Exploring the Path of Cookieless Retargeting: The Significance of Google's PAAPI in Ad Tech's Upcoming Era
As a consulting expert in advertising technology, Ivan Guzenko offers expert guidance to the executive team, including the CEO, at SmartyAds Inc.
Regarding the controversy surrounding Google's decision to maintain third-party cookies, this controversial move didn't spark any controversy. The issue of phasing out cookies was always a delicate balance, as Google aimed to present a substitute that could still support cross-site advertising targeting while ensuring user privacy.
Google's initial attempt to resolve this predicament (FLEDGE) failed to create enthusiasm within the advertising technology sector. Now, rebranded as the Protected Audience API (PAAPI), this technology may have the potential to succeed.
Exploring PAAPI: Local Bidding and a New Route for Targeting
Already accounting for 10% of Chrome traffic, PAAPI is a component of Google's overall Privacy Sandbox initiative. In combination with Topics API, Protected Audience allows advertisers to continue displaying relevant ads to users based on interests, without disclosing personal data or browsing history. Essentially, Topics API tracks broad interest categories, while Protected Audience handles the user identification and keeps track of their browsing activity within the browser.
To demonstrate the new approach—consider a user who purchases sportswear and adds it to their shopping cart, and an ad technology partner (like a demand-side platform) creates a "sportswear" interest group (associated with this website), then requests the user's browser to join the interest group. At a later time, when that same user visits an entertainment website that sells ad space, the supply-side platform connected to this site triggers an ad request to the same DSP, extending an invitation to participate in the auction.
However, the twist—instead of data being exchanged through the internet, the bidding will happen directly on the user's device. Each ad option will be rated and evaluated locally, with the browser choosing the winning ad and displaying it, ensuring that user privacy is preserved.
PAAPI and Its Capabilities in Retargeting
The debate over the use of cookies has taught the industry an important lesson—placing all one's eggs in the basket of a single tracking method is not sustainable in the long term. Consequently, PAAPI may serve as a modern solution to cookie-based targeting, enabling advertisers to create ads based on user interests rather than relying solely on page content.
Where might PAAPI be used?
• Ensuring Data Protection and Privacy: This approach shifts the focus towards protecting user data, as it excludes the sharing of data with third-party services.
• Improving Targeting Accuracy: PAAPI, which relies on interest groups and on-device auctions, enables advertisers to connect with their target audience while increasing engagement rates and enhancing ROI.
• Compliance with GDPR and CCPA: PAAPI aligns with the requirements of both GDPR and CCPA. Additionally, some believe that this mechanism may eliminate the need for data processing consent.
Preliminary testing indicates that PAAPI's effectiveness is promising. In partnership with Google, the U.K.'s CMA conducted trials to examine PAAPI's performance in a cookie-less environment. Surprisingly, traffic decreased without the precision of cookies, resulting in an 88% drop in click-through rates (CTR) and a 90% decrease in conversions. However, advertisers who used PAAPI for retargeting experienced only a 47.4% drop in clicks and a 50.2% decrease in conversions.
Can PAAPI’s Retargeting Capabilities Compare to Cookies?
PAAPI-powered retargeting appears somewhat risky, with only a 50% probability of success, akin to setting sail on a boat with such odds. However, it's crucial to note that the fault lies with the slow adoption rate within the advertising technology ecosystem, specifically among supply-side platforms where Privacy Sandbox is not yet widely utilized.
The performance of PAAPI is lower due to fewer ad impressions and limited industry-wide adoption. Yet, when adjusted for ad spend and impression counts, PAAPI actually performs quite well—it is 86.4% as effective as cookies in terms of click rates and 81.8% as effective in terms of click-through conversions per dollar spent. While not perfect, this shows that PAAPI has potential even as it continues to gain popularity.
In the meantime, publishers have turned to alternatives such as ID bridging to bridge the gap between cookieless and cookie-based ads. However, tests conducted by BU's Garrett Johnson and colleagues raise concerns about the sustainability of cookieless traffic. As first-party cookies have a short lifespan, this data fails to provide a sufficient basis for relevance over time.
While PAAPI boasts a promising foundation, Privacy Sandbox is far from reaching its full potential. Its reach is limited, and the costs of widespread implementation are prohibitive for many businesses. PAAPI also grapples with latency issues, which negatively impact the user experience, particularly on mobile devices.
One potential solution to tackle these obstacles is by allowing more publishers and ad exchanges to participate in client-side auctions through Prebid. This approach could level the playing field, accelerate transactions, and improve performance for all parties involved.
It's clear that wider acceptance is still a barrier for PAAPI, which can be addressed by delivering focused education that emphasizes its compatibility with regulatory norms. Google, in collaboration with the IAB, could arrange interactive sessions for publishers and Supply Side Platforms (SSPs), demonstrating PAAPI's advantages using real-life scenarios to tackle potential adoption concerns.
Organizations may also consider in-house training, participating in Privacy Sandbox-related industry events, and utilizing Google's integrating resources for smoother implementation. Advertisers should incorporate PAAPI into broader ad projects, assessing its efficiency separately and alongside other cookieless tactics like contextual targeting and first-party data, to determine the optimal application strategies.
Forward Thinking
The traditional approach to cookie-based ad targeting relied on third-party cookies, allowing advertisers to trace users' browsing activities across various websites, much like a breadcrumb trail. However, as privacy issues escalated, this strategy turned into a double-edged sword—highly effective for ad targeting but decidedly unfriendly to user privacy.
Are we in search of an alternative yet? Yes, and the Protected Audience API shows potential. Despite its imperfections, addressing its weaknesses, improving infrastructure, and resolving latency issues will be essential for creating strong, privacy-sensitive targeting and retargeting solutions.
The Website Technology Council is an exclusive, invitation-only platform for distinguished CIOs, CTOs, and technology leaders. Am I eligible?
Ivan Guzenko, the consulting expert in advertising technology, could provide valuable insights to the Website Technology Council on how to implement and leverage the Protected Audience API (PAAPI) for enhanced targeting and privacy protection.
Considering the Privacy Sandbox initiative's importance in the evolving advertising landscape, Ivan Guzenko's expertise could significantly benefit the council in navigating the challenges and opportunities presented by PAAPI.
