In our Part 1 blog post, we established a way to understand the open web landscape, and what was changing, and why. In this Part 2 blog post, we outline the NextRoll position on the nature of this change to the open web, and how we recommend navigating through it.

Let’s start by stating our position clearly. We believe preserving the vitality of the open web is to the benefit of everyone. We believe it’s possible to build a vital open web that is also more private for internet users. We’re excited for the future of digital advertising, because we see the potential for these changes to unleash new innovation that was previously not possible while the industry relied on a 26-year-old hack. We commit to continue playing a full role within the AdTech and MarTech industry and working iteratively and collaboratively to help our customers navigate this change together.

Understanding the Nature of the Change to the Open Web

Now that we have a better understanding of the open web landscape and the participants and their motivations from our Part 1 post, we can move on to understanding the nature of the pending change.

  • Collaboration conquers the challenges of change. This is not the first time the open web landscape has experienced change. The advertising industry has experienced many technological and legal changes over the last 26 years, since Hotwired.com delivered the first internet ad for AT&T in 1994. We’ve seen a shift in formats, a shift in manual to programmatic, a shift from owned and operated to auction exchanges, a shift from pre-ordered to real-time bidding, the emergence of mobile, GDPR legislation from the E.U., and CCPA legislation from California. The industry has grown and evolved and risen to each challenge during this time, as evidenced by the growth to almost $400 billion in digital advertising. The early evidence is the industry is rising to the challenge of Chrome discontinuing support of third-party cookies in 2022 to collaborate again in rebalancing privacy and precision. For example, Google’s Privacy Sandbox initiative is an iterative, collaborative environment to discuss and test methods to deliver a more private but thriving web ecosystem. FLEDGE (standing for First Locally-Executed Decision over Groups Experiment) is one of those proposals that started as TURTLEDOVE and evolved to FLEDGE after collaboration from Criteo, NextRoll, Magnite, and RTB House. 
  • Change ≠ Worse. If you type “death third-party cookies” into Google search, you get hundreds of millions of results. Death is associated with loss, mourning, despair. It’s rarely viewed as a positive. This is neither an accurate nor helpful way to conceptualize the nature of the change. Let’s use another analogy to explain why the change is not definitively a change for the worse. Imagine we discovered the human race was on track to consume all the available reserves of crude oil and gasoline by the end of 2022, and as a result the $6 trillion global transportation industry (automotive, aerospace, shipping) needed to replace all their gasoline-powered vehicles with electric vehicles (or other alternative fuel sources) by the end of 2022. In this analogy, the demand for transportation represents the demand for advertising, the disappearing crude oil and gasoline represents the discontinuing third-party cookies, gasoline-powered cars represent existing advertising solutions, and electric cars represent new advertising solutions. Despite the major technological shock to the industry, the fundamental demand for transportation remains and continues to grow independent of the shock. When people first envisioned electric cars, they assumed they were worse versions of gasoline-powered cars. Over a million car owners in the U.S. have now discovered electric cars can be superior to gasoline powered cars on dimensions such as less noise, faster acceleration, lower maintenance costs, and higher safety ratings. At NextRoll, we’re excited for the future of digital advertising, because we see the potential for these changes to unleash new innovation that was previously not possible while the industry relied on a 26-year-old hack. When Lou Montulli, who became one of the founding engineers at Netscape in 1994, delivered HTTP cookies it was to solve the problem of partial transaction states for MCI. He did not consider advertising as part of the original design.  When advertising becomes a first-class citizen on the web, new opportunities will arise.
  • Not All Cookies are the Same. It’s important to note that not all cookies are the same and there is a fundamental difference between first-party and third-party cookies. When an internet user visits a domain such as cnn.com, a first-party cookie from cnn.com can be installed in that internet user’s browser. That first-party cookie is then only available to that cnn.com domain. When that internet user browses other sites, those sites cannot access that first-party cookie from cnn.com. These first-party cookies are seen by Browsers and internet users as “good,” since their main focus is to improve the onsite user experience. Chrome, Safari, Firefox, and Edge/IE support first-party cookies by default.
  • One Hack replaced by Two Types of Identifiers = Innovation.  For the last 15 years of massive digital advertising growth, third-party cookies have been one of the foundational elements of that growth, albeit as a hack. We’re now approaching an inflection point where we will have two forms of identifiers rather than one. The first form of identifier is being determined in Google’s Privacy Sandbox, where data collection about users and their behavior is moving to the browser based on first-party data and cohorts. Google stated in March 2021 that it won’t support cookieless identifiers and that has been our expectation at NextRoll since their January 2020 announcement. It’s consistent with its role as both Browser and Walled Garden. This restriction doesn’t apply to the broader AdTech ecosystem beyond Google, which we believe will become more competitive with Google by making different decisions. It would be challenging for Chrome to restrict email-based tracking. We expect Google AdX (formerly Doubleclick Ad Exchange) to pass cookieless identifiers to SSPs and AdExchanges but that Google DV360 will not bid on these identifiers.  The AdTech industry is coming together to collaborate on cookieless identifiers solutions, such as The Trade Desk’s Unified ID 2.0, and Liveramp’s ATS in forums, such as Prebid. We believe these two worlds can coexist and promote healthy competition and innovation.

