an existential challenge to mobile advertising, at least on iPhones.

By shifting to an opt-in approach, Apple will throttle advertisers’ ability to leverage audience segments for cross-app and cross-channel targeting. However, the move also creates an opportunity to stimulate innovation and the development of solutions that benefit all stakeholders. We expect more advertisers to forge direct partnerships with owned and operated publishers and platforms in order to use contextual targeting to reach known, addressable audiences in premium environments.

Another opportunity for media buyers and brands is to leverage device-level data captured by apps and websites, such as location. However, the sustainability of this solution relies on ensuring there is a fair value exchange for consumers, and this won’t be possible in all cases. For example, requesting location data in order to surface nearby fuel prices is a utility that a user is likely to opt in to because there is a clear benefit to doing so. A photo editing or flashlight app requesting access to location data, however, offers no apparent value to consumers, meaning that users may be less inclined to give their consent. This could spur a general decline in consumer consent to track device-level data, causing a knock-on effect on the wider industry.

Connected TV/OTT

Today, billions of consumers around the world own Smart TVs and over-the-top (OTT) devices.

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This creates a channel via which media buyers and brands can reach considerable addressable audiences in highly engaging, premium environments. Additionally, due to its digital nature, advertising on connected TV (CTV), OTT, and video on demand (VOD) services can be highly personalised while offering the ability to reach incremental audiences at the same time.

The vast majority of broadcaster VOD platforms, content apps, streaming devices, and other video services require individuals to sign-up with an email address to access their content. The increasing popularity of these services means CTV providers are rapidly building large-scale addressable audiences. These audiences are easily segmented using behavioural and demographic data collected by the provider, and are highly accessible for media buyers and brands. The fact that CTV audience data is collected using email address as the unique identifier enables brands to overlay their first party data to target their known audiences directly on CTV/OTT platforms.

Universal IDs

With the demise of third-party cookies, Universal IDs have been touted as an alternative to tracking and targeting consumers across the web. As these IDs are delivered in a first-party environment, many have considered them a more future-proof way of collecting identity information.

There are essentially two styles of Universal IDs, each with their own benefits and challenges. The first is probabilistic Universal IDs. These combine some first-party data with additional user behaviour clues and traffic-level attributes, such as the browser used and favourite websites, as well as the screen resolution and download speeds on the accessing device. This data is then used to create an individual user profile which can likely be matched with other non-logged-in user profiles across different devices and browsers.

The second style of Universal IDs is deterministic, or de-anonymised. These work in a similar way to third-party cookies in that they are able to track on-site user behaviour; the difference is that the type of cookie used for deterministic IDs is first-party owned, Real ID (meaning it is placed by the owner of the website) and thus the data collected can legitimately be used for advertising purposes. The drawback is that first-party cookies do not provide cross-site or cross-channel insights because they are tied to the domain of the website owner. PubMatic is helping to solve for this by combining various probabilistic and deterministic ID solutions and making these available to buyers. This enables us to identify the best mix for individual advertisers.

To achieve data portability (and thus audience addressability), first-party IDs and associated data are shared in some way with a third-party Universal ID provider. These solutions use this data to build an identity graph which is made available to media buyers and brands for targeting.

For mid-sized companies, universal IDs are likely to be the addressability solution of choice due to the combined offering of scale and precision. Larger companies will likely use universal IDs too, but as a back-up rather than a preferred solution.

Using browsers’ audience segments

The final option, which is still being defined, uses browsers-based audience segments. This approach is highly scalable but lacks transparency. The net result is not dissimilar to the old network model and blind buys on unsold inventory. For publishers and brands, this method poses a threat to brand safety, and the lack of visibility into placements seriously throttles performance and yield optimisation potential.

PubMatic’s approach to addressability

As we move towards a cookieless future, we encourage advertisers and publishers to explore the audience addressability landscape, and to begin experimenting with identity and data solutions to test the efficacy of each strategy and see what yields higher percentages of addressable audiences.

