ePrivacy regulation: many losers and one winner

Why hardly anyone would benefit from the new legislation, and what companies should do now.

ePrivacy regulation: many losers and one winner

Tracking cookies are unpopular: among users who use pop-up blockers to filter out advertisements, among browser manufacturers and certainly among European politicians who, in the interests of improved data protection, want to give users the choice of whether to allow such an identifying feature – in the worst case, individually for each website. In the coming year, the ePrivacy Regulation could result in important changes in the online marketing game rules.

At this point, the financial damage the new ePrivacy Regulation would cause is a matter of speculation. The German Digital Industry Association (BVDW) expects a loss of €500 million, while the Online Marketing Circle (OVK) estimates a revenue risk of more than 30 percent of the digital advertising market. “If the EU Commission actually implements the version of ePrivacy Regulation currently being discussed, it will have dramatic consequences for the global competitiveness of European companies”, warns BVDW Vice President, Thomas Duhr (IP Deutschland). In addition to this, the diversity of content in digital offerings would be “at serious risk”.


Publishers would lose sovereignty over premium advertising

To truly understand who stands to suffer in which way, however, we have to look beyond the numbers and turn our attention to more fundamental considerations. First of all, there are online publishers, print media companies and portal operators whose business model is based on the delivery of target group-specific personalized advertising. They would no longer be able to monetize their advertising to the usual extent by targeting and could only guess the possible reach based on incomplete data. The owner of a large agency group calculates that it is realistic to expect a 40 to 50 percent drop in portal sales due to lower efficiency and a lower proportion of premium advertising forms. Business with premium forms of advertising would no longer be carried out by the local publishers themselves, because advertisers and their media agencies would already be paying the big international players more and because they themselves would have to make greater use of their services.

The large networks and closed web platforms would be the actual profiteers, namely Google, Facebook and, in the e-commerce sector, Amazon. They have the privilege that users have signed in and agreed to the use and assessment of tracking cookies. This is also the reason some companies that are dependent on online advertising in Germany are seeking their salvation in login alliances like netID. After all, server-based persistent logins for storing user identities and consents would be an alternative to pseudonymous cookies.


Creative campaigns at risk

This all requires marketers and companies to rethink their strategies as well, because they cannot be indifferent to where they spend their money and through whom they place advertising on the internet. Thomas Duhr has called for diversity in German online media, which enables publishers and online services to finance editorial content in the first place. What’s more, it is precisely the local agencies and publishers who develop exciting digital campaigns and creative solutions. Such individual agreements, as made possible by local publishers, are rather unlikely with large players, for whom Germany is only one market among many.

Branded companies in particular are also keen to ensure that their brand messages are displayed in high-quality editorial environments as display and mobile advertising. However, it is precisely these display campaigns, which take profile data into account, that can no longer be economically and sensibly placed in such a system. The consequence would be that more targeted social media advertising would have to be used, as social networks have more information than anyone else on the opinions, preferences and sensitivities of their users.

And, last but not least, the experience on the Internet would also deteriorate for viewers. They would not see less advertising, but just indiscriminate ads that don’t fit their needs. As a result of the drop in value for all involved, viewers would actually see more advertising and less high-quality content, because publishers who are already having difficulties monetizing their digital business today would have less room for good content. All in all, no one would benefit from this situation (with the exception of the large American networks).


Conclusion: long-term strategy without cookies

In the long run, however, everyone involved must be prepared for such a change and browser manufacturers will have to increasingly resort to suppressing cookies. They can do this by turning their backs on cookie-based approaches or, in the case of publishers, by continuing to convert their business to paywalls – a strategy that works for top target groups or exclusive content, but not for large media brands with a focus on reach. In the future, companies and their agencies will also have a harder time or have to rely more heavily on the US players mentioned here. An alternative would be to display targeted advertising based on the topic of a website. From today’s point of view, however, this can only be an emergency solution, because this type of placement is less differentiated and risks higher advertising wastage.