In the third of our series of articles, in which Decision Marketing is looking back over the past 12 months – and forward to 2025 – to gauge the progress of a number of seemingly immortal issues, we study the online advertising market.
At first sight, it would appear the industry has very little to concern itself with. After all, according to GroupM’s recent This Year, Next Year Report most of this year’s growth in the advertising market will directly benefit the largest sellers of digital advertising rather than providers of marketing services.
In fact, the top five digital advertising companies (Google, Meta, ByteDance, Amazon and Alibaba) are expected to earn more than half of all global ad revenue in 2024, with overall spend forecast to increase 9.5% in 2024 to surpass $1 trillion climb 7.7% in 2025 to $1.1 trillion.
However, this is still an industry perpetually ill at ease, with privacy proving a huge thorn in its side.
In one of this year’s most significant developments, IAB Europe failed in its attempt to overturn a 2022 ruling that its real-time bidding adtech system – used by many of the world’s leading brands – is in breach of GDPR.
The IAB system allows brokers and platforms to bid for advertising space based on website users’ profiles in real-time. It encodes users’ preferences for the bidder to know what the user consented to and places a cookie on the user’s device.
However, the ruling confirmed that IAB Europe fails to give users precise information on the use of their data and ordered the organisation to establish a legal basis for data processing as well as to strictly vet organisations that use its real-time bidding system in order to ensure that they meet the requirements of the GDPR.
By April, the Competition & Markets Authority had forced Google to put back the demise of third-party cookies for a fourth time, and while it did not come as a huge surprise to many in the marketing industry most experts urged advertisers to act now or risk falling behind.
Covatic CPO Dan Pike summed up the sentiment when he said: “The latest delay highlights once again that the industry cannot afford to wait and hope that Google can solve this problem for everyone else.
“The importance of being the master of your own strategic and operational destiny has never been more apparent. Rather than allowing us to take our collective foot off the gas, this announcement further emphasises the need to act. My hope is that industry players continue to invest in, adopt, and develop alternative solutions so that when the time does eventually come for cookies to meet their end, we are all well ahead of the curve.”
Google would eventually announce that third-party cookies will no longer be fully phased out, which while welcomed by some, triggered warnings by others that the industry still needs to evolve to embrace a privacy-first approach.
Meanwhile, Google was also hit by the threat of a £13.6bn class action being brought by a group of media owners and advertisers, alleges the tech giant is abusing its power in the digital ad market, leading to billions of pounds in ad revenue being lost.
The British claim, which is being supported by similar action in the Netherlands, seeks to recover compensation for lost revenue from the sale of advertising space on the websites of news publishers and any site funded by online advertising.
At heart of the issue, the Ad Tech Collective Action ATCA argues that the abuses are stark examples of abusive self-preferencing by Google. It claims that on both the supply- and the demand-side of online advertising, Google dramatically favours its own services. As a result, Google has, for some years now, created, and maintained, multiple near-monopolies within the adtech stack, spanning an entire area of the economy worth hundreds of billions globally.
Things took an even more serious turn for the worse when the US Department of Justice demanded that Google sells its web browser Chrome, shares data and search results with rivals and possibly even flogs off its Android operating system to stop the tech giant from maintaining its monopoly in online search.
The proposed measures, branded “staggering” by Google parent Alphabet, are part of a landmark case in Washington, which has the potential to turn the online advertising market on its head.
The measures, which stem from a ruling in August, would be in place for up to 10 years, enforced through a court-appointed committee to remedy what the Judge Mehta deemed an illegal monopoly in search and related advertising in the US, where Google processes 90% of searches. The US has also come down hard on TikTok owner Bytedance, which is also under threat of a forced sale.
Meanwhile, back in Europe and Austrian privacy activist and lawyer Max Schrems also scored another victory in his long-running battle with tech giant Meta over the use of personal data for advertising, in a court ruling that will have widespread consequences for the entire online ad industry.
At the moment, Meta uses all personal data it has ever collected for advertising. For example, Facebook user data can go back as far as 2004 and include data entered by the user, by other users or data collected via online tracking or tracking on mobile apps.
To prevent such practices GDPR established the principle of “data minimisation”, requiring to limit the processing to strictly necessary data but until now it has not been enforced.
Katharina Raabe-Stuppnig, the lawyer representing Schrems, said: “Meta has basically been building a huge data pool on users for 20 years now, and it is growing every day. However, EU law requires ‘data minimisation’. Following this ruling only a small part of Meta’s data pool will be allowed to be used for advertising – even when users consent to ads. This ruling also applies to any other online advertisement company, that does not have stringent data deletion practices.”
The online ad industry’s woes were further exposed by two damning reports, the first, WARC’s Future of Programmatic 2024, claimed marketers are facing a triple whammy of declining addressability, brand safety fears and ad fraud.
This was reinforced by a study by Apply Digital which revealed that marketers remain unprepared for the widescale disruption to online advertising once Google rolls out its new Chrome browser, with most professionals planning to continue to use third-party cookies for the foreseeable future, while millions of consumers plan to opt-out.
The Cookieless Revolution study showed almost all (99%) businesses still use cookies to drive some or part of their online advertising strategy and – perhaps less surprisingly – 70% of senior marketers support Google’s decision to continue supporting them.
However, a separate Apply Digital study – published in October – revealed that a substantial 38% of UK consumers say they intend to opt out of third-party cookies when a single opt-in is introduced to Chrome next year – and around a quarter remain, as yet, undecided.
In addition, 61% of marketers said Google’s decision would significantly impact their digital strategies by 2025, notably with 70% of retailers expecting disruption compared to just over half (52%) of FMCG marketers.
A third of respondents were worried about increased customer acquisition costs and this concern is tied to the potential loss of precise targeting capabilities that third-party cookies provide.
Apply Digital chief commerce officer Matt Gould said:“It might look like there will be a future for cookies on Chrome, but ultimately they are a fading technology. It would be wise not to rely on third-party data too heavily and instead explore new and better options such as behavioural AI mapping tools that will better define the future in the long-term.”
“As third-party cookies are phased out and customer acquisition costs rise, businesses need to rethink their approaches. Many are recognising that prioritising customer retention may offer a more sustainable path to growth than an endless pursuit of new audiences.
“Yet our research reveals that disconnected data leads to disconnected decisions. When data remains fragmented, businesses face challenges in delivering the personalised experiences that customers expect. The end of third-party cookies means businesses need to adapt – and fast.”
Has there ever been a more pressing need for brands to finally build their own first-party data sets?