PubMatic supports addressability through two available tools:

1. PubMatic’s Identity Hub enables publishers to activate, manage and curate ID solutions that drive the scale needed for buyers to increase addressability and reach desired target audiences through their ID of choice. Built on Prebid, Identity Hub curates over a dozen leading ID solutions for publishers, that include both probabilistic and deterministic IDs. Publishers that have Identity Hub activated can begin to develop and experiment their identity strategy, by implementing A/B tests to identify ID efficacy. When Publishers leverage Identity Hub to manage and curate their ID strategy, this delivers an improved and renewed level of audience addressability for buyers to activate. Buyers that create private marketplace deals with PubMatic’s unique ID targeting can bring improved personalised ad experiences to consumers in privacy-first and brand-safe environments. This ultimately helps buyers boost media efficacy and campaign ROI across contextual omnichannel formats: mobile, in-app, CTV, and web display.At PubMatic, we support and advise both advertisers and publishers in weighing the benefits of each partner identity solution against key metrics and KPIs across omnichannel formats.
2. PubMatic’s Audience Encore is an audience data platform designed to improve the way marketers and data owners transact audience data by giving more control to the data owner and better ROI for the advertiser. Buyers can then create fully custom curated data segments in private marketplace deals to align with brand clients’ target audiences across a multitude of first-party audience data readily available through our premium and exclusive partnerships, including: H-Code, Captify, Audigent, Lotame, and more.

By partnering with PubMatic, agencies and publishers can quickly and easily benefit from our audience addressability ecosystem of identity and data solutions to deliver more meaningful programmatic advertising experiences.

How to prepare for post-cookie challenges and start experimenting with ID solutions

There is no doubt that third-party cookies have shaped the powerful, performance-driven digital advertising ecosystem of today, however, it is widely acknowledged that, as an industry, we should have addressed privacy concerns sooner. Collaboration will be key to supporting the open web and preventing further dominance from the walled gardens.

Shifting to a first-party data-driven approach will give brands and publishers the transparency and control required to create seamless user experiences, while optimising revenue for both sides.

The pace of change will vary across sectors — brands are in a good position to move quickly as they already sit on a wealth of first-party data. Some publishers will need to play catch up and create a logged-in audience database upon which to build addressable audiences to meet advertisers’ needs. The ad tech industry may waver on the cusp of hard developments for a while longer as we wait for further clarification of the actions that will be taken by the likes of Chrome. This time will be put to greatest use if spent creating collaborative working groups and developing solutions that will prevent the walled gardens from dictating the future.

It is also vital that we use this time to rethink our future strategies and business models, and to open our minds to change. For buyers, evaluating their SSP partners is an important step towards truly understanding the differences between different supply partners. Buyers should measure their SSP partners’ willingness to share data, and quantify any special or unique values that set them apart.

Brands should look closely at advertising and explore ways to generate similar results through alternative methods. As advertisers begin testing cookieless alternatives, they will quickly discover which are the most effective. If, for instance, they find that an alternate ID approach yields 50% of the ROAS they’d previously been making, that may be unacceptable. Brands need to take a decision as to where on the scale they are willing to accept, for some this may be 90%, for others it may be 80%, the point is that each brand will have to take ownership of this decision.

Publishers should also evaluate their partners and elect to work with those that are able (and willing) to support their business in the new normal. Above all, we need to focus on audience addressability strategies which offer identity solutions that deliver against monetisation and performance goals across all platforms, channels, and ad formats. The ability to maintain a centralised database consisting of non-redundant IDs may well prove central to the future of influential, cost-effective ad targeting. There will be multiple benefits for those who turn to individual management interfaces for operating unique IDs. The reliance on a single platform dramatically reduces redundancies, minimises tech costs, and makes measurement, attribution and reporting far more effective. Furthermore, publishers gain a better sense of how each ID contributes to revenue which enables them to partner with and help advertisers with attribution.

How are publishers and advertisers changing their approach to audience addressability, and what should the industry expect to see over the next 18 months?

The sell-side is jumping on the opportunity afforded by the growing pressure user- level identification is under to get more involved in audience addressability. This trend is dissolving the dichotomy between audience and contextual targeting, leading to a new approach where the right audience is associated with the right inventory, creating more easily buyable deals for the demand side.

On the buy-side there is a greatly increased focus on contextual targeting as a response to the growing pressure on user-level targeting. The challenge is how to prevent a regression to the contextual targeting of yore instead creating a new approach, which substantially enables the customisability we have grown accustomed to with audience targeting. At Semasio, we call it Unified Targeting.

Kasper Skou, CEO and co-founder at Semasio

Expect publishers — and marketers — to test and optimise more authentication strategies, starting with browsers that do not support cookies today (e.g., Safari, Firefox). The goal will be to better understand which strategy yields higher percentages of addressable audiences and, tangentially, revenue per session. This “test, reflect and optimise” approach will be even more critical as total cookie deprecation accelerates across all browsers, including Chrome.

