As the cookies crumble, digital agencies pivot to contextual advertising

In the absence of cookies, agencies are now focusing on first-party data, prioritising compliance while pushing the envelope with creativity.

While the year that just passed may not have been particularly eventful for many lines of business, it was undoubtedly significant for the digital marketing ecosystem.

Despite signals from major tech companies like Meta and Alphabet indicating a shift towards prioritising user privacy and safety, concrete steps to solidify these intentions were not taken until this year. Throughout the year, global regulatory bodies heightened their scrutiny over user privacy concerns. 

In January 2024, the Indian government is set to announce the regulations of the Digital Personal Data Protection Act of 2023. Meanwhile, the European Data Protection Board (EDPB) issued a permanent ban on Meta, preventing the use of personal data for advertising across the European Union (EU) back in November.

Although Meta has not yet unveiled its strategy to completely move away from the use of third-party cookies, Google plans to roll out its Tracking Protection feature, starting January 4, testing on one percent of its browser ‘Chrome’ users globally.

With this initiative, the company aims to phase out third-party cookies by the second half of 2024, enhancing user privacy. Also, on September 7, the company announced the general availability of Privacy Sandbox.

The company had announced that privacy concerns would be addressed with its Privacy Sandbox commitments back when it began working on it in 2019.

Unlike others, we're designing the Privacy Sandbox in the open, and in consultation with the industry. That includes offering regulatory commitments to ensure the changes we make in Chrome apply in the same way to Google’s ad tech products as to others. https://t.co/wMP7q8lgLH

— Google Europe (@googleeurope) January 24, 2022

With privacy taking centre stage, experts express concerns about the planned retirement of third-party cookies, a crucial element in the effectiveness of digital marketing and advertising.

Often likened to the foundation of digital marketing, the removal of cookies could potentially bring seismic changes to the entire ecosystem. How are agencies preparing for the impending impact of these significant shifts?

Agencies transition to be more data-centric

Kiran Capoor, head of technology, Schbang, explains that agencies’ focus now lies on refurbishing their approach to adtech.

“We are witnessing a shift from relying on pre-provided data sets to actively gathering and deriving insights. Privacy takes precedence, given heightened user awareness, the impact of regulations like the DPDP Bill, and the departure from cookies by big tech. The emphasis now is on a data-first approach, voluntarily gathering data with a central focus on consent. Agencies are innovatively developing strategies, such as online gamified portals, to collect this valuable data."

Capoor opines that, moving forward, agencies will be transitioning to a role where they actively crunch the numbers and prepare cohorts independently, without relying on third-party data sets.

He is of the belief that the development of centralised data sets for brands will reshape the dynamics of collaboration between clients and agencies.

"At Schbang, our proactive response to the challenges posed by the cookieless environment involves internal system development. We gather insights from various brand communication channels, including websites and apps, analyse the collected data, and use it to inform our strategic planning. This signifies a deliberate shift towards a data-first approach in our media and advertising endeavours. Embracing a data-first mindset, we leverage multiple sources as pipelines to fuel our robust data engine, ensuring our marketing strategies are driven by valuable insights."

Siddharth Devnani, co-founder and director, SoCheers, says that the expulsion of third-party cookies entails a reinvigorated focus on different data points used in the design and implementation of brand campaigns. 

“Looking ahead, for a world without cookies, we are preparing ourselves by being super proactive. One big move is shifting our focus to first-party data, which means we're getting to know our audience better by directly connecting with them. This helps us understand what they like and do online, so we can keep our ads right on target,” he adds.

Shift to contextual advertising

Given that the agency business now calls for a heightened focus on first-party data, there are multiple facets in the overall operations that are in the process of a reevaluation.

Preetham Venkky, CDO, DDB Mudra Group, says that agencies wield access to two critical facets of media—brand building through reach media and action optimisation via performance media.

Amidst this, a fundamental reconsideration has occurred concerning the alignment of these efforts with the collection of first-party data. For DDB, the recent years have already seen a pronounced focus on harnessing first-party data to drive campaigns efficiently, ensuring they reach the target audience with a higher likelihood of conversions.

