Adtech’s Foundations Are Cracking

Between talks of a cookie-less future and the implications of international data privacy regulations, the faults in the adtech ecosystem are becoming increasingly apparent.

Written by Somer Simpson
Published on Dec. 09, 2020
Adtech’s Foundations Are Cracking
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Adtech is facing its reckoning. As it should. After years of unchecked growth and an overall lack of accountability, the industry is being challenged with the repercussions of its decisions thus far. Between discussions of a cookie-less future and the implications of international data privacy regulations, the cracks in the adtech ecosystem are becoming increasingly apparent.

I have spent my career in advertising and publishing, starting when I built my local newspaper’s website in the spring of 1994 and placed its first banner ad. Today, I serve as the vice president of product management at a major adtech company, where I have led our team to design, build and iterate on a new era of privacy-first audience intelligence and compliance tools. I’ve witnessed the exponential expansion of the industry firsthand, with the complexity of adtech opening the door to limitless revenue opportunities and subsequent bad behavior as companies jockey to win — whatever “winning” means.

As concerns regarding data privacy, cookies and the overall economic conditions surrounding adtech have continued to build, one thing has become increasingly clear: Adtech has gotten too big for its own good. There is more bad behavior than can be comprehended or tracked, and in order to find the best path forward, we as a collective group need to take a hard look in the mirror and be frank about how we got here in the first place.


The Beginnings of Adtech

To diagnose the issues the adtech industry faces, it’s important to clearly understand its origins. Advertising on the web started out as a simple barter: Websites had banner spots for sale, and advertisers would pay to place an ad on the spot.

This basic transactional model continued for some time before ad networks rose as the intermediary between publishers and advertisers. They would aggregate ad inventory across the web and sell it. Because of the opportunity, more and more ad networks were created, which made it difficult for both the buy and sell side to understand who was placing ads where. This system made it difficult for publishers to protect their brands and keep the garbage out. And it made it difficult for marketers to know where their ads were being shown and protect their brands. Even with a myriad of ad networks complicating things, everything remained relatively straightforward until the onset of programmatic advertising in the early 2000s. And that’s saying something.


The Arrival of Programmatic

The introduction of programmatic was a pivotal moment in the history of adtech. It turned the banner ad-buying process into an automated auction, introducing mass competition for limited inventory in real time. In a lot of ways, programmatic did for ad-buying what Craigslist and eBay did for newspaper classifieds.

There were plenty of upsides to programmatic, including the ability to buy and sell inventory much more efficiently and make real-time measurements. However, a less productive side effect of automation was the industry losing grasp of which decisions were being made and why. Prior to programmatic, the process of ad-buying had been in the hands of website owners, making it fully transparent. As these processes became automated, people lost touch with the rationale behind ad placements, subsequently leaving the door wide open for competition between software builders in order to win the most bids and fight for credit where credit isn’t due.

Even so, programmatic was here to stay. The technology began to outpace the industry’s ability to measure success. Ad spots were flying off the shelves across virtually every website consumers were on, and with so many vendors powering these online auctions, buying the inventory and serving the ads, a new challenge arose: attributing audience conversions.


Layering Tech on Top of Tech

When so many players are involved in the buying and serving of the same brand’s ad to the same consumer, who gets the credit when someone makes a purchase?

To address the challenges of attribution, advertising agencies came up with a web analytics model called “last-touch attribution.” The goal was to give credit for a sale or conversion to the last touchpoint with which a consumer was exposed to a campaign.

Created with the goal of simplifying attribution, the model actually introduced a new arena of competition in which vendors were not only vying for impressions, but credit for the conversions themselves. Instead of a “right place, right time” mentality, advertisers began chasing to deliver as many impressions as possible, with the hopes of being there slightly ahead of when a consumer eventually converted. This level of competition gave advertisers biased insights about consumers and created a conflation of correlation with causation, which led to misguided optimizations, wasted ad budgets and poor ad experiences for consumers.

In order to solve the various issues created by last-touch attribution, technology Band-Aids, like first interaction, linear and last-click attribution, were developed — which further muddied the adtech supply chain and made the system increasingly convoluted. Not only that, but these Band-Aids added more expenses to the mix. Today, one-third of adtech supply chain costs are unattributed. This speaks volumes to the ways in which a massive, fragmented industry has been able to hide behind the complexity and convolution of the system itself.

But Band-Aids simply aren’t a solution anymore. More than ever, we need to remove the complexity, provide more transparency and rebuild things from the ground up, while putting consumer privacy at the forefront.


An Opportunity for Rebirth

Adtech is too big for its own good. There are thousands of companies and layers to the industry that are all stuck together with nothing more than duct tape. It’s led to untraceable bad behavior and a lack of guiding principles for how the industry runs.

In many ways, the uncertainty of COVID-19 will put into perspective the need for consolidation. At the end of the day, we don’t need more Band-Aids to fix the problem. We need laws that address the ethical grounds upon which adtech is allowed to operate, not laws that create loopholes for the unethical to continue to exploit. We as an industry need to fix the technology to account for all the ways in which gaming the system may happen.

In practice, this would require pulling together a task force of like-minded businesses that can solve specific fundamental issues for the industry — like attribution and real-time bidding security to prevent impression laundering — and to do so in a way that upholds transparency and consumer privacy. Small, mission-driven task forces, which represent the voices of the industry and can speak intelligently to specific problems, are important because the bigger these task forces get and the less aligned the voices, the more dragged out the solution process becomes. Agility and ethical focus are key to efficiently understanding and solving the various problems in adtech.

If we’re able to tackle the root problems of adtech today one by one, we will have a fighting chance. Otherwise, today’s browsers will address the bad behavior by controlling exactly how adtech can and cannot operate. Those browsers also have a horse in this race and should not be making decisions about what people can access on the open internet any more than our internet service providers should be able to prioritize traffic at the expense of consumer choice and healthy competition. It’s our job to ensure that we can facilitate an ethical and sustainable future for adtech.

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