We also anticipate publishers will begin “walling off” more content to grow their subscriber base. This will translate to an increase in “freemium” models that prioritise the value exchange between content providers and individuals: e.g., consumers willingly provide personal data, like an email address, in exchange for content, services, and experiences. As subscriptions increase, whether the associated content is free and ad-supported or not, publishers require access to a secure and privacy-first identity infrastructure to underpin more engaging content, grow ad sales, and increase lifetime value to reduce subscriber churn.

In summation, publishers must make all their ad space addressable to increase demand for their inventory, and protect and monetise high-value audience data across environments: browser, video-on-demand, CTV, and in-app.

Tim Geenen, managing director, EU addressability at LiveRamp

For advertisers, addressability means the ability to connect to an audience that meets very specific parameters. It has grown thanks to 3rd party cookies and has become one of the pillars of the programmatic revolution, enabling marketers to minimise waste and focus on building meaningful connections with the most relevant prospects.

While addressability is currently facing challenges from an increased emphasis on privacy, new ways have emerged to enable marketers to continue delivering meaningful connections. A competitive advantage can be achieved by collecting 1st party data and creating a compliant ecosystem of partnerships to support scale. Additional AI-driven contextual targeting is gaining ground and is already proving to be a very relevant alternative in the “content is king” world.

Rik Boin, digital trading director at Havas Media Netherlands

There is a huge focus on the value of 1st party authenticated data as a cookie replacement, but realistically this is only going to represent a fraction of the market initially due to the scale limitations of consumer consent, who it can be shared with, and the proportion of companies that are able to offer adequate value exchanges to obtain it.

Where cost of entry into this space is too high or slow, brand and inventory owner demand will foster innovation around solutions that are independent of specific identifiers, and therefore not limited by their scale or further regulation.

Advertisers and publishers will look to either readily available proxy identifiers like postal code due to its ubiquity, modelling consented data (e.g. panel/social data), or contextual indicators where direct matches aren’t available — all of these represent truly cross-channel strategies that should see significant diversification in the next two years.

Duncan McCrum, co-founder at Fifty.io

With the planned deprecation of third-party cookies, publishers are in the driving seat to redefine user identification in a privacy-compliant, first-party way. Thanks to their unparalleled understanding of users’ behaviours, preferences, and intent, publishers sit on a treasure trove of valuable data that they can share with brands. In the past, third party cookies made this sharing difficult or even dangerous because they lacked the control and capabilities required to protect publishers’ data from leaking to unscrupulous players.

The development of first-party shared ID solutions, built on strong privacy and data protection foundations and activated by them, gives publishers a unique opportunity to monetise their data assets in a controlled manner. These initiatives, combined with investment in first-party data management solutions, will continue to gain traction, enabling publishers to benefit from the transition away from third-party cookies and into a first-party identity world.

Mathieu Roche, co-founder and CEO at ID5

If the last year has taught us anything, it’s that consumer behaviour can be completely unpredictable. And, if this wasn’t already enough of a challenge for advertisers, budget cuts mean marketers are under more pressure than ever to demonstrate ROI. This means that advertisers can no longer afford to simply waste money reaching out to uninterested audiences.

As a result, audience addressability will become a much bigger priority. Over the next 18 months, we’ll see more advertisers look to take the guesswork out of marketing by harnessing first party — and importantly, cookieless — data that allows for more accurate targeting. Brands are also waking up to the power of real- time data in informing ad campaigns, helping them cater to changing consumer behaviours. Their appreciation of this will only grow over the next couple of years, meaning we’ll see more publishers offering these capabilities.

But, with real-time audience addressability relying on harnessing huge banks of data, there is a risk that some advertisers will become ‘data drunk’ and not be able to do anything meaningful with it. However, with the right technology, we can turn real-time data into powerful insights that ensure ads are served to the right people at the right time. It will be really exciting to see what new innovations and technologies emerge!

Harmony Murphy, GM advertising UK at eBay

2021 will see significant change as publishers and advertisers mature their audience and targeting capabilities as they prepare for a world without 3rd party cookies. The last twelve months have seen huge amounts of innovation across the identity space and it is clear to me that this is an area of the ecosystem that will only continue to evolve, providing both publishers and advertisers enhanced methods of delivering advertising to the right audience at the right time.

The industry will also continue to see technology vendors aggressively moving into providing privacy compliant data solutions that match publisher and advertiser data to ensure a new higher level of activation we’ve not quite seen before.

I also believe that publishers will double down on their audience offerings to ensure they can manage one the most significant changes to open auction trading we’ve seen. Future is well prepared for the upcoming changes and investing heavily into this area across our audience and identity solutions to ensure that advertisers can access our unique and high intent audience signals to deliver against their goals.

Nick Flood, global commercial operations director at Future