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Firefox Power Shifts Reveal Need for Market Evolution

Posted by Martin Smith on May 15th, 2013 at 8:31 am

As we test the pre-release versions of Firefox 22, the furor regarding the browser's blocking of third-party cookies continues to capture minds. While the fact of the change is undeniable, it is useless to debate the merits of the decision. Instead, advertisers and agencies must focus on developing a strategic response to the market shift that is about to occur. It is clear that there will be considerable impact to current models and yet, it is very unclear how the markets will respond to the change. In order to evolve with this change, it's important to understand the overall impact that will take place in the market.

With the release of Firefox 22, Mozilla joins Apple’s Safari browser in blocking third-party cookies. This will likely impact 40% of unique browsers (actual, not downloads), and advertisers and agencies will see significant measurement distortions (except those solely using click metrics) and data management impact. (Note because measurement is census-based, the distortion will be exponentially larger than 40%.)

First order of the day is to take an inventory of the near-term impacts to the eco-system. Typically advertisers use 8-12 different technologies to plan, decision, deliver and manage digital advertising. The eco-system has historically bounced data from partner to partner via tags, broadcast synch or stitched it together. ALL THESE WILL BE IMPACTED: attribution, analytics, data management, available cookie pooling, ad measurement, site conversion measurement, etc. etc. In tests just on the Apple browsers, we’ve seen this distortion create significant impacts and distortions up to seven times, so we will expect to see this rise rapidly after Firefox 22 goes into wide release.

With the increased volatility in the measurement framework, we will also see the collateral power shift to sell-side groups with well-architected data models. These include the usual suspects—Google, Yahoo!, Facebook—. These companies are being joined by eBay and Amazon. As these companies also enjoy a direct consumer relationship, they are well-insulated from the volatility that besets others in the market such as third-party networks, publishers using third-party networks as an inventory model, retargeters (though one could argue that Criteo is better-placed than most as it relies on click model) and data pools that use third party tags that do not have a direct client relationship. Expect to see the balance of power shift to the majors.

What is less clear will be how the DMP folks will fare as, on the one hand, they are organizing data in a first-party model to support programmatic buying, while on the other hand, they need to effect good linkage currently. Companies such as Blue Kai could be very well placed as they also have strong data and publisher links while more standalone DMPs may struggle.

Clearly the uber-players are seeing big potential gains.  Weakness in the third-party middle of the market may drive better quality inventory to them as they develop significant data on-boarding frameworks. Of course, the sting in the tail here could be that privacy concerns are escalated. Last year Senator Markey et al. in Washington and others in the market pushed hard for change in different data practices and fair and adequate notice, choice, consent and derivative works.

The uber-publishers also need to be sensitive to the fact the advertiser and agencies need to able to measure the efficacy of their investments and also have the tools and technologies to determine where to invest in media. This may be antithetical to the model of “We know what’s best” but advertisers and agencies have significant concerns that, with the two largest ad delivery technologies owned by the majors, there will be a dumbing down or restriction on things like data exports, etc.

As the Barclay’s Renaissance of Ad Technology report (published just before the Firefox announcement) showed, there is still a need for better validation of spend as the industry investment still lags significantly behind the volume of eyeballs consuming content. Measurement and targeting are key staples of driving effective media investments and there is need to ensure that there is adequate availability of these on the buy-side as well as the sell-side. Judging by the volume of new business calls our team is getting for our first-party model, this is understood in the market. I’m actually excited by the change as it will force the market to innovate with renewed energy as a disruption in the eco-system creates opportunity to get creative. We may be able to eliminate much of the non-working media costs in the model, which currently is probably the biggest limiting factor in the equation. When 63% of the cost of media is not on media, then there is a problem.

Evolution or revolution is being forced on the market. The power shift has created better visibility into who is buy-side and who is sell-side – the LUMAscape can be re-drawn with more clarity – you are buyer or a seller or you help the buyer or the seller, ambiguity resolved. Simplifying and redrawing the eco-system will maximize efficiency of spend and improve ROI across the board. Display marketing will be stronger and serve all parties better, once the growing pains have been overcome.

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