Preparing for a Cookieless Future: The Evolution of Programmatic Advertising
Programmatic advertising is an advertising method that relies on using cookies to track user behavior and enable targeted ad delivery. In short, it’s an effective way to ensure that advertisements reach their desired audiences and bring forth an excellent ROI for brands.
As such, there’s no denying that programmatic advertising revolutionized the digital marketing landscape — and will likely continue to do so moving forward. In fact, global pragmatic advertising spending is expected to reach $673.1 billion in 2026.
However, these estimations may be proven false due to the decline of third-party cookie usage, otherwise known as ‘cookie deprecation.’ With search engines such as Google planning to deprecate cookies entirely by the end of 2024, the future of programmatic advertising must be reshaped sooner rather than later.
This article delves into programmatic advertising, cookies, and the challenges of cookie deprecation. It also examines emerging solutions and strategies to prepare for a cookie-less future.
The Rise of Programmatic Advertising
There are many reasons why advertisers rely on programmatic advertising. For example, it allows them to:
- Automate ad placements
- Target specific audiences
- Optimize campaigns in real-time
A Brief History of Programmatic Advertising
1994: The first-ever online ad was launched in 1994 on HotWired.Com. This was a ‘banner’ ad for AT&T. While it was the first of its kind, it was not all that effective. Only “44% of the people who saw it actually clicked on it”, likely because it was not a ‘targeted’ ad.
1995: The first central ad server was created. This allowed advertisers to sell ads on multiple websites. DoubleClick, one of the first ad servers, was launched around this time and was later bought by Google in 2007 for $3.1 Billion.
The first ad network, WebConnect, was also launched in 1995. Web networks pool unsold ad space from several publishers and offer it to advertisers at a discounted rate. They were designed to combat the fact that there were more websites available than people looking to advertise on them.
The biggest issue both advertisers and publishers faced during this period was targeting. After all, there was no real way to determine who would see your ads, making it nearly impossible to connect with your target audience. This paved the way for the introduction of Real-Time Bidding in the mid-2000s.
Real-Time Bidding, as the name suggests, enabled advertisers to bid in real-time on ad inventory at the same time as it became available online. For the first time, advertisers could begin to use their digital ads to target audiences based on the following:
- User demographics
- Browsing behavior
Of course, RTB still had some issues during its early years. Many were concerned about ad fraud, as they had limited visibility into the quality of the ad inventory they were purchasing ahead of time.
As an alternative to using intermediaries or ad exchange platforms, programmatic direct was developed to allow advertisers to buy ad inventory directly from publishers.
The primary benefit associated with this development is that, once again, it gives advertisers more control over where their ads land. It’s also a more cost-effective approach. However, it does sometimes limit advertisers’ access to important data.
The Impact of Cookies on Programmatic Advertising
Unsurprisingly, cookies have played a pivotal role in programmatic advertising, as by leveraging cookies, advertisers can send tailored ads to users who are most likely to interact with them based on browsing history, interests, and more.
In 2023, third-party cookies still serve a crucial purpose in programmatic advertising, with 51% of advertisers relying on them. However, due to changing public attitudes towards third-party data, advertisers must explore alternative ways to engage with their audiences.
Cookie Deprecation and Industry Challenges
Google plans to deprecate cookies entirely by 2024. However, they have already begun to phase out third-party cookies through their Privacy Sandbox initiative, and Apple launched its Intelligent Tracking Prevention system in 2017.
Despite this, “95.33% of advertisers are not entirely confident they’re ready for a world without cookies”, as it will be harder than ever to gather data from web visitors that can be used in campaigns. For example, they may have to rely on other methods, like targeting users based on their IP address.
Transitioning Beyond Cookies: The Future Of Programmatic Advertising
Fortunately, there are many ways in which programmatic advertising can be done without cookies, many of which include relying on first-party data (data collected directly from your website) over third-party data (cookies). Of course, this data is harder to collect- as it isn’t done automatically. Instead, it is gathered through forms, subscription models, mailing lists, and surveys.
