Customers have been ticked off by how online advertisers snoop on them for years, but adtech keeps steamrolling over their privacy. In fact, my colleague Max Eddy detailed exactly How Companies Turn Your Data into Money years ago. Now customer advocacy groups are heading to court. Despite the fact that it’ll be a long and uphill battle, these groups will fight to rein in this technology to acceptable levels or even abolish it entirely. The most recent blow was struck last week and while it’s coming from Ireland, it’ll be settled in Germany.
What Is Adtech?
Adtech is the sophisticated and mostly hidden technology that snarfs up reams of data about you, primarily by installing third-party cookies in your browser. Advertisers either use this technology directly or pay for the data gathered this way by a third party. A behind-the-scenes player that’s heavily involved in this process is New York City-based IAB Tech Labs. This organization says it’s acting as a standards body for the digital advertising industry, but those standards seem to be way too lax for some when it comes to protecting consumers. That’s why it’s being taken to court in Germany by the Irish Council for Civil Liberties (ICCL). That group has been vocal in recent years about its opposition to adtech, largely via ardent tweets from a senior fellow at the ICCl, Dr. Johnny Ryan.
Ryan was once an adtech hawker himself but morphed into a whistleblower best known for pronouncing adtech’s real-time bidding (RTB) as the worst data breach of all time. He and the ICCL have been probing large data collection operations like Google and Facebook as well as smaller data brokers, like OnAudience, for the last couple of years. They want to find out if that data collection is breaking the rules set forth in the EU’s GDPR legislation. The suit is happening in Germany because of its GDPR foundation and the fact that IAB has an office there.
RTB works like this: A publisher’s ad inventory is put up for auction and advertisers can bid on impressions for that inventory pretty much in real-time. The highest bid gets shown to the consumer. These let advertisers target exactly the customers they want to attract because it lets them focus their bidding. When customers visit a website and do a search, show interest in a product, or even buy that product, cookies on the customer’s browser report that data to publishers and third-party data collectors. Those cookies often aren’t even from the vendor that runs the site, but from a third party that’s looking for nothing other than your salable data. That data powers the sales and buy engines in the ad exchanges where advertisers are bidding on impressions. If you’ve ever accessed a website and suddenly see display ads selling something similar to whatever you bought on Amazon the day before, that’s RTB at work.
Because so much of adtech either depends on or is at least adjacent to RTB, the ICCL suit is essentially going to suck in what Ryan calls the entire “data industrial complex.” That’ll include a long list of web companies both large and small. Basically, any service that makes money from profiling internet users and selling access to that information. That’ll include several behind-the-scenes players, like OnAudience, but also big names, like Amazon, Facebook, and Google, among others.
What the ICCL is objecting to is the disturbing and creepy kinds of data that RTB brokers are selling these days. Far from just providing information on what a customer buys, these companies are selling data on race, nationality, as well as religious and political affiliations. There are also markets for customers searching on LGBTQ information and medical data. There is enormous value in knowing who is searching for specific illnesses, such as cancer or AIDS.
But What About Media Revenues?
If you’re thinking this stinks worse than a urinal cake, a lot of people agree and say at least some of these practices should be illegal if they aren’t already. But when tech like this takes a hit, someone is going to have trouble paying their bills. In this case, online media companies worry that if these watchdog suits succeed, they’ll be the ones who wind up taking it the shorts. You might not weep if that includes companies like OnAudience, but it might include many decent, incredibly useful media companies, like PCMag.com. (Disclosure: This is PCMag.com.)
Realizing the storm is coming, many vendors are quickly launching privacy-oriented measures and trumpeting them as loudly as possible. At its WWDC21 event, Apple announced in a livestream that it was adding new privacy features for all its products, including those dependent on apps, email, and voice recognition. Apple also updated its Intelligent Tracking Prevention features. This means Apple will now hide your IP address from trackers while also blocking all third-party cookies. Google is following suit by blocking all third-party cookies as part of a Chrome update it says is coming in 2022. That’ll neatly block other companies’ data gathering while leaving the Google gold mine alone.
So will these measures or the result of ICCL’s lawsuit cripple adtech and hurt online publishers? Google says it’ll result in a nasty revenue drop for most media companies totaling between 50-70%. But there’s some vagueness in Google’s study on whether that revenue drop will happen to publishers or to RTB brokers and other back-end adtech purveyors. But studies, like this one from Ad Fraud Researcher, claim that’s not at all the case and that studies like the one from Google are self-serving and “vastly overstate” the negative impact that losing data gathering cookies would have on media company ad revenues.
Frankly, I agree. The kind of data that cookies are now collecting makes them more malignant digital growths than a path to more personalized shopping. Consumers are people, not just data mines and they deserve at least some expectation of online privacy without having to jump through hoops to get it. Some reasonable legislation here would be a very good thing, not just for consumers but also advertisers in the long term.
That’s because more and more consumers are finally figuring out how closely they’re being tracked and it’s pissing them off. Customer dissatisfaction is a real metric, after all, and it won’t help sales if the very people you’re looking to sell to start hating your guts. Not to mention that if you change nothing, someone is going to perfect ad-blocking technology and then online advertisers will really have problems.
There’s plenty of straightforward ad inventory still available to marketers that don’t work nefariously behind the scenes. Plus, RTB-gathered data may not actually be that effective. Even Google’s own study says that only 1% of advertisers’ dollars really get them the targeted response they think they’re paying for. And if you think about it, that’s probably accurate. They’re selling search data. If I search on when the highly entertaining New York Gay Pride Parade is starting, I get tagged as LGBTQ even though that’s not right. And if I search on “Republican Primary,” am I really a member of the GOP, or am I just looking for a good laugh?
Sure, RTB is automatic so it requires much less effort for both advertising buyers and inventory sellers, and it’s also happening very quickly, which means lots of money is moving around, too. But considering how much money gets wasted in RTB transactions as well as how angry it’s making consumers, I’d say returning to the older model of buying inventory directly from publishers will get most marketers a much better ROI on their ad-buying investment. And it won’t give me a weapons-grade nightmare whenever I look at all the cookies that have been stuffed into my browser. Whether you’re on the same page or not, let me know in the comments.
More of This Week’s Tech Business News
- The US is ranking second in the world when it comes to using employee surveillance tech. That’s disturbing, but then again the data is based on that not-always-accurate search data we just described above. But even if just a small segment of businesses are using this stuff, the fact that it can be installed without employee knowledge or consent is a powder keg just aching for a lit match.
- Microsoft introduces Windows 11 with a few benefits for business, primarily around commerce. That angle comes from a revamp of the Microsoft Store where you can now use your own commerce engine; and if you do that you’ll get 100% of your app sales revenue rather than the usual 85/15% split.
- Based on his Twitter feed, everyone’s favorite Trump-imitating business luminary, Elon Musk, has agreed to discuss the Bitcoin issue with Square CEO Jack Dorsey at The BWord event next month. Whether your a crypto proponent or detractor, at the very least it should be entertaining.
- Hyundai buys Boston Dynamics. An interesting acquisition, but is it for a more efficient factory, or is Hyundai looking to turn your SUV into a self-driving R2D2?
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