Online 'signal loss' triggers rise in contextual targeting

UK advertisers are responding to the decline of cookies and the shift from opt-out to opt-in consent by ploughing more spend into alternative targeting methods, with contextual targeting one of the early winners and predicted to rise 8% to £770m over the next 12 months.

So says a new report by Nano Interactive, which surveyed 150 UK brands and agencies in partnership with CoLab to understand how they are dealing with so-called “signal loss” in 2023.

People-based ad targeting is becoming far more challenging – for example, only 60% of customers are reportedly addressable on Google Chrome as they browse incognito or make increasing use of the privacy settings at their disposal.

As a result, the study reveals advertisers are shifting their budgets to maintain advertising effectiveness.

In a separate report published last summer, contextual targeting – buying ad space based on the relevance of a website’s content to your product – was shown to be up to three times as effective as other forms of targeting when costs are comparable.

When Nano Interactive asked about the trends that will impact their marketing needs across the coming year, larger advertisers listed cookie decline as the number one factor, followed by their environmental impact and social responsibility credentials. For smaller advertisers, cookie decline was less of a concern, appearing just fifth in the list, with influencer marketing taking the top spot.

As brands and advertisers reassess how they are measuring success in the wake of signal loss, “attention” is also emerging as a valuable metric.

Nearly two-thirds (63%) of those surveyed had a positive view of attention metrics, with a similar proportion (57%) choosing attention from a list of ten metrics as the best to measure and report against. Larger advertisers were the most enthusiastic, with just 21% showing negative sentiment towards attention metrics.

However, there is still work to be done before attention emerges as an established form of measurement. A third of respondents (33%) said that attention targeting tools still needed to improve for the metric to be usable.

While AI is already having a huge impact on the advertising industry, the report also reveals where advertisers believe its impact will be most felt in future. Targeting will be most affected by AI, with 52% highlighting this area, closely followed by campaign optimisation (47%) and streamlining operations (37%).

Advertisers also see AI as having a significant impact on contextual advertising, as it potentially fills the gap left by signal loss. Almost two thirds (59%) of respondents thought that AI has significant potential to improve contextual advertising.

Nano Interactive chief executive Carl White said: “Signal loss is not a new problem in online advertising and to succeed as an industry we should be aiming for future-proofed solutions.

“Targeting that is free of all personal identifiers is likely to be one of the fastest growth sectors in digital marketing this year. Brands and advertisers who embrace these new targeting models will be well placed to navigate signal decline and ensure their campaigns are safe from changes brought both by tech giants and new legislation.”