“First-party data, in essence, establishes a profound connection, enabling brands to cultivate deeper relationships across diverse consumer touchpoints.”

Thus, he asserts that the significance lies not just in the touchpoint data itself but in the contextual understanding surrounding it. While vital for building mass reach, the era of third-party data has witnessed a dilution in engagement targeting. 

Although topics of interest still provide a framework, hyper-targeting is challenged in the absence of third-party data. Thus, the precision of engagement and action targeting becomes more elusive. Building a brand-consumer connection, therefore, hinges on the ability to gather and leverage first-party data sets.

Understanding the context in which consumers interact with a brand becomes paramount. In a landscape where third-party data's efficacy diminishes, agencies must navigate the challenge of crafting meaningful connections by tapping into the richness of first-party data and the contextual nuances surrounding consumer interactions.

“Contextual advertising takes centre stage in our approach, emphasising that connections aren't built with content but with context. In the realm of brand building, context holds more sway than mere content. Understanding the context in a consumer's life that aligns with the brand becomes the focal point, and this is where contextual advertising assumes a more prominent role. The next imperative step is refining our approach to contextual advertising.”

“While contextual advertising has always existed since around 2004, its prominence was overshadowed by the prevalence of mass media or the intense focus on performance media. With the shift away from performance media, there arises a necessity to develop robust strategies for contextual advertising. However, a challenge lies in the fact that the startup ecosystem, primarily geared towards customer acquisition, heavily leaned on performance marketing,” he adds. 

For SoCheers, Devnani shares that the agency has been grappling with specific challenges related to targeted advertising, particularly in understanding audience personas and utilising tools that capture evolving behavioural patterns.

"The challenge was heightened by evolving behavioural patterns, demanding a reevaluation of our strategies for continued effectiveness. To address this, our agency integrated tools capable of adapting to dynamic audience personas. These tools provide valuable data and insights into audience behaviour, empowering us to refine advertising pitches based on the latest trends. This not only enhances targeting precision but also positions our agency as adaptive and forward-thinking in the eyes of clients, solidifying our ability to navigate the ever-changing dynamics of targeted advertising."

He explains that the agency is actively working on evolving its contextual targeting abilities.

“Instead of snooping on individual users, we're making sure our ads match the vibe of the content they're hanging out with. It's like showing dog food ads when someone's reading about puppies – just makes sense, right? And to supercharge our smarts, we're bringing in Artificial Intelligence (AI). Moreover, we are surely trying our hands on Google Click ID (GCLID) which helps us track how well our ads are doing and tweak them for even better performance. So, while the cookieless future is coming, we're all set with this approach to ace the digital ad game!,” he asserts.

Venkky says that the ongoing transition demands a reevaluation of agency strategies. “Agencies need to re-optimise their workforce to effectively execute contextual advertising strategies, a process that might span 6-9 months. It's not just about the creatives; it's about recontextualising and fostering a shift in thinking towards contextual relevance.”

A more privacy-conscious world? 

Capoor also highlights that privacy now takes precedence as there is heightened user awareness and the impact of regulations like the DPDP Bill and the departure from cookies by big tech. 

Venugopal Ganganna, CEO, Langoor Digital, shares that brands, particularly in industries that heavily rely on digital advertising, have become more cognisant of data privacy issues.

He explains that the concerns about privacy issues and data protection in 2023 have been greater than ever before. This focus is also clearly visible in their expectations from agencies. Thus, the focus for agencies is now to prioritise compliance and adopt transparent data practices - while also pushing the envelope with creativity.

“Brands are increasingly open to investing in technologies and solutions that prioritise user privacy. This may include technologies like privacy-focused analytics, identity solutions compliant with regulations, and consent management platforms. Additionally, the changes in the digital advertising landscape have prompted clients to explore new ad formats and channels that may be less reliant on third-party cookies. This includes considering emerging platforms and creative approaches that respect user privacy,” he says.