What the Addressability Spectrum is and its impact on the cross-domain identifier performance of websites.
Why it matters — Addressability is in for a significant change with the deprecation of third-party cookies. Advertisers need to understand their addressability options and build their advertising plans to account for a portfolio of solutions.
Digital advertising is changing rapidly in response to increasing demands for consumer privacy from governments, privacy advocates, companies, and consumers around the world. These changes impact the digital advertising ecosystem and force companies to reconsider the way they understand advertising and the internet.
For more than a decade, digital advertising focused on reaching individual consumers with ads tailored for them based on insights or inferences about their online behavior. As a result of the global shift towards greater privacy and data security, this is being challenged.
When Apple updated iOS devices to iOS14.5, the ad industry received a preview of how addressability will change when third-party cookies are deprecated. According to mobile app analytics company Flurry, the global opt-in rate for IDFA on iOS is 21%. The US opt-in rate is only 15%. That means that only 15% of all US-based iOS users can be tracked by advertisers on their iPhones or iPads, and only on individual apps that earn permission.
This shift is forcing the industry to redefine how digital advertising is understood and delivered.
What is addressability?
“Addressability” is a term often used in digital advertising to describe how much of an audience can be identified for ad targeting and online measurement. Third-party cookies and device identifiers, like IDFA, enable high addressability across websites and mobile apps as companies in the digital advertising value chain are able to recognize individual consumer devices as people use them to browse the internet or use mobile apps.
Specifically, almost all programmatic ad targeting that happens today is based on the ability to track consumer devices across websites and across apps. When third-party cookies are deprecated in all major browsers, information about online consumer behavior will be available on a website by website basis, but will not be easily available across websites.
This change represents a tremendous shift in how advertisers need to think about targeting ads to consumers and measuring the success of their ad campaigns.
Introducing a new way to think about addressability in response to privacy changes
The industry needs a more nuanced definition of addressability in response to every major browser moving to deprecate third-party cookies, and mobile app platforms, like Apple iOS, making mobile advertising identifiers opt-in only.
The Addressability Spectrum (shown below) provides a visual framework for thinking about addressability once the impending changes to web browsers and app platforms take effect.
Collectively, the categories displayed in this diagram represent the future state of addressability. Each ad impression will fall into one of these addressability categories. Working from left to right in the diagram, the definitions below explain what addressability will mean.
This is a segment of consumers who are already working to hide their online behavior. They may be using multiple VPNs, the Tor browser, or taking other actions to prevent their online behavior from being tracked. This segment is very small and advertisers don’t generally target these consumers, but they are included here for completeness.
Cohorts are effectively groups of consumers with similar behaviors. They are often referred to as “audience segments”. Privacy Sandbox proposals like FLoC and FLEDGE propose that cohorts be used to target consumers instead of targeting individuals.
- First-Party Identified
This is a segment of individual consumers who are identified on a website-by-website, or app-by-app, basis. This can be achieved with pseudonymous identifiers by using first-party cookies or local browser storage. It may also be achieved when a consumer chooses to create an account on a website and provides an email address or other unique information.
- Cross-Domain Identified
This is a segment of individual consumers who are identified across different websites, or across different apps. Once third party cookies are deprecated in all major browsers, this may only be achieved with identity solutions like Liveramp RampID or ID5. Consumers who opt-in to IDFA on iOS apps fall into this category.
Examining the internet through the lens of the Addressability Spectrum
These impacts will apply to all channels, including web and mobile apps. Thinking about how the Addressability Spectrum will apply to websites provides a lens into the challenges that advertisers will face once third party cookies are deprecated and mobile device identifiers are opt-in only. Similar analysis can be done for mobile apps as well.
Below, four stereotypical websites are used to illustrate how the new definition of addressability along a spectrum creates challenges for advertisers when compared to current methods of advertising. Note: There are outlier websites that don’t fit this model, but they are few and far between. Most websites will fall neatly into these descriptions.
long-tail-site.com is representative of the vast majority of websites on the internet. These websites typically have low monthly traffic but monetize with programmatic advertising. Generally, these websites are going to be able to identify less than 2% of their consumers with cross-domain identifiers.
Popular-publisher.com is representative of high quality, high traffic websites, or high quality niche websites that have consistent viewership. However, these websites are able to identify less than 2% of their consumers with cross-domain identifiers. Many of these websites have tried to increase the number of cross-domain identifiable visitors, but have been unable to compel their visitors to create accounts or sign up for emails at high rates.
Login-publisher.com is representative of very high quality, very high traffic websites that have consistent viewership. These websites are able to identify between 10-15% of their visitors because they’ve found ways to incentivize visitors to create accounts or sign up for subscriptions. Further, these websites tend to be some of the largest and most popular websites on the internet.
Popular-brand.com is representative of brands on the internet that are driving purchases or consumer signups for goods and services. The most popular brand websites may be able to identify as much as 20% of their visitors because they have products that people love and return for more.
Adding it all up
When viewed through the lens of the Addressability Spectrum, it becomes clear that addressability will change significantly when third-party cookies are deprecated in all major browsers and mobile device identifiers become opt-in only on iOS and Android.
While some websites and apps will be standout performers that can earn cross-domain identifiers from more than 10% of their visitors, the vast majority of websites and apps will not. As more privacy regulations are passed, technical blocks to work-arounds like first party click redirects and device fingerprinting are put in place consumer transparency, control, and consent is increasingly required for the capture and use of consumer information to power digital advertising, those cross-domain identifiers will be less and less valuable because consumers are expected to restrict the capture and use of their data to the websites and businesses they trust.
To address this future state, the digital advertising ecosystem will need to think about addressability differently. The opportunity for advertisers lies in solving for cohorts of consumers as proposed in Google’s FLoC or FLEDGE and leveraging supply partners to use first party audience information.
TripleLift is building for the future of addressability
TripleLift is focused on a portfolio strategy to solve for the future of addressability. Our products will use the best available data from across the addressability spectrum, on every ad impression, to ensure that a campaign will reach the intended audience. The way campaigns are planned and success is measured will need to change to reflect the available data and capabilities, but TripleLift has the experts and experience required to help guide your advertising to successful outcomes.