The GDPR Inflection Point: Finding New Ways to Target

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It is always with a certain amount of skepticism that readers approach an industry peer in a trade publication advocating why this solution is the next best thing, or why that platform will finally change the digital world in some transcendent and positive way.

We have all grown wary of corporate rhetoric and self-promotion, but we still value each other’s opinions and insights. In a post-GDPR era, it is even more essential for the good of our customers and business community to share honest, intellectual insights into how we can—and must—continue to innovate and thrive in the face of seemingly daunting challenges on the regulatory and user experience front.

There is no question that the implementation of GDPR places many uncomfortable limitations on the digital advertising marketplace, not only for business operations working within or outside of the 28 countries that span the EU, but for the potential adoption of similar if not stricter regulations by the U.S. Government in the very near future.

U.S. companies looking to continue to globalize and expand their businesses have been tasked with immediately prioritizing their data privacy framework to ensure that they understand how their business collects and/or uses the personal data of individuals—among many other critical measures that must be taken to abide by these new regulations.

But despite the considerable investment that tech giants such as Google and Facebook put into GDPR preparation, both still got slammed by up to $9.3 billion in fines on May 25, the first day the new privacy act went into effect, or the maximum of 4 percent of their respective annual revenue, which the EU regulatory body allows.

And practically overnight, the ad exchanges that rely mostly on behavioral targeting data to fuel the incredible volume of programmatic advertising that feeds global advertising saw a precipitous 25-40 percent drop in demand. Some publishers even decided to stop delivering content to European countries until they can resolve GDPR compliance issues.

This sudden upheaval sent a cumulative shudder through all of us.

However, brands and their agency partners should not just focus solely on compliance but rather on the global shift in how we now view and respect data privacy, as an industry. This means adopting and developing creative and compliant ways of serving ads while still providing meaningful branded experience for consumers. And while some of our advertising practices may no longer be sustainable when held up to the rigors of GDPR, more effective advertising methods have emerged—or re-emerged in the case of contextual advertising—that are far more suitable for this regulatory age.

GDPR is Changing How We Target

Despite the copious amount of dollars and time spent getting many of our digital business practices in check for the enactment of GDPR, its required user opt-in consent requirement has resulted in a significant shift away from the longstanding advertising practice of behavioral and demographic targeting to the lesser utilized but more GDPR-compliant contextual targeting.

Advertising methods such as retargeting use first-party data, while behavioral and demographic rely heavily on third-party data, resulting in programmatic advertising plays that are now under harsh regulatory scrutiny for their reliance on user data that does not meet GDPR opt-in requirements.

Only an estimated 25 percent of user data currently meets the GDPR requirement for fully informed, opted-in consumers.

Behavioral and demographic data is also considered private by many people, as well as by regulators, and the general practice of using third-party data has been on a steady downward spiral for quite some time due to poor performance and concerns over bad audience data, brand safety, fraud, and a lack of transparency into how behavioral and demographic audience segments are created.

According to internal GumGum research, there is growing evidence of more people downloading encryption software or anonymous web browsers that allow them to browse the internet without being tracked. In addition, marketers are challenging the value of behaviorally targeted ads in general. This is due to at least three common missteps: high frequency caps (how many of the same ad can be shown to a user on a given day), the lack of conversion pixels (when retargeting ads stop being delivered), and the arms race to win the last click/touch (so that the provider of ad can take credit for marketing attribution).

Contextual Advertising Makes a Comeback

Contextual targeting was first established in 2003 (when Google introduced AdSense) as one of the original forms of targeted marketing. In this post-GDPR world, contextual advertising is seeing a resurgence as a proven advertising tactic that creates ad experiences that are relevant to the content consumers are actively engaged with because of its ability to combine text and visual analysis. Contextual targeting doesn’t rely on audience data and is therefore not as directly affected by GDPR.

For marketers and their brand and agency partners who are nervous about programmatic’s ability to place ads in safe and suitable environments, advances in computer vision now make it possible to accurately determine the visual content of a publisher’s page. No longer based on keyword searches and the inherent risks that come with poor ad placement, contextual targeting is considered by many to be the safest way for a brand to reach and engage consumers, offering hyper-targeted customer messages and offers that are sent at exactly the right stage of the buying cycle.

Marketers can leverage computer vision and semantics analysis to develop a comprehensive understanding of a user’s interest, affinity, or intent, and contextual advertising is cost-effective and generates revenue. Equally important, it doesn’t usually require the same technology as behavioral targeting.

To underscore this point, a recent eMarketer report on digital display trends in 2018 cited GDPR, along with a continued shift back toward direct buys, as primary reasons for contextual advertising’s expansion. In fact, another study conducted by Trusted Media Brands in January of last year found that 40 percent of respondents planned to increase their spending on contextual targeting over the following 12 months, with 56 percent maintaining levels of investment.

Why Contextual is the Only Ad Targeting Left

Difficult change often results in unexpected opportunity whether we see it immediately or need time to let the dust settle first before we can gain a clearer understanding of where and how we need to adapt to new circumstance.

As contextual targeting gradually moves closer to the forefront of the advertising ecosystem, we can likely expect to see a great deal of innovation and creativity in the coming months and years as GDPR compliance becomes embedded in the digital fabric of how we do business as marketers and solution providers.

One of the most exciting challenges that ad tech companies are solving right now is how to offer a positive ad experience while remaining GDPR compliant. And as we figure this out in these highly regulated times, various forms of Artificial Intelligence and computer vision are already being applied to the tactic of contextual targeting, and the results have been transformative for both the brand and the consumer.

As an example, GumGum has a type of contextual targeting known as augmented advertising—content that augments a creative, as opposed to advertising that augments the content. A few years back, we ran a promotional campaign for the TV show The Witches of East End, which is about a mother and her daughter who don’t realize they’re the family’s next generation of witches. In designing an ad for the show, we thought: How can we capitalize on the show’s theme? We decided to focus on the surprise element of witchdom: Who, among us, are also witches?

Using augmented advertising, we searched the web for images of people, and for a brief second, we turned them into witches by overlaying creepy green glowing eyes and fading out the background. A nanosecond later, we overlaid an ad for the show along the bottom of the image. This augmentation happens in the span of a few seconds and the user can easily click to close the ad. In other words, it’s a brief, unintrusive, but almost magical advertising execution.

As A.I. and other emerging technologies continue to evolve the effectiveness of contextual advertising, we are also see trends in semantic A.I., which goes well beyond keywords by examining each and every word in a sentence to assess the gist of an article. Among other things, this further prevents airline brand messages from appearing near stories about plane crashes. Combined with computer vision, which uses neural networks to screen millions of images to identify appropriate or inappropriate page content prior to placing an ad, semantic A.I. provides a lock-solid solution to brand safety concerns.

A GDPR Future

As GDPR stabilizes and we get a better understanding of how the various regulatory authorities will act upon any perceived violations, one of the biggest challenges will be education. To minimize lawsuits, the inadvertent, negative impact to a company’s reputation and credibility, effort needs to be made to educate EU residents on the differences between contextual advertising and behaviorally targeted advertising. Behaviorally targeted ads require consent, and the IAB Consent & Transparency Framework, Google’s Framework and many commercial consent management platforms have prepared to comply with GDPR accordingly.

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