Display advertising to see boom on internet as cookie-based ads decline

Studies carried out in the US this month show that while spending on digital display ads will grow faster than any other format, the attraction of cookie-based advertising is dwindling, mainly because of its high cost and the fact that some popular browsers shun them.
According to an eMarketer report, investments in display ads will hit $21.18 billion to claim 44 per cent of all digital advertising - the second-largest share – this year; and in 2015 it will surpass 'search' to claim the largest portion of the digital ad spending pie as companies seek to further prove display as a compelling storytelling medium for brands.

The report, The State of Digital Display 2014: An Industry Readying Itself for Brand Advertisers, released last week, explores how four main digital display advertising trends will both manifest and intersect in 2014.

Marketers will look beyond behavioural web data to better understand their customers and reach those customers across devices. Location-based and TV data have existed before, but this year, marketers will make a concerted effort to leverage this information for greater insight into consumer behaviours and apply that data to improve ad experiences across devices.

The focus will continue to shift from standard display ad units to more dynamic, engaging ad units. Banners won't cut it anymore, and brands will look to native advertising and richer content ads to draw in consumers.

Another study released at the IAB Annual Leadership meeting by the Digital Advertising Alliance a week earlier says that with browsers like Firefox ending support for third-party cookies, cookie-based ads are losing attraction for advertisers. Advertisers will pay up to three times more for cookie-based ads than other online formats, and the premium will rise to seven times if the cookie is 90 days old.

It is not surprising that brands are willing to pay more for interest-based ads; and advertising technology companies are already exploring alternatives to cookies as a way to deliver highly-targeted display and mobile ads to consumers.

The DAA's self-regulatory principles require members to allow users to opt out of tracking, but the current mechanism for doing so relies on cookies that at some point soon won't work in Firefox, one of the most popular browsers.

Apple's less-used Safari browser has long blocked the same variety of cookies, known as third-party, which are installed by companies that don't have a direct relationship with consumers.

''There hasn't been a lot out there about the benefits of interest-based advertising and what it has delivered to the internet,'' said Lou Mastria, managing director of the DAA, which plans to share the results of the study with policymakers in Washington. ''This shows interest-based advertising is the workhorse for subsidizing content on the internet.''

The new research comes at a time when advertisers are waging a battle with Washington over cookie-based targeting, and so far the industry has been able to hold off regulators and fight new legislation that would limit how brands deliver ads to audiences online.

Programmatic direct will emerge as a primary vehicle to pair those richer ad units with consumer data. Brands will get smarter about using programmatic direct not just to automate the procurement of premium ads, but to bring that inventory to life among a more captive audience.

The viewable impression standard will finally become just that - a standard. With the US Media Rating Council expected to lift the advisory on viewable impressions in March, many expect the viewable CPM - a metric finally more in line with broadcast measures - to emerge as a new display pricing model.

''The kind of content available on the Internet is based on the money that will fund it, and that's the sale of advertising, which is everyone's business model these days,'' said Prof Howard Beals, one of the authors of the study.

One thing that's certain is that the online publishing industry could be severely impacted in the near term by decisions in Washington. Large and small publishers depend on the revenue generated from premium interest-based ads, and narrowing this revenue stream will wreak havoc among the smaller sites where interest-based ads make up to 60 per cent of their inventory.

Alternatives to cookies are currently being explored by several advertising companies, with solutions ranging from matching IP addresses to leveraging data from universal logins to the more controversial digital fingerprinting techniques.

Each of these solutions aims to help marketers identify consumers across devices. Until a new standard is embraced by the industry and blessed by consumer privacy advocates, the debate will rage on.