Are targeted online ads going away?
Source: Instagram; Fresh Direct

Are targeted online ads going away?

Meta was dealt a significant blow last week when being found guilty by European Union regulators of effectively forcing users to accept personalized ads. Required changes for the parent of Facebook and Instagram may significantly limit access to data to sell such ads in the region.

The social media giant was also assessed a $414 million fine.

Regulators found that Meta’s terms of service, which includes language that in effect requires user’s consent to deploy their data for targeted advertising as a contractual condition for using Facebook and Instagram, violated the E.U.’s landmark data-protection law, General Data Protection Regulation (G.D.P.R.).

Meta has three months to outline how it will comply with the ruling with no guidelines provided on how to do so. If forced to provide an opt-in only option to share data for targeting purposes, a large number of reluctant users would restrict Meta and other platforms’ ability to show them ads based on what they click and watch within those platforms’ own apps.

Personalized ads are believed to make up the bulk of Meta’s revenue.

Meta has estimated Apple’s privacy features introduced in 2021 cost the company $10 billion in lost sales in 2022 with surveys suggesting a majority of users blocked tracking in Meta’s apps. In a Wired column, columnist Morgan Meaker wrote on the ruling, “Many believe the company has only one option — to introduce an Apple-style system that asks users explicitly if they want to be tracked.”

No federal data privacy law exists in the U.S., but E.U. rules could set a precedent globally.

In a blog post, Meta said it plans to appeal the ruling. Citing “Contractual Necessity” as a legal basis, Meta argued that “providing each user with their own unique experience — including the ads they see — is a necessary and essential part” of the personalized Facebook and Instagram experience.

In an op-ed last September in The Drum, Claire Noburn, Google’s ads privacy lead, similarly said an ad-supported web model “isn’t only vital to advertising success — it’s essential for the future of the web.”

She stressed that a ban on personalized advertising and shift to “contextual” advertising, or tailoring ads based on context, “won’t pay for the web everyone wants.”

BrainTrust

"This is a challenge for all types of monetization. However it also brings about some larger questions that brands could consider about these targeted ads."

Katie Thomas

Lead, Kearney Consumer Institute


"A more critical question is whether these ads were worth it for the advertiser. They were sold on an unchallenged idea – that the targeting was economically powerful."

Doug Garnett

President, Protonik


"Regardless of how Meta is ultimately able to navigate this, this is an increasingly important topic considering the cookies situation."

Melissa Minkow

Director, Retail Strategy, CI&T


Discussion Questions

DISCUSSION QUESTIONS: Will calls for opt-in only requirements for online ad tracking get louder in the years ahead? Would a ban be a significant threat to online advertising and the web experience overall?

Poll

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Katie Thomas
1 year ago

This is a challenge for all types of monetization. However it also brings about some larger questions that brands could consider about these targeted ads. First of all, are they really that personalized? Is there a way to utilize online ads that feels less invasive to consumers? And perhaps most importantly, are we too reliant on ad data rather than truly understanding consumer behavior?

Dion Kenney
1 year ago

Sounds like the first GDPR shoe has fallen! And we should expect a similar outcry in the U.S., even though GDPR doesn’t apply here. However Meta can make a legitimate case that their algorithm requires user-specific details to optimize content for the user experience. The trick will then be to make a convincing case that ads are content!

Gary Sankary
Noble Member
1 year ago

Consumers and their advocates in government have been clear about their concerns about privacy protections. I expect this to get more traction and to see more protections imposed on companies like Facebook and Google. It doesn’t help that many of the companies have appeared to be tone-deaf when it comes to reacting to privacy concerns. This scenario seems to be played out over and over again.

Camille P. Schuster, PhD.
Member
1 year ago

Privacy protections in the EU are significantly different from those in the U.S. Whether the changes companies have to make to do business in the EU will impact practices in the U.S. is not certain. However it is possible that changes in the U.S. will happen. Companies need to prepare for change.

Doug Garnett
Active Member
1 year ago

A more critical question is whether these ads were worth it for the advertiser. They were sold on an unchallenged idea – that the targeting was economically powerful. Yet many wise advertisers know that they weren’t – in part because a gap remained between what could be chosen as a target and the people advertisers were interested in reaching.

While it sounds like a major loss if these hyper-targeted ads disappear, I don’t think it would be. There are more effective ways of targeting ads than what we were sold by the digerati.

Ryan Mathews
Trusted Member
1 year ago

Opt in-only is the wave of the near future, so yes demand will increase. That’s not in and of itself a bad thing assuming branders can start providing value-added curated offers people will opt in to. And yes, a “total ban” would probably destroy at the least the current online advertising economic model. It won’t necessarily threaten the overall web experience, but it would make it more expensive for consumers because fees would have to replace ad revenue.

Melissa Minkow
Active Member
1 year ago

Regardless of how Meta is ultimately able to navigate this, this is an increasingly important topic considering the cookies situation. The process of collecting data first-party is becoming top priority, and the brands that master that best and first will be in very powerful positions.

Ananda Chakravarty
Active Member
1 year ago

Ironically, tracking identity continues to be challenging as Google’s plans to remove 3P cookies are in the works — at the same time, there has been an introduction of clean rooms and Google’s privacy sandbox that is expected to roll out soon. Per a November 2022 article, the sandbox beta version is to be released in early 2023. I believe Google is planning to implement some of the necessary protections within this sandbox. Will that appease regulators? Still left to see, but Google has enormous influence and may just allow their actions to be approved by the right players to move forward. The ad industry status quo supporters continue to hold their breath.

Mark Self
Noble Member
1 year ago

Privacy this, opt-in that … does targeted advertising even work? From my perspective it does not. I mean, I go look at a web site (pick one-say I go to an automobile manufacturer’s site to daydream a little) and then I go to my yahoo mail in the browser. Then, lo and behold, on the side is … that automobile’s ad! Wow, as if I needed reminding that I was just there….

Online advertising will not die, however, the idea that one can be effectively tracked in order to convert to a sale is, for now, difficult, and it is made worse by so many of us starting to get hyper aware of all of the tracking.

My prediction: We will go back to the days of the old adage of “I know 50% of my marketing budget is effective, but I do not know which 50%.”

ZoharG
1 year ago

It is hard to tell which way the pendulum will swing as it is in the hands of politicians and bureaucrats. While every politician offers a rallying cry for privacy, someone has to pay the web experience bill, which has been predominantly paid through personal advertising. Lack of personalized advertising will hurt merchants as well, as targeting new customers becomes harder and much more expensive. These costs will have to be absorbed by customers. However, the “opt-in” option can definitely work when it is juxtaposed with paying real money. It is already here. You can opt in to see ads with free movies on Amazon and Netflix — instead of buying or renting a movie. You can opt in to be on an online merchant’s email list in return for a first-time 20% discount. Perhaps a future where Google would charge a fee for search or navigation unless you opt-in, is not so far away?

Nicola Kinsella
Active Member
1 year ago

Less targeting will be a challenge. You have to cast the net wider and can’t charge as much per ad. But it might also help people discover new markets that they might have missed if they only used super targeted advertising. Regardless, it will put more focus on advertising ROI. And in the world of retail, that means making sure that the items you’re promoting are in stock so you don’t waste spend on acquiring customers only to disappoint them. My prediction for 2023 is that advertisers will begin to think about how they can make their advertising inventory aware.