Programmatic CPMs Will Drop

Without personalized user profiling, programmatic advertising takes a hit. Advertisers rely on these profiles to target their ads effectively, and without them, the effectiveness drops. This means advertisers will spend less, and prices will drop. According to an IAB report, publishers could lose up to $10 billion in ad revenue due to the end of third-party cookies. Google’s own research from 2019 highlights the potential impact on revenue through a detailed A/B test.

Google conducted an A/B test to understand the difference in revenue between personalized and non-personalized ads. They analyzed 500 publishers, comparing revenue generated from personalized programmatic ads (using third-party cookies) against non-personalized programmatic ads (using their contextual targeting). The findings were stark: without third-party cookies, revenue significantly dropped across the board, with a median decline of 64%.

Even with Chrome’s Privacy Sandbox—an initiative by Google to develop new web technologies that aim to protect user privacy while still enabling effective online advertising—things aren't looking rosy. Criteo, a company known for personalized online display ads, suggests that publisher revenues could decrease by an average of 60%. This means that without cookies, the ability to deliver highly targeted and personalized ads is severely diminished, leading to a drop in programmatic CPMs.

The Impact on Premium Publishers

For premium publishers, the impact could be even more severe. Their high-value users, who bring in higher CPMs, become harder to detect without identifiers. Quality content attracts users with higher buying power and selective engagement. Without identifiers, these valuable users become nearly impossible to identify, making it difficult for brands to target them effectively, leading to significant revenue losses.

Opportunities for Premium Publishers

But it's not all doom and gloom. The shift away from cookie-driven advertising presents a significant opportunity for premium publishers. Here’s how:

Leveraging First-Party Data

Publishers have a wealth of first-party data collected from user logins, site interactions, and content preferences. This data allows for precise audience segmentation based on demographics, interests, and behaviors. Hyper-focused ad campaigns become possible, increasing the effectiveness of advertising efforts. As third-party cookies disappear, this first-party data becomes even more valuable to advertisers looking for effective targeting options.

The Trade Desk already see that publishers get up to 2x higher CPMs for authenticated users (users who have logged in or provided email addresses).
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“We found that authenticated users monetize better, but they also come back more frequently.” - Emry Downinghall, SVP of programmatic revenue and strategy, Unwind Media

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Shift to Private and Direct Deals

With the decline in effectiveness of cookie-driven advertising, advertisers will likely shift their budgets to private and direct deals with premium publishers. This shift is driven by the need to maintain the effectiveness of their ad spend and the priority placing ads in a brand-safe environment.  Premium publishers have a distinct advantage here due to their high-quality content and highly engaged audiences. These publishers can offer advertisers a premium environment where ads receive up to 11× higher attention compared to non-premium sites. This increased attention translates to better ad performance, higher engagement rates, and ultimately, better returns on ad spend for advertisers.

Moreover, private deals come with premium pricing. Since advertisers are paying for the exclusive access to a high-quality audience, publishers can command higher CPMs.

The Comeback of Contextual Advertising

Contextual advertising is back in the spotlight. Ads relevant to the content on the screen are effective and less intrusive. For example, The New York Times' new GenAI-powered targeting solution matches campaigns with relevant articles and engaged audiences, showing promising results. This innovative approach leverages AI to interpret a campaign’s brief and align it with the most suitable content, ensuring that ads are seen by users who are genuinely interested in the related topics. This not only increases engagement but also enhances the overall ad performance, making it a highly efficient strategy.

“Premium and proprietary ad products like BrandMatch have contributed to the success of our ad business. It allows us to help solve for challenges that advertisers previously hadn’t had solutions for. How do we help them reach the perfect audience if you can’t define it with the existing targeting segments?” - Joy Robins, Global Chief Advertising Officer, The New York Times

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Regional publishers can achieve similar success with simpler solutions—serving ads from local companies on local articles. By aligning ads with the specific interests of their local readership, regional publishers can create a more personalized and relevant advertising experience. For instance, a local news site featuring an article about a community event could display ads from local businesses sponsoring the event. This form of targeting is not only accurate but also enhances the reader's experience, making ads more relevant and less intrusive.

This targeted approach also benefits the readers. From the average reader's perspective, these ads are more relevant and far less intrusive than cookie-based behavioral retargeting. Instead of feeling like they are being stalked by random ads, readers see advertisements that actually relate to the content they are engaged with. This relevance reduces the "creepiness factor" associated with traditional cookie-based ads and fosters a more positive relationship between the reader and the publisher.

The Silver Lining

The end of cookies might seem daunting, but it's a chance for publishers to innovate and find new revenue streams. By leveraging first-party data, shifting to direct deals, and embracing contextual advertising, publishers can not only survive but thrive in this new landscape. This transition presents a opportunity for publishers to make more revenue and become independent from the big ad networks.

At Smartico, we help publishers leverage this opportunity by enabling news publishers to offer their advertisers a premium ad product with high-impact ads and tailored landing pages, delivered in the right context and designed to reach high attention levels. Our visual dashboards provide clear insights into metrics such as banner visibility time, engagement, and time spent on landing pages.

By partnering with Smartico, publishers can showcase these premium metrics to their advertisers, demonstrating the value of high-impact ads that capture quality attention. This helps publishers sell better ads at higher CPMs, maximizing their existing ad inventory and driving more revenue.