How Can Advertisers Stay Ahead of the Game Without Cookies?
One of the easiest ways to gather first-party data is to incentive users to hand over their information through forms and surveys. For example, “9 in 10 consumers are willing to share their email address in exchange for a worthwhile incentive,” such as free products or discount codes.
Alternative ID Solutions
Alternative ID solutions, such as Google’s Privacy Sandbox, will allow for specific user data to be collected that can be used for advertising purposes without violating the users’ privacy. Similar platforms are in development (or in their early stages of implementation), such as ID 2.0 from Trade Desk, which uses hashed email addresses for ad targeting.
Try Contextual Advertising
Contextual advertising allows advertisers to target ads to users based on the content they consume instead of targeting ads based on intent or past behavior (as achieved through cookies).
Within contextual advertising, keywords and topics are used to send relevant content to your target audience, who will likely have already expressed an interest in your product or service.
Start Testing Non-Cookie Based Solutions Immediately
While 2024 may seem a while away, and Google has pushed back its cookie ban numerous times, advertisers must begin testing non-cookie-based solutions immediately. After all, this means that you’ve already got a reliable strategy in place for when cookie deprecation occurs. Failure to adapt could mean your future advertising campaigns fail to bring a suitable ROI, and company sales plummet.
What Does the Future of Programmatic Advertising Look Like?
Right now, it’s hard to say precisely what the future of programmatic advertising will look like. After all, it’s an advertising endeavor that’s set to undergo rapid change in the coming years, especially as cookies begin to get phased out.
However, experts predict that the future of Programmatic Advertising will include the following:
- The use of AI technologies
- Private marketplaces (also known as auctions)
- Ad experimentation
AI & Programmatic Advertising
More than 80% of advertisers worldwide already use AI, whether they use it to produce web copy or as an automation tool. After all, AI software can:
- Streamline the process of placing and bidding for ad space
- Make it easier to target the ideal consumer at the right time
- Gather and analyze data on users’ behavior
- Curate effective and persuasive marketing/ad content
Utilizing AI technology can also save advertisers a great deal of time and energy. This is because the tools can send your advertising campaign directly to the screens of those most likely to be interested in it — without the advertisers having to do any of the groundwork.
However, while this seems like great news for advertisers, it’s important to note that consumers do not always think so kindly of AI. In fact, a recent Forbes article found that “over 75% of consumers are concerned about the ways businesses use AI”.
Following the death of cookies, programmatic advertising campaigns will likely begin to rely on PMPs (Private Marketplaces) to ensure their advertisements are placed on the right sites before the consumers who are most likely to interact/engage with them. PMPs are a digital marketplace accessible only by invitation where select parties can programmatically buy and sell ad inventory.
This is a direct shift from more traditional methods (such as open ad exchange), but it can prove fruitful. This is because it will allow advertisers to send out hyper-targeted ads, which will likely bring around a better ROI. After all, “over 80% of internet users are more likely to click on an ad that is targeted to their specific interests.” Private marketplaces also give advertisers more control of ad inventory and, as such, allow for greater transparency.
Ad Experimentation, sometimes referred to as ad testing, is the process of sending out different advertisements to your target audience and seeing which are the most effective. Through this experimentation, advertisers can begin to develop a better understanding of their customers and audience, which in turn, will allow them to enhance any future advertising campaigns.
Ad experimentation, however, is not merely a creative pursuit. It can also be driven by first-party data, making it easier to create targeted content and ads. As such, advertisers looking to get ahead of the game before cookie depreciation occurs should begin to use ad experimentation to their advantage.
Right now, the exact future of programmatic advertising is unclear — but this does not necessarily need to be a point of concern. Consumer behaviors and habits change continuously, so it only makes sense that the methods advertisers use to target them change too.
Furthermore, the sooner companies and advertisers begin to embrace these changes and seek out new opportunities, the better — as this will give them a chance to stay ahead of their competitors.