Since about this time last year, I've been seeing and hearing a lot of speculation about how consumer concerns over behavioral targeting and other perceived misuses of consumer information might bring about regulation from the U.S. government. I think it would be naïve to think that the government won't step in. There is, however, wide-ranging opinion from people I respect in the digital marketing industry about the extent to which regulation will affect what we do every day.
Following the iMedia Financial Summit this past year, I was having a conversation with Jason Burnham, the founder of Mass Transit Interactive, who sold that agency to Horizon Media in 2005. We were talking about this very issue, and that's when I first started thinking about what I would consider to be the next "Chaos Scenario" for digital: losing the cookie.
By way of background, I'm a total cynic when it comes to the subject of governmental regulation of business. In general, it tends to be heavy-handed, not very nuanced or articulate, and generally produces unintended consequences that are often the exact opposite of what was intended by the regulation.
This tends to hold true regardless of the industry being regulated, which party controls Congress, or who the president is. There are a lot of tiny but important details that are germane to the discussion of the evolution of a business sector and why things are the way they are. I don't believe that most of our elected representatives (or the appointed ones, for that matter) have the time to understand all of these details and issues.
Not to be alarmist, but I like to prepare for the worst. The cookie is an obvious target, and I could very easily see a naïve lawmaker landing on "let's just get rid of these third-party cookie things. Problem solved."
So Jason and I started talking about what the post-cookie digital marketing world might look like.
If we lost the ability to marry data to third-party cookies, we'd lose some very important abilities that we take for granted in digital marketing today:
- Behavioral targeting across a network or multiple sites. OK, forget behavioral for a second. Most network targeting options would disappear, with some notable exceptions.
- Frequency-capping
- Retargeting and custom advertiser-specific targets based on cookie data
- Ad sequencing
- Much of the data-based targeting that relies on marrying data profiles via cookie-synching
- Closed-loop reporting
Some things we would still have left:
- Rudimentary geo-targeting based on IP address or user-declared data from first-party cookies
- Targeting based on anything in the HTTP header (browser version, OS, IP, etc.)
- Panel-based measurement
- Targeting options within a single site
If the government simply got rid of the third-party cookie for marketing purposes, we'd see an immediate thinning of the herd. Without an alternative to third-party cookies, ad networks and exchanges would suffer a great deal, as the targeting options that made them popular would disappear. Third-party ad servers would probably continue to exist, mostly to simplify trafficking and reporting, but much of their functionality would be stripped out. We'd stop getting those insightful reports from the third-party servers about the state of the industry.
Power would begin to shift back toward single sites with large traffic volume. In the absence of third-party cookies, after all, marketers would have to rely solely on data captured by individual sites in order to target ads in any compelling way. In other words, we'd be thrown right back into 1996-era portal mania.
Repercussions would be felt all the way through the measurement sphere as well. Direct response and e-commerce advertisers would be hit hard, as they would no longer be able to set cookies on users to find out whether they later bought something on their website.
Companies like comScore and Nielsen might emerge unscathed, while cookie-reliant companies like Quantcast might not fare as well.
Some of you might be saying to yourselves that this doesn't sound so bad. The notion of publishers being able to live or die based on their reach and the data they're able to collect from their own visitors sounds like a good idea. Thinning the herd and shifting revenue away from networks and exchanges might sound like fun for publishers. Agencies that have had to keep up a fevered pace of tracking industry trends might find the whole interactive sphere a bit easier to cope with. Certainly, things would get simpler for everybody concerned.
But the post-cookie digital marketing world would erase a decade and a half's worth of innovation in targeting, segmentation, audience aggregation, and measurement. It might kill the network business and the exchange business along with it. It will certainly give advertisers fewer options. I'll leave it to you to decide whether that's a good thing or a bad thing.
We should all be thinking about the worst possible regulatory scenarios and plan accordingly. The third-party cookie might survive scrutiny, and regulation might take another form, but we should prepare anyway.
Tom Hespos is the chairman and president of Underscore Marketing and blogs at Hespos.com.
On Twitter? Follow Tom at @THespos1 or @_MarketingLLC. Follow iMedia Connection at @iMediaTweet.
