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Turning off retargeting could hurt publishers and empower Google, Facebook

People being stalked around the internet with ads for the same pair of sneakers is one of the unfortunate side effects of digital advertising. But online ad campaigns still rely on retargeting because, well, it works.

Users can turn off their cookies to reduce retargeting, but it’s hard to eliminate all ad tracking since advertisers also identify users by their login data. It’s also difficult for users to prevent data aggregators from accumulating information on them whenever they log into their email or social media accounts.

Many want a simple button to turn off retargeting for a product they already bought or aren’t interested in. If users could opt out of retargeting with a single click — rather than having to manually remove tracking capabilities across all their devices, browsers and email accounts — mass adoption of this feature would ripple through the industry. It could lead to the shuttering of ad tech companies, more power to Facebook and Google, and a dip in digital ad spending.

“It would almost be like a daily reset button because we wouldn’t have the data to follow people the way we want to,” says Julie Rezek, North American president at ad agency Hacker Agency.

The sales impact
Turning off retargeting with one click would give first-party data another advantage over third-party data, says Dana Hayes, president of social sharing platform ShareThis. First-party data is information like purchase histories that a publisher or advertiser collects directly from users. Third-party data is information like audience demographics that advertisers purchase through third parties to help them target ad buys across large numbers of people. First-party data providers like Google and Facebook benefit from retargeting opt outs because preventing advertisers from tracking users with third-party data they obtain from another company puts more power in the hands of first-party data providers since they obtain data directly from their users.

Without retargeting, third-party data simply won’t scale. Ad buyers trying to reach specific audiences will turn to customer-relationship management and sales data from their brand clients to predict where they are likely to convert users. But most brands don’t share personally-identifiable information or gather behavioral data, so without being able to track users’ browsing behavior, brands will have a harder time finding new customers, which will hurt sales, Rezek says.

Cutting out retargeting will also prevent advertisers from reaching users across devices, Rezek says. And it will make attribution more difficult since a lack of user tracking makes it harder for advertisers to determine which variables actually drive sales.

Costs to consumers could rise
Preethy Vaidyanathan, svp of product at cross-device tracking firm Tapad, believes that a pullback on retargeting will also hurt publishers because many of them rely on selling audience segments that ad buyers find through retargeters. To make up for the lost publisher revenue, consumers would likely have to start paying for more content.

If users start opting out of being targeted, vendors like Criteo and AdRoll that specialize in retargeting will lose business, says Ari Paparo, CEO at ad tech company Beeswax. Since adding retargeting data to campaigns increases ad rates, a reduction in retargeting will lower the CPMs that advertisers pay. The trade-off is that advertisers will reach smaller audiences in return, which could lead retailers to lose some sales, he says.

Dave Morgan, CEO of TV ad-targeting firm Simulmedia, says that users opting out of retargeting also hurts ad tech companies like ad exchanges, demand-side platforms and data-management platforms.

“Those companies are all about creating data to target particular users across digital properties,” Morgan says. “If you limit the techniques they use to find those audiences, much of what they do will not be relevant anymore.”

If ad tech platforms can no longer segment and target audiences, the trend of ad dollars increasingly shifting toward programmatic will stop since automated buying will lose many of the advantages that it holds over direct sales, Morgan says. In this scenario, marketers will turn to other channels to reach users, like direct marketing through email.

While cutting off ad retargeting would be perilous for many companies in the digital ad supply chain, a restriction on retargeting will benefit people who are concerned about the privacy of their digital data and annoyed by the ads that follow them around the internet. Ad tech execs and ad agency reps claim targeted ads benefit users by making ads more relevant for them. But people are clearly fed up with digital advertising given that about 30 percent of U.S. internet users block ads, and the number is growing, according to eMarketer.

Although users have an incentive to expel ad trackers out of concern for their privacy, most people outside of the ad industry aren’t that sensitive to the issue, Paparo says.

“As with most consumer-facing ad things, only a small minority of users would be aware of this option and would remember to click it,” Paparo says. “And probably many of the people who would choose to already use ad blockers.”

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