Video Vault: Will Privacy Regulations Devalue Location-Based Ads?

This is the latest in LSA’s Video Vault series. Running semi-weekly, it examines selected conference talks and video clips, including embedded video and key takeaways. Speakers’ opinions are their own. Check out the entire series here.

The advertising world is in flux as uncertainty looms around privacy measures. That includes both state-regulated privacy restrictions (GDPR & CCPA) as well as self-regulated privacy restrictions at the OS level (iOS 13). The latter brings restrictions that are particularly impactful on location-based marketing.

This was the biggest theme that organically emerged during Localogy’s Place Conference in Austin last month, and threaded through many sessions. It was particularly pronounced during a session with C-level execs from location intelligence firms like PlaceIQ, NinthDecimal and GroundTruth.

The quick takeaway is that looming restrictions will actually have a positive effect on “good actors” and stronger players (represented by the panel). That’s because it will raise barriers to entry, without which we’ve seen location intelligence players come out of the woodwork over the past five years.

But it’s not all good news. Some industry-lifecycle milestones are being held back by the uncertainty that’s inherent in looming restrictions. For example, it mitigates investment which impacts exit potential. That in turn means less incentive for location intelligence players and thus less drive and sector innovation.

But beyond those high-level takeaways (see full coverage here) and potential impact, there are a few other possibilities brought by these restrictions. These were raised at a recent AdAge event (video below) with  Conde Nast Chief Business Officer Craig Kostelic, and the Wall Street Journal CRO Josh Stinchcomb.

Adding to the list of possible detriments of privacy measures, they believe ad inventory de-valuation could follow. In other words, if publishers have one hand tied behind their backs to target and report granular ad tactics (including location segmentation), advertisers may be less inclined to pay premiums.

“Obviously, the more that you understand who somebody is and what actions they’re taking and an ability to retarget them,” Kostelic said during the panel, “the higher the price point that they’re willing to pay from a supply standpoint. And without that information the less they’re willing to pay.”

It should be stated here that this comes from the position of publishers — the sell side of the advertising ecosystem. That differs somewhat from the above players that are ad tech enablers that serve the buy and sell sides. But the position is still valid in terms of how privacy restrictions could impact their wallets.

“We are seeing significantly lower eCPMs [effective cost per thousand ads],” Stinchcomb says. “So, I think that’s a sort of early look at sort of diminished value of inventory when you start to take out certain targeting capabilities.”

This goes back to the point above about the strongest surviving. Restrictions will essentially create an environment where publishers and ad tech players will have to adapt to the environment and get creative. Just like we discussed on the Localogy panel, this could compel a return to contextual targeting.

“You’re seeing a lot of publishers, I think smartly sort of beef up their contextual targeting capabilities. You know, we certainly are doing that,” Stinchcomb says. “I think contextual targeting, which I guess is kind of where the web started, is going to come somewhat back into vogue and be part of the mix of solutions.”

See the full panel discussion below.

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