The following is a guest post by Debra Fleenor, founder and president of ad-ops company Adapex. Opinions are the authors' own.
Google just unveiled Topics, a new model for post-third-party-cookie ad targeting that replaces the company's previous proposal, Federated Learning of Cohorts (FLoCs). We may remember FLoCs as the last stand of the cookie. The model proposed targeting groups of users based on their interests and behaviors — essentially, behavioral, cookie-based targeting as we know it for groups instead of individuals.
But Topics shows Google taking a markedly different approach to ad targeting. Topics will collect data on users' interests over a rolling three-week period, assigning each user's interests to one of 300 Topics. When advertisers want to reach users, Topics will randomly assign them three possible topics — one high-interest topic for each week of browsing data — that advertisers can use to target consumers.
Topics marks a step in the right direction as Google attempts to navigate how to calibrate ad targeting in a way that respects user privacy. But the drastic shift away from behavioral targeting, announced just days after federal legislators unveiled The Banning Surveillance Advertising Act, also suggests the advertising industry needs to make a better case to the public about the value of data-driven targeting.
Let's explore what Topics suggests about the future of advertising and how the industry should respond to lay the foundation for a sustainable future for advertisers, publishers and the customers they serve.
What Topics signals about advertising's future
Digital advertising's shift away from leveraging granular tracking of user behavior to target ads has been years in the making. Since 2018, Europe, China and U.S. have rolled out legislation to give consumers more control over their data. Apple and Google have been downgrading tracking on mobile and desktop and privacy-centric companies such as Brave and DuckDuckGo have emerged to provide alternatives to services premised on tracking.
But Topics, a response to Google's forthcoming retirement of the third-party cookie, is the clearest signal yet that the days of amassing third-party data on user behavior over long periods of time are coming to an end. Instead, advertisers will need to acquire more first-party data, adopt tools that enable them to predict user behavior based on more limited information and invest more in targeting techniques premised on matching ads to the content of users' digital experiences, as opposed to their behavior and demographics.
Years of privacy moves foreshadowed the arrival of Topics. Google's new ad targeting method is very similar to contextual targeting, which has been around for decades. The difference is that whereas contextual targeting matches an ad to a user's current experience (think about targeting an Adidas ad to someone reading about running), Topics marshals three weeks of data to match ads to user interests beyond the article they're currently reading.
Benefits and dangers of Topics
On the one hand, Topics represents a step forward for privacy-safe advertising. The proposal also shows that Google, which sets the tone for the digital ad world, is helping advertisers prepare for the inevitable diminishment of behavioral targeting. With Topics, Google is enhancing contextual targeting with a touch of behavioral data — a move that may increase its efficacy.
On the other hand, advertisers and publishers should question whether Topics will be effective enough to replace cookie-based targeting. Even more importantly, the shift away from user data collection suggests the advertising industry is succumbing to a counterproductive "us-versus-them" narrative that says collecting data is good for advertisers and bad for consumers, a surrender that should concern every ad industry player — from publishers to advertisers to intermediaries.
How the advertising industry needs to respond
The industry should expect Topics to stick around longer than FLoCs. Advertisers and publishers should also lobby Google for transparency and cooperation as the tech behemoth further develops the technology and tests Topics' effectiveness. It is possible to recognize that Topics, or more limited behavioral tracking, is the future of advertising and a positive change for user empowerment while rigorously questioning its effectiveness as a business model.
But the industry should also see Topics as a sign that advertisers, publishers and ad-tech companies must make a stronger case to the public about the value of data collection. Consumers pay for most content by consenting to see ads. In the absence of user data, advertisers will have to adopt spray-and-pray messaging, a change that will hurt the user experience and will be more expensive for advertisers. Ultimately, advertisers will pass those increased costs onto customers.
Consumers want relevant and free content. Publishers want to monetize their inventory. Advertisers want to reach audiences who are interested in their products and services. Integrating at least some consensually obtained user data into advertising will fuel all those parties' desires. To get there, the advertising industry must push for a more collaborative conversation that clarifies the benefits of data collection for consumers.