Navigating Through the Change to the Open Web

So if you’re a digital marketer who now understands the open web landscape and the participants and their motivations, and who understands the nature of the pending changes, then the final question to answer is “How do I help my company and marketing function navigate through this change?” Since the specifications are still in a state of flux, and testing is expected to continue throughout 2021 and into 2022, it’s not possible to be completely prescriptive at this stage. But there are two guiding principles to keep in mind, as you help your organization navigate through this change.

  • Guiding principle #1. The Future Is Not Predictable but There Are Good Reasons To Be Optimistic
    We need to acknowledge the open web landscape is a complex, rather than complicated, system, and as such it’s impossible to predict the future with a high degree of certainty. This is one of the reasons why you should dismiss the “doom and gloom” scenarios suggested by the emotional headlines using the word “death.” The evidence suggests the AdTech industry will be able to successfully collaborate to continue to fulfill the $400 billion global demand for digital advertising. The evidence suggests that moving from a unipolar world of third-party cookies to a bipolar world of first-party cohorts managed by the browser and cookieless identifiers will unleash more innovation. The evidence suggests that moving from an industry based on a 26-year-old hack to a stronger foundation of advertising as a first-class citizen on the web will lead to higher levels of growth and investment. When a system is complex and not predictable, a smart approach is to build as many sensors as you can into the system. This will help you understand what is happening and take small data driven iterative steps. So NextRoll has started experimenting with the FLEDGE APIs and FLoC (standing for Federated Learning of Cohorts) APIs to test how these proposals are balancing privacy and precision.  As we learn from these experiments, we will share what we learn with the D2C and B2B marketers we serve.
  • Guiding principle #2. Select Your Martech and Adtech Partners Carefully
    While it’s true that there are reasons to be optimistic that this will be a net positive at the industry level, it’s also true that there will be individual winners and losers as a result of this change. So as a marketer, you need to choose the MarTech and AdTech vendors you partner with strategically to avoid becoming disadvantaged in this transformation. As you evaluate your current Martech and AdTech vendors and consider new vendors, there are probably three new questions you should ask in those evaluations.

        • Does your AdTech vendor have a “seat at the table” in defining the replacement for third-party cookies?
        • When you are traveling through unfamiliar territory, it’s helpful to have a deeply knowledgeable guide. Working with an AdTech vendor who has a “seat at the table” in Google Privacy Sandbox and Prebid is a strong signal that it will be a capable guide for you as you navigate this transition.

        • Does your AdTech vendor have experience in the MarTech first-party data world?
          One of the consequences of the demise of third-party cookies is anonymous AdTech worlds and known MarTech worlds are colliding and coming together. To help you navigate this world, you need vendors who bridge these two worlds, rather than stand on just one side. For example, how does your AdTech vendor’s first-party data asset compare to its third-party data asset?

        • Does your AdTech vendor have a deep capability in machine learning and applying it to new problems?
          One of the consequences of the direction of Google Privacy Sandbox is machine learning remains critical, but how it is applied is going to change. Does your AdTech vendor have a demonstrable track record of using machine learning at scale? Does your AdTech vendor have a demonstrable track record of applying machine learning to new problem areas?

While this is our first public statement about the pending changes to the open web landscape, it will not be our last. We commit to continue playing a full role within the AdTech and MarTech industry and working iteratively and collaboratively with all parties to find a sustainable balance between privacy and precision. We believe preserving the vitality of the open web is to the benefit of everyone and NextRoll remains committed to helping our customers navigate this change together.