Why Prediction-Based Advertising Is The Future Of Digital

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By Jürgen Galler, Co-founder and CEO, 1plusX

Digital advertising is undergoing huge transformations. Google may have delayed the demise of third-party cookies, but change is still on the horizon and, although disruption is inevitable, it’s also likely to create opportunities, perhaps more so than many anticipate. After all, challenges often lead to innovation.

While no single replacement can fill the gap third-party cookies will eventually leave behind, the industry can leverage a patchwork of targeting approaches to address its needs. From the rise of cohorts to advances in contextual solutions, user-level targeting will shift towards a one-to-many approach – and this is where the real change will take place.

To optimise audience-level targeting, the ecosystem’s future will depend on predictive solutions which can maximise advertising’s impact with minimal data availability.

Pivoting from precision to prediction

Third-party cookies enable advertisers to identify their most desirable target in a vast network of data-sharing pointers, alongside where they were and how to reach them. But in the near future – 2023 to be exact – this ability will disappear and take precision-based targeting with it.

A new data infrastructure will therefore need to be built, leveraging technologies, such as SaaS solutions, that can extract value from data closer to its source. Data processes will adapt to focus on both minimising the risks attached to sharing information and facilitating greater predictive capabilities. Google’s Federated Learning of Cohorts (FLoC) is one targeting method that looks to master the latter. Using Google’s unrivalled quantity of browser activity data, FLoC’s algorithms build anonymous groups based on users’ shared preferences, behaviours and interests. Google’s predictive modelling technology identifies groups with similar traits to its known audiences and enables targeting those with the highest probability of conducting a purchase.

As a result, the power of walled gardens will no doubt grow. This development, however, will fuel a new branch of data management solutions – with capabilities powered by artificial intelligence (AI) – that can make sense of cohort-based targeting and refine predictive capabilities. In turn, these technologies will benefit wider industry players.

The new data czars of digital advertising

Publishers also occupy a powerful position in the new digital ecosystem. Their direct access to audiences makes them gatekeepers for an invaluable amount of first-party data. Using data enrichment tools and predictive analytics, publishers can truly capitalise on their data assets and provide advertisers with in-depth insights that facilitate audience-level targeting. These tools can deliver the quantity and quality of data that advertisers need to achieve their objectives.

Additionally, the industry is witnessing a push towards more sophisticated contextual targeting, as the only approach that doesn’t depend on privacy legislation or user data availability. Not only will this enhance relevance, impact, and suitability for advertisers, but it could also give publishers greater control over their contextual ad revenues.

AI will help future-proof targeting and measurement

One critical element all these approaches have in common is AI. As the ecosystem adapts, this often-overlooked tool will be instrumental in a number of key areas.

Firstly, by enabling user-level data enrichment, AI lets industry players compute predictions that offer a clearer picture of target audiences. With more detailed insights, advertisers can deploy stronger personalisation tactics and deliver on consumer expectations. Secondly, as marketing plans and compiling audiences become more complex, humans will increasingly depend on machines to achieve their targeting goals. The future digital industry can expect AI to play a far greater role in decision-making. Last but not least, AI-driven contextual targeting will utilise advanced analytics to uncover granular user interests. Knowing what content earns the most interaction will take contextual-based approaches further than high-level keywords.

The execution of digital advertising is undergoing a massive change, and the industry shouldn’t be fooled by Google’s delay. There is a continued need for first-party data and AI-powered predictive capabilities, with relationships between industry players beginning to evolve. As progress continues, targeting methods and the technologies that enable them will be major factors in defining the new age of advertising.