In this opinion piece, Viztrade founder and managing director Simon Larcey argues that in the wake of increasingly strict regulations and concerns around privacy, real-time bidding (or RTB) is on its last legs…

The digital ecosystem and programmatic advertising are set for seismic upheaval.  As the regulatory environment becomes increasingly strict and concerns around digital privacy become more acute, one of the most widely flouted and intrusive methods of advertising – real-time bidding (or RTB) – is headed for extinction.

A new method of ad delivery must be created, and despite the ripples (or in some cases tidal waves) this will cause in the digital advertising space, these developments are good news for consumers, and represent an opportunity for advertisers and publishers, provided they are willing to evolve with the times.

There is no doubt that the public and the policymakers are finally catching up with technology.  Third party cookies are already on the chopping block, and there is no doubt in my mind that real-time bidding is next in line to face the Grim Reaper.

RTB, as we know, is on life support and will fade away over the next few years. Of course, no one will change the way they do anything until the eleventh hour but the current delivery mechanism of bidding on an impression every time a user lands on a page will become extinct in the near future. What makes me so confident of this prediction?  Here are a few signs of things to come:

1. The crumble of the cookie means the death of RTB: I predicted the death of third party cookies back in 2017 when Apple first started blocking them, and the prediction has come true. Third-party cookies – those nasty little bits of code that enable advertisers to track you from site to site, create user profiles and store more personal data than the public is comfortable with – are the digital villain of the day.  Two of the biggest web browsers in the world, Safari and Firefox, have given users the ability to block or significantly reduce third-party cookies, limiting the effectiveness of existing ad-targeting methodologies.
2. The mainstreaming of self-serve advertising: As more self-serve advertising platforms become mainstream, the chase to game the system by agencies will become insignificant. There will be more advertising dollars from brands and businesses who can access inventory directly, without having to get involved in the complex and opaque world of RTB.
3. The rise and rise of regulation: The General Data Privacy Regulation (GDPR) has torn its way through the European digital advertising market like a mad bull on steroids and the first privacy regulation in the USA, the Californian Consumer Privacy Act (CCPA) will be rolled out January 1, 2020. There is no doubt in my mind that similar privacy protections are just around the corner in Australia. The regulation of online surveillance and increased consumer protection in the digital space will make RTB more difficult to implement.  In fact, a recent report in the UK published by the Information Commissioner’s Office suggests RTB does not meet GDPR regulations and borders on illegal.

RTB is on shaky ground.  But the show must go on, and the digital advertising industry must find alternative, less intrusive ways to monetise their audiences.

The goal hasn’t changed.  In fact, the goal was the same even before the advent of programmatic and cookies and RTB and even the internet: Generate valuable audiences to package up and sell to advertisers at scale.  This has been the goal since the very beginnings of advertising.  Since the creation of advertising, brands have been attempting to glean information about audiences in order to better understand them, serve them messages and sell to them.  But the clandestine, subversive and (until more recently) unknown nature of digital surveillance has taken this sentiment too far, and now the digital boffins need to transform the game and create a transparent, opt-in playing field.

So, with this in mind, what is going to replace RTB and the cookie generation? How are brands and businesses going to effectively advertise within the privacy regulations and without pissing anyone off.  Well, the major publishers – or at least those with even the slightest inkling of a head on their shoulders – are tackling this problem with gusto, and there are more than a few proposed solutions.

My money is on contextual targeting and the increased use of first-party data.  With the demise of RTB and third-party cookies, it will be more important than ever for advertisers to develop a contextual strategy.  Of course, contextual targeting is nothing new.  In fact, Google’s main advertising platform Ad Words uses contextual targeting. You type in a subject, and you are provided with relevant results, surrounded by contextually relevant ads.  Contextual advertising has always been an effective way to advertise.  The logic is simple: a car ad on a car website is going to generate better results than a car ad on a sports website.

More importantly, contextual advertising meets privacy regulations, is not blocked by the main browsers and is simple to implement.  With the world’s biggest publishers like News Corp strengthening their contextual first-party data plays, contextual advertising looks like becoming the strongest contender across programmatic advertising, and with the evolution of machine learning and AI, the opportunities around contextual targeting are set to explode.

If other publishers and technology players want to follow suit and continue to target on a one-to-one basis, new permission-based channels must be introduced. The introduction of subscription-based VIP clubs across publisher sites will provide advertisers with a transparent and targeted environment to reach consumers on a one-to-one basis.  In these environments, consumers subscribe to the club and provide personal information and in return get access to exclusive content, events, competitions and giveaways.  These are mini networks of consumers within premium media environments.  The likes of Vogue VIP are already headed in this direction.  As part of the network, opt-in audiences can be reached by Vogue VIP partners in a non-invasive but personal fashion.  These initiatives are paving the way for the future of programmatic.

Anything that tracks a consumer’s behaviour across digital media without their knowledge or permission is a non-starter and is no longer acceptable.  Contextual targeting provides an exciting alternative to third party cookies and RTB, and the ability for publishers to build subscription-based clubs and offer great value in return will provide a range of opportunities for the next generation of digital advertisers.