Coronavirus Taking Bigger Bite Out Of Third-Party Cookies

If the pressure on third-party cookies wasn’t enough to damage the future of the open platform digital ad space, the coronavirus will pretty much take it over the top.  Things are not looking good for the open web right now.

The walled gardens are safe.  That’s the key story right now.  By walled gardens, I refer to Google, Facebook, Amazon  —and I personally include AT&T and Verizon.  All five of these companies have a wide breadth of first-party data they can stitch together to give you a holistic, accurate view of a digital user.  That view can be used throughout the journey, across devices and channels, to deliver a targeted ad experience.  

These companies will survive and thrive in a landscape where third-party cookies are dying a slow and methodical death.  They will also survive the coronavirus.

Ad spend is getting pulled back.  There are concerns about a recession stemming from the economic uncertainty being displayed by the global stock markets.  



This all comes in an election year, which is typically unstable already.  It’s a triple whammy and it could signal the end of many ad-tech and martech companies.  

As dollars get pulled, they are going to be pulled from partners with a shorter potential lifespan.  This means the open web platforms, which only account for 20%-25% of the ad pie, are going to have a hard time acquiring campaign budgets.  

Search (Google) is stable.  Highly targeted commerce platforms (Amazon) are stable.  The largest social media platform (Facebook)  is relatively stable — although I expect it could still see a decrease in ad revenue growth.  What saves AT&T and Verizon is the aggregation of desktop, mobile and OTT or digital broadcast.  This represents a growing portion of the market, so I think they could weather the storm.

Companies in the sub-$30-million revenue space are going to feel the most heat.  Ten+ years ago, Sequoia issued its infamous “RIP Good Times” presentation, heralding the impact of the last great recession on the venture space.  

In the last couple of weeks, a new presentation from Sequoia has made the rounds and is telling a similar story.  Companies with low cash flow and low cash coffers are going to have a hard time over the next year or so.  

You need to have the strength to withstand a downturn, regardless of the time frame for any potential economic uncertainty.  What makes this one different is that by the time it turns around, the lifeblood for many of the ad and marketing tech companies will no longer be available to them.  The third-party cookie will be obsolete within two years and any downturn could last from six months to two years.  That does not bode well for these companies.

So how does a small martech company that relies on third-party cookie data succeed in the next few years?  Partnerships are going to enable you to either survive or not.  

Consolidation has been the name of the game for the last three years, and the next 12 months will be even more so, albeit from a sense of need rather than want.  

Companies doing between $10 million to $30 million in annual revenue are going to be looking for partners where they can bolster their business.  This means finding ways to leverage first-party data sources or diversifying revenue streams to be less dependent on cookie-related solutions.  In this situation, I see some major strength for AT&T and Verizon, as they could pick up some great deals on companies that give them a competitive edge or simply bring them to parity with the offerings from Google, Facebook and Amazon.  

On the other side of the coin, the leading three walled gardens will have the chance to further strengthen their positions by securing an increased portion of digital media budgets by broadcasting themselves as they safe and sound place for companies to spend their budgets.

The next 12 months are going to represent a culling in the LUMAscape.  I anticipate Terry’s landscape chart will look a lot cleaner in 12 months.  It will make it easier to update after the next year, at the very least.

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