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Recently, Digiday published an article about the “winners and losers” of the new EU ePrivacy law. As suspected, behavioral targeting is a clear loser due to its reliance on cookie-based targeting. The only winners mentioned seemed to be those outside of the realm of digital advertising. When the dust settles, after every publisher and tech company rushes to be compliant with these new rules, there is one clear winner in the digital advertising category that has so far gone unmentioned—contextual targeting.
Background on the ePrivacy Regulation
Separate but complementary to the broader GDPR law that is slated to go into effect in May 2018, the ePrivacy regulation specifically targets companies that collect user browser cookies. Several key areas of the legislation should be highlighted:
- Simplifying cookie collection: At the most basic explanation, the regulation states that it should be easy for users to consent or refuse to having cookies set. This is typically most easily done at the browser-level. From a user experience perspective, this most likely means that if one has their browser’s settings to not allow cookies, one will see more and more sites that have pop-ups that state they can’t view content unless their cookies are enabled (as users who have ad-blockers enabled already experience today). If one has their browser settings configured to accept all cookies, then each site that they visit will still need to prompt them to explicitly consent to have cookies set for that particular site.
- Permitting non-obtrusive cookies: Certain forms of e-commerce cookies, such as those that remember the shopping cart history of a user, will be spared the requirement for needing explicit consent under this regulation. Additionally, Google Analytics and similar anonymized statistics tracking cookies will also most likely be permissible
- Online advertising cookies: Due to the lack of clarity from sites on which specific third-party cookies they set to collect end-user information, many are interpreting this law to negatively impact the future of third-party cookies used for digital advertising, and specifically, deeming it a death sentence for behavioral targeting. By today’s standards, end-users are not made easily aware of which parties are tracking them by cookie ID for advertising purposes, nor are they aware of the audience targeting and data collection methods that are employed by these third parties in a general sense.
- Steep fines: The same fines that are outlined in the GDPR are applicable to violators of the ePrivacy regulation (4% of annual revenue or €20 million, whichever is highest)
Understandably, ePrivacy has struck fear in digital advertisers who rely on cookie-based targeting to understand the demographics, purchase behavior, and purchase intent of its intended audiences. In order for ad targeting to survive in the EU after these regulations are firmly put into law, it has become clear that alternative targeting methods need to be employed.
Why Contextual Targeting is a Winner
Contextual targeting, which relies on the content, keywords, and category of a page to find the most suitable ad placements, seems to be the clear winner and most logical alternative. Here’s why:
- No user data or personally identifiable information (PII) is collected: Instead of relying on behavioral attributes of users, contextual targeting relies on the attributes of a page–does it contain content about a particular topic that the advertiser and target audience is interested in (a basketball site would be an appropriate place to advertise basketball shoes, for example)?; does it contain objectionable content that would hurt advertiser perception (think site categorization for the sake of brand safety)? Pages are not people, so everybody wins when it comes to user data privacy when taking this approach.
- It makes sense for smaller platforms: In order to do behavioral targeting effectively, one has to amass millions of profiles and have a sound Big Data management strategy; smaller ad platforms often don’t have the means to invest in a data science team nor expensive server clusters. Doing targeting at the site level greatly reduces the short-term and long-term cost of effective ad targeting.
- Better for local campaigns: According to a SearchEngineLand case study, contextual targeting is superior to behavioral targeting for local campaigns with strict geographic limits in four major areas: stronger engagement in the form of higher click-through rates (CTR); increased relevance to site placements; lower cost per thousand views (CPM); lower cost per acquisition (CPA).
- Audience behavioral profiles can still exist with contextual categorization: Publishers who have walled gardens and rely on user registration can still collect a considerable amount of user-declared registration data. This data can be leveraged in ad targeting because due to the Terms of Service Agreements (TOS) and opt-in agreements on these sites. With the TOS, the user has explicitly consented to not only provide some information, but also to have their site behavior analyzed, and allow it to be licensed to third party/advertisers. This allows these publishers to create audience profiles of their users, and through site categorization and contextual targeting, can allow advertisers to still reach them based on behaviors. For example, if a membership-only site knows that their users who fall into the demographic of women, ages 18-34, are most active in the afternoon on their site, then they can work with advertisers to set up dayparting campaigns to target this audience with relevant advertising content.
While the upcoming ePrivacy regulation is certainly a scary prospect for the future of behavioral targeting, it should not dissuade Ad Tech platforms and advertisers to seek out alternative methods to adapt to increasing data and privacy rules. The only way to ensure full compliance to an existing or future user data privacy law is to move away from targeting people and focus on targeting pages.
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