Sigma Software Group's Olha Paramonova on Evolving Ad Tech Strategies in a Privacy-Focused Era

From Q1 2024, Chrome plans to disable third-party cookies for 1% of users to facilitate testing, and then ramp up to 100% of users from Q3 2024. 

Olha Paramonova, VP of AdTech at Sigma Software Group and a speaker at ATS London 2023, shared her thoughts on how publishers are adapting to the deprecation of third-party cookies, how the need for user privacy can be balanced with the need for effective targeting in digital advertising, and what a mutually beneficial relationship between brands and publishers looks like.

How Publishers Are Adapting to the Deprecation of Third-Party Cookies

While cookies deprecation is no longer breaking news and has been talked about for years, a year ago it still seemed far away, now, however, January 2024 is just around the corner. 

In reviewing many of the industry reports, it appears (as one could expect) that the publisher’s level of preparedness has not increased significantly throughout the year. With cookies deprecation, publishers have an opportunity to gain a stronger position in the field, however, this position is not without a price.

Many challenges in adaptation are associated with the global change in the industry, whose underlying narrative is not to recreate the same tracking ecosystem through alternative means, but to truly enter the transparent privacy-focused era, embracing the main reason behind the change — lack of trust. Most of the advertising technology today was built around the users’ identity and actioning on this knowledge. The next year invites a fundamental change, a paradigm shift that leads to re-thinking every part of the ad serving technology, and even their whole existence at the overall landscape level. 

The lack of trust, while touching every part of the ecosystem, is mostly and directly impacting publishers, as their users view advertising through the lens of the publishers they consume, and it is so pivotal to create the right messaging, and so easy (and sometimes inevitable) to make a mistake. It is a big responsibility to carry users’ trust and consent will not only require extreme levels of creativity, understanding of the underlying technology (which is already a challenge assuming the number of vendors and often opaque choice), but also a deep understanding of various regulations and the associated risks.

Many adaptation strategies are in place, such as alternative identity solutions, CDPs, server-side tracking, clean rooms, authenticated traffic solutions, etc. 

While these are some of the technical challenges, the other bigger challenge is securing and maintaining your audience. Here, it is important to examine some aspects on a global scale, as well as delve into individual user journeys. As an example, a massive turn to subscription or the adoption of paywalls in an attempt to cover for ad revenue loss, has been showing negative trends for many. While subscriptions on their own are a fair approach, within the subscription economy it is now more difficult to maintain the user base. Users are facing the need to subscribe to a large amount of content sources, and the inevitable churn has been seen as an outcome globally.

Some have turned to investigating the options to reduce friction in turning the now-unauthenticated users into subscribers at a cost or free of charge, while facing challenges in conversion rates as well as lack of technical means to verify those subscriber identities and fight abuse.

Additionally, changes in media consumption patterns, where a significant portion of attention — often measured through various emerging and non-standardised methods — is directed towards social media, tend to support brief periods of focus. This trend results in less time being devoted to high-quality content sources that require longer engagement and attention spans.

Balancing User Privacy with Effective Digital Advertising Targeting Strategies

Overall, user consent plays the key role within the current operational paradigm. Not only does consent on its own require a continuous effort to obtain and retain, it also demands data segmentation efforts, as well as having to make it available, actionable and performant. 

A study conducted by Deloitte found that in the areas of perception of cookies by users, around 70% of users would respond that the reputation of the publishers plays an important part in their level of trust.  

However, 60% would agree that they are willing to share more data to receive personalised benefits and discounts. The combination of these above is the business opportunity for publishers, however, if the first block fails, which is reputation and trust, the second block fails too.  

While CMPs are widely adopted, here we also see, in many cases, “dark patterns” are present, which is maintaining the gap between consumer expectations around privacy and implementation as a response.

Balancing is hard to do, but what isn’t hard? The balance can be reached if the focus is set on user needs and journeys, making it comfortable and frictionless for them to share their data, while offering transparency into how and why it may or may not be used.

What a Mutually Beneficial Relationship Between Brands and Publishers Looks Like

While establishing privacy-compliant data collection processes is a major step on its own, data sharing is an area of increased risk, where control (and transparency) over data usage is crucial. 

Brands rely on first-party data available at the publisher level within their advertising strategies and enabling access to this data is a mutually beneficial partnership. 

According to IAB, Data Clean Rooms (DCRs) have become an essential tool for audience insights, measurement and activation in a privacy-centric ecosystem, thus being a way to establish secure data sharing between advertisers and publishers. DCRs are designed to help establish the necessary level of transparency and control through the collaborative process when it comes to safe sharing and enrichment. DCRs have been in place for a few years now and are getting sophisticated, becoming easier to enable, and more accessible as either fully managed services or as a technology within well-known providers such as GCP, AWS and Snowflake.

However, having a high rate of adoptions, DCRs still represent a high barrier to entry for smaller publishers, as this technology requires an investment in talent, infrastructure, onboarding and maintenance.

Looking at other ways of beneficial relationships, classic ways of partnering between brands and publishers have not gone anywhere and bring a lot of value within the contextual advertising. Overall, we see more and more solutions around contextual advertising addressing cookies deprecation, which is a great organic evolution.