Why Subscription-Based Online Publishers Should Fight Against Ad Tracking

Websites with dedicated (and paying) audiences will benefit if advertisers cannot follow users around the Internet.

Nowadays, advertisers can follow specific individual people from site to site — you’ve seen it when you put a doodad into Site A’s shopping cart, but ads for that doodad appear on Site B and C and D. Somehow, they know it’s you, and they want to remind you to go buy the thing you left in that cart.

Advertisers think this is peachy. They want to be able to track you as you browse the Web. And they want to put specific ads in front of YOU, yourself as an individual, maybe by your name, or at the least, by your income, race, politics, and hometown. Advertisers say that this is a good thing, because they can show you ads that are timely, useful, and specific.

But regular people tend to think of this tracking as invasive, creepy, and stalker-ish. But what does advertising have to do with the subscription business? Well, read on, and I’ll make the case that what’s bad for ad tracking services is good for subscription web sites. 

THE RISE AND FALL OF AD TRACKING

Let’s start with online display advertising. Back in the day, online ads followed the print model: ad space was sold by publishers to advertisers, and in exchange for payment, publishers put display ads on their websites.

But soon technology allowed ad serving computers to swap ads in and out of spots on a web page, removing a human intermediary. And the ads served could be placed according to criteria, such as time of day, total ad impressions, or some other program. These ads, delivered in accordance with a program, are programmatic ads.

Take a look at the rise of online programmatic advertising, in raw revenue (billions of dollars):

And as a percent of total online display ads, programmatic is also growing fast:

Note that over five years, programmatic ad buying has gained 50 percentage points of market share. That represents ad spending that is no longer going to specific websites, but instead to programmatic buys.

One result of the rise of programmatic advertising is a lot of pain for sites that rely on both subscribers and advertising. Sites that register their users know who those users are, because they log in when they visit in order to get registered-user benefits. Publishers of those sites, therefore, deliver a known and valuable audience to advertisers who buy display space on that site. That means subscription-based sites can sell advertising at premium prices because they deliver a premium audience.

A programmatic system ruins that advantage because it can identify the users who visit a given site, and advertise to them when they are on sites with low ad rates. Josh Marshall at Talking Points Memo lays that out pretty clearly:

  • In the old days advertisers would use publications as proxies for the identities of people they were trying to reach. CEOs and investors? The Wall Street Journal. People into Tech? Wired and Ars Technica. Affluent, educated liberals? TPM. Now it’s different. Advertisers (or more the major agency holding companies who act on their behalf) sometimes have a defined list of say 500,000 people they want to contact. You can show the advertisers ad to those people and only those people.

The main tool used to track users is the cookie, but user tracking goes beyond just cookies through the identification of the characteristics of your particular device, your location, your IP address, and so on. This kind of tracking really does raise important concerns about privacy, transparency, and so on. Here’s a 2016 poll of media planners, a group of people one would expect to embrace ad tracking, but even they have deep concerns:

 

TRENDS AGAINST PROGRAMMATIC

Some important players are concerned enough to act. Steven Melendez, writing for Fast Company, explains that the entire European Union is cracking down: “The European Union’s forthcoming General Data Protection Regulation (GDPR) will require sites to explicitly gather European users’ consent for how their data is used.” The new law, set to go into effect in May 2018, treats cookies as “private data,” which is subject to strict regulation.

The other big news is the recent revelation that Apple is implementing “Intelligent Tracking Prevention” initiative in the newest versions of IOS devices (iPhones and iPads) as well as in the Mac OS. In a statement to Adweek, Apple said:

  • “users feel that trust is broken when they are being tracked and privacy-sensitive data about their web activity is acquired for purposes that they never agreed to. … Ad tracking technology has become so pervasive that it is possible for ad tracking companies to recreate the majority of a person’s web browsing history. This information is collected without permission and is used for ad re-targeting, which is how ads follow people around the Internet.”

The same article — titled “Every Major Advertising Group Is Blasting Apple for Blocking Cookies in the Safari Browser” — also makes the advertiser point of view pretty clear.

I don’t know which way the debate will go, but we can look ahead to two possible futures: In one, much like the present, it is easier to track users. In the other, it is harder. Which future is a better one for subscription websites?

For websites that depend on a mix of subscription and non-programmatic advertising revenue, the answer is pretty straightforward: user tracking and programmatic ads dilute the value of your advertising, because advertisers can track your high-value audience as it browses the web and target desired customers elsewhere.

For websites that do depend on programmatic, there will be a lot of short-term pain as advertisers migrate to large platforms like Facebook and Google, which can, to an extent, track users without relying from third-party sites. But according to Fast Company’s Melendez, the long term may see an advantage to all ad-driven sites: the “junk mail” style of current programmatic ads may well evolve into something more reputable. Melendez says:

  • One possibility for ad-reliant publishers is that the tracking restrictions will ultimately improve the quality and respectability of digital ads, leading to more of the sort of lucrative big-brand advertising familiar from television and print media, says Jason Kint, CEO of Digital Content Next, an online publishing trade organization. “At the end of the day, it will increase the trust in digital advertising.” … Advertisers could still target ads to particular segments of the population based on factors like the context where their messages will run, just as they currently do in traditional media like TV, radio, or print. Right now, the majority of ads online are automatically targeted and “more akin to junk mail in your mailbox,” he says.

And for websites that do not depend on advertising at all, the argument against programmatic advertising is more complex. For a very long time, the distribution of content has depended on advertising. We accept ads so that we do not have to pay more for newspapers, magazines, and TV. The net result has been to weaken or sever the connection between content creators and content consumers. That is, consumers expect that their content will be free, or at least, artificially cheap, thanks to the ad subsidy. Reconnecting with users, strengthening the idea that the content is worth the cost to produce it, is a major challenge for all subscription content providers.

Talking Points Memo’s Marshall gets this as well, when he says, “Technology has placed the ability to extract the greatest profits from advertising into the hands of the players that do not shoulder the costs of creating the content that make it possible.” Therefore, anything that throws sand into the gears of the ad tracking industry is a good thing. Marshall says:

  • disruptions in tracking are good for publishers. Actually basically in all ways it’s good. In this way, we have a vaguely common interest with Apple since we see our business future as tied to paid services, memberships, etc. Apple does too. In practice, the little players have the least ability and resources to protect themselves during periods of market chaos. But in theory at least, if Apple’s self-interest led it to disrupt the cookie architecture and wreak havoc in Google’s business model, that would likely be good for publishers. In any case, these are all reasons why we have focused our energies on moving toward paid memberships and subscriptions.

Insider Take

Recent trends toward tracking users from site to site and targeting them with ads wherever they go are bad for subscription sites. For subscription sites who also depend on advertising, programmatic ads dilute the value of those ads. For those who are pure-play subscription, programmatic still hastens the divorce of content creators and those who benefit from that content. Therefore, recent events intended to diminish the power of ad tracking are good things that subscription-based publishers should applaud.

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