Dal Gill, global head of programmatic at Seedtag, says that in an age of stringent data protection regulations, the argument for contextual advertising has never been stronger.

More than a year has passed since the General Data Protection Regulation (GDPR) came into force. The data privacy debate is still open and has been recently intensified due to the new regulation, the California Consumer Privacy Act (CCPA), which will come into effect in 2020. The aim of this piece is to demystify these new regulation implications and explore the best possible alternatives for marketers and brands to navigate this sea of uncertainty.

What do we need to know about GDPR and CCPA?
First things first: let’s start by clarifying each of these acronyms and getting a deeper understanding of their implications and consequences for the advertising sector.

Both GDPR and CCPA legislations try to protect and give the power back to consumers, allowing them to have ownership of their personal data. Personal data is understood as any information relating to an individual which can identify them directly or indirectly. Specific data items could vary from biometric data, household purchase data or family information to geolocation, financial information or even sleep habits.

GDPR came into force in May 2018 in Europe. This new laws purpose was to give individuals more power over how their personal data was collected, shared and stored by companies. In order to be compliant with this new regulation, companies need to make it clear when they are collecting user data and to be transparent in how they are using it without giving it to third parties.

Falling on the heels of the GDPR, the California Consumer Privacy Act may represent the starting point of stricter US consumer privacy regulations. Popularly claimed as the “almost GDPR in the US”, this will be the strongest legislation across the US. Companies who are compliant with GDPR already meet many of the CCPA requirements. So, what do companies need to do to be compliant with the CCPA? This new regulation establishes that if a business collects any type of personal information, consumers should be informed about it in a clear privacy policy that’s available on the company’s website.

Beyond GDPR and CCPA
Following these privacy concerns, it does not come as a surprise that the global usage of ad blockers has increased to more than 200m users over the past five years, according to a study carried out by IPG Media Lab. This increase has its origins in the abusive and inappropriate use of data by companies, irrevocably leading to a higher user sensitiveness: in short, consumers are fed up.

The debate is guaranteed, and to some extent it also concerns other ad tech players as well as web browsers. In fact, the two most important ones have already pronounced themselves on this matter.

On one hand, Google has just started internal conversations to come up with a long-term sustainable solution. The company is trying to find a balance between users’ privacy, while still providing advertisers with enough information to be able to personalize their campaigns. What Google proposes is to regroup users according to certain features, but always guaranteeing their anonymity. For now, this is just a project and it is estimated that it will take two to three years for these changes to be implemented.

On the other hand, the Safari browser, whose income does not rely on advertising, has already implemented a new and stricter tracking prevention policy, which even prevents covert and cross-site tracking.

Implications for brands and some alternatives
The hype generated even before GDPR came into force raised awareness among consumers and caused them to be more wary of sharing any kind of data, and to be more thoughtful when giving permission, something that they tended to do automatically in the past.

In this new environment, audience-based targeting strategies are at risk. Within this whirlwind of change, media planners and brands are seeking alternatives to reach their targets in an effective way. To give you an idea of this challenge and its magnitude, it is estimated that around 43 per cent of all EU consumer data is now unusable, according to Vibrant Media. As a consequence of the aforementioned regulations, brands have to consider if they have access to enough first-party or consensually-acquired data to replace audience-based targeting strategies.

An option that is gaining popularity is the use of contextual targeting. Placing ads within the right context is an old strategy and is not exclusive to the digital environment. In TV, for example, brands have always tended to buy spots during programmes that were relevant to their products, expecting users would find these messages relevant.

Thankfully, the use of machine learning and AI-powered technologies provide a more accurate understanding of content, which means brands can now target their audience in a brand-safe way, based on sentiment analysis, avoiding sensitive content and ensuring the best possible contextualization.

Contextual comeback
According to a Markets and Markets study, spend on contextual strategies is experiencing an upward trend, and is expected to be worth $297bn (£232bn) by 2023. In fact, in another report released in 2018 by GumGum, 49 per cent of advertisers in the US claimed to be already using contextual targeting.

When leading a strategy based on contextual targeting, what brands are really doing is targeting the users’ interests in real time, which is more likely to pay off in terms of effectiveness. Let’s imagine someone reading an article related to environmental issues and sustainability. It would not come as a surprise for this user to see a Tesla motor advertisement right next to the article. Furthermore, the user could even find that the ad is somehow enhancing the experience and adding extra value.

If we look at its benefits, when comparing different targeting strategies, in a recent IPG Media Lab study, contextual stood out for driving better results: as much as 40 per cent increase in favorability, 63 per cent in purchase intent, and a more than 80 per cent lift in recommendation intent metric.

Final thoughts
It is now clearer than ever that digital ad trading has shifted towards automated buying. This trend continues to grow and buyers are actively pushing for programmatic activations across display, video and native.

If we look at the programmatic spend figures, despite the introduction of GDPR last year, programmatic spend rose by 33 per cent last year to hit €16.7bn. If this is anything to go by, then it is safe to hope that when the California Consumer Privacy act kicks in, programmatic spend will not be affected.

If we take a closer look at the programmatic spend, we would see how most media buyers have also moved the majority of their spend from audience targeting to contextual targeting strategies or direct deals with publishers, as a strategic move to ensure they comply with the new regulations, while still being able to reach the right users in an effective way.

Google Chrome recently put forward its “Privacy Sandbox” proposal, which would impact those implementing re-targeting strategies and the use of third party cookie tracking. This latest release could also help facilitate the greater use of contextual targeting if data pools are being squeezed for brands to target potential customers.

Cookies and device IDs are typically used for programmatic buying, but moving forward, the use of a unified identity solution could also solve this over-reliance problem. This will enable marketers to track a range of behaviours and attributes of the user across the ever-growing number of devices that are being used to consume content.