Well, 2021 was quite a year. Although optimistically predicted to be a return to normal back in January, if anything it was even stranger than 2020.
So rather than make the same mistake again, and confidently predict a routine 2022, we can instead look back at the lessons we learned in 2021, and apply them to resolutions and goals for this year.
The past two years really do feel like a blur, and we have emerged out the other end in a significantly altered digital ad sales landscape. From March 2020, online traffic shot up all over the world, and digital advertising became one of the preferred ways to sell products and services.
Marketers quickly adjusted their strategies, which took its toll on traditional platforms: by the start of 2021, TV, radio, out-of-home, and print ad spend had fallen 15.7%, while in the US advertisers increased their digital ad spend by 14.9%.
Marketers were also working with less capital. In Gartner’s “The State of Marketing Budgets 2021” report, it was revealed that overall marketing budgets (as a function of overall company revenue) fell from 11% in 2020 to 6.4% in 2021 - a record low since this data has been gathered.
If you instinctively ascribe that drop to pressures brought on by the pandemic, you would be largely right. But the expectation was for normal service to be resumed in 2021. That change never came, which Gartner attributes to marketing departments proving that they could do more with less, as well as ongoing rapid digitalization.
Their study found that the lion’s share (72.2%) of this constricted budget was funneled into digital channels. And as is so often the case, once any area of life becomes more “digital-first”, it is pretty much impossible to put the genie back in the bottle. So the new landscape is here to stay, and media ad sales vendors are going to have to adapt fast to ensure ongoing revenue growth.
This is doubly true thanks to the looming demise of third-party cookies and ever-increasing concern for consumer privacy throwing a spanner into the works.
The era of third-party cookies is coming to an end. Firefox has been stating its intentions to block them by default as long ago as February 2013, while Safari implemented full third-party cookie blocking in March of 2020.
Finally, when Google Chrome announced their intentions of phasing them out by late 2023, the writing was on the wall: as of September 2021, these three browsers between them constitute over 85% of all browser usage (Chrome 67.56%, Firefox 7.93%, Safari 9.67%) - with third-party cookies blocked on all three, they’ll be as good as gone.
The move away from third-party cookies has largely been driven by growing public concern over internet privacy, which accelerated in the wake of various debacles including the Facebook-Cambridge Analytica scandal.
Although they have been identified as a significant privacy threat since way back in 1997, as recently as 2019, 81% of surveyed Americans said they believe they have little or no control over data the government (84%) or private companies (81%) collect about them.
In the EU, one of the goals of 2018’s GDPR regulation was to enhance individuals' control and rights over their personal data, while in Asia, which accounts for approximately 50% of all Internet users, privacy regulations in various countries are also picking up steam.
While all of this is good news for the average citizen, it is bittersweet news for advertisers, and media sales vendors, who have been major beneficiaries of third-party cookies for the better part of the last two decades.
This, among other things is creating a challenging ecosystem for publishers:
Escalating cost to serve
There is an increasing misalignment between deal value and cost to serve for some organizations, particularly for lower-value agencies and smaller segment customers.
This can limit the customer segments the publisher can afford to support economically, impacting both profitability and revenue.
Targeting becoming more challenging
The increasing focus on privacy and the lack of transparency in programmatic advertising is driving a wedge into digital advertising.
Having access to high-quality first-party data is key to publishers being able to offer effective targeted advertising and competing against the digital giants.
Traditional revenues under pressure
The continued contraction of traditional linear advertising is putting pressure on many publishers’ traditional revenue sources.
Publishers are looking for more ways to diversify their revenue and offer more value to their customers to both retain them and expand share of wallet.
Digital ecosystem becoming high-effort
Ironically all the automation that drives modern ad tech is often orchestrated through manual process.
The more demand-side platforms, trading platforms and ad servers that need manual campaign setup drive down profitability.
Revenue dilution and transparency
Revenue transparency, particularly with programmatic advertising, is an issue, with much revenue being funneled into third parties involved in the bidding and buying process. This drives down publishers’ margins without adding specific value to them and is difficult to reconcile.
These issues are doubly hard to manage for small to medium-sized publishers.