IAB Finds Signal Loss Driving Higher Ad Cost, Shift To Contextual

The good news is advertisers are spending more on media due to shifts in privacy regulation and the lost of consumer data signals. The bad news is their costs of buying media are increasing because of it.

That is one of the key findings of a report being released this morning by the Interactive Advertising Bureau (IAB), which found that 87% of "ad buyers" -- both advertisers and agency media execs -- say their advertising costs are rising due to privacy legislation and consumer data-signal losses.

The findings, which come from a survey conducted among 500 advertisers, agencies and publishers conducted between November 2023 and February 2024, are contained in the IAB's just-released "State of Data 2024" report.

Overall, the report concludes that the industry has generally shifted to a "privacy-by-design" model, individual organizations on the supply- and demand sides are at various points of adapting to it, but they are still grappling with compliance, organizational, legal, and operational costs associated with the transition.



The report is detailed and granular, and covers a wide swath of strategic and tactical issues, including shifts in media spending related to platforms -- especially Google's deprecation of cookies and Apple's iOS identity solutions -- but there seems to be an overall shift toward either relying more on sources of opt-in "first-party" data collected by advertisers and/or publishers or embracing benign contextual-targeting data signals as an alternative to personal identity-based ones.

Interestingly, agencies are outpacing their clients in the shift to contextual targeting by a significant margin (see chart above), and both agencies and publishers are outpacing advertisers in collecting the kind of data on content consumption that could be a proxy for better contextual targeting (see chart below).

"We’ve had to rapidly think differently about how we can optimize our media and really deliver ROI when our signals have suddenly become so deeply obfuscated," one anonymous agency executive quoted in the report told the researchers, adding: "We’ve lost almost 70% to 80%. It’s been a scramble to recalibrate and reestablish what good looks like.” 

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