The history of advertising recently has been one of identity … specifically, knowing identity across sites and apps.
That’s changing: the third-party cookie is dying, Apple’s identifier for advertisers is going opt-in, and Google’s GAID might as well. What does that mean for the future of advertising? And … what does it mean for the ad-supported services we’ve all come to enjoy?
In this episode of TechFirst with John Koetsier, we chat with Sheri Bachstein, Global Head of Watson Advertising and The Weather Company.
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(This transcript has been lightly edited for clarity)
John Koetsier: Identity brought us Facebook and Google. Will privacy bring us more like Netflix and Spotify?
Welcome to TechFirst with John Koetsier. So the history of advertising, recently especially, has been one of identity. Specifically, knowing identity on a granular way across websites and apps. That’s changing. The third-party cookie is dying and Apple’s Identifier for Advertisers is going opt-in. We’ll talk a little bit more about that shortly.
Question though, is what does that mean for the future of advertising? And what does it mean for the ad-supported services that we’ve all come to enjoy? To dive in a little more, we’re speaking with Sheri Bachstein today. She is the Global Head of Watson Advertising and The Weather Company. Welcome, Sheri!
Sheri Bachstein: Hi, John. How are you doing?
John Koetsier: I’m doing well, thank you. Thank you for joining, really appreciate it. I mean, we’ve got to start here, Sheri, because the big news has been that Apple in iOS 14 is taking away the IDFA, it’s getting opt-in on a per-app basis with a pretty scary message and people thought, you know, that’s going to result in very low numbers opting in. But, this morning they just kinda mentioned that, hey, we’ll let that slide for a little bit.
Sheri Bachstein: Yeah. I mean, I think publishers, ad companies, networks, they’re definitely breathing a little sigh of relief today, no doubt about it, you know.
But I think, look, the change that Apple’s making — which I agree with by the way — it’s a big change. And so giving the businesses time to prepare, I think is the right thing to do.
I mean, after all we are their customers. And so I think it’s a good change. Doesn’t mean we shouldn’t be preparing for it, because it’s going to happen, but I think it’s great that they give a little bit more time, you know, to figure out solutions.
John Koetsier: Excellent. Maybe set the stage a little bit for those who may not know what the IDFA is or something on the Android side, the GAID or something like that, how that’s been used, and why that’s being pulled back.
Sheri Bachstein: Yeah, absolutely. So they’re identifiers that help you to identify a device or in some cases, you know, a behavior of a person. So from an advertising perspective, it’s, you know, the more information that an advertiser has on a user, the more they can decide is that the user that I really want to target. Is that the user that is going to be more open to seeing my advertisements?
And so the targeting is extremely important for anybody who underwrites their services through advertising.
John Koetsier: Excellent. Yes. So question then is, we know that’s going away at some point. Apple’s slowing that down, there’s a grace period, but what’s the overall trend around privacy and advertising right now?
Sheri Bachstein: Yeah, so the trend is around transparency and control, right? It’s giving users the ability to take the information that is theirs and figure out what they want to share with a publisher, with an advertiser, and having that control over it. So I think that is a really good thing. I mean, after all, it is their information.
John Koetsier: Yes.
Sheri Bachstein: And so I think there’s just a real big opportunity for tech companies and publishers to increase privacy collectively.
And I think you’re starting to see that with the changes that Apple’s doing. Google is to follow.
And then of course, there’s been all the legislation around it too.
John Koetsier: Exactly. So from a marketer point of view, you could see in the past — and to some extent still today, obviously — with a third-party cookie, where somebody maybe has been in the past, what websites they tend to frequent. Maybe you could determine from that what they’re interested in. You might be able to determine some things around affluence level or something like that.
And you could do similar things with the IDFA on iOS or iPhone. And you can do similar things with the Google Identifier for Advertisers as well, the GAID.
As those start phasing out, and of course Google hasn’t said anything about the Google Ad ID yet, but as those start phasing out, or they become more opt-in, or the transparency that you’re talking about happens, we see more things like GDPR … what kind of targeting options are left?
Sheri Bachstein: So, I really think, frankly, the advertising industry really needs a new backbone. And I really think that backbone is going to be AI.
Because AI is augmenting human process, human thought. So it can be predictive, it can recognize patterns, and it can actually use a massive amount of data to create insights for marketers and for publishers so then they can connect with their audiences. And so I think that that is going to be a real pivot in our industry to use a technology like that, that isn’t dependent on identifiers or cookies.
John Koetsier: Mm-hmm. Can you go into some more detail? How does that work then?
Sheri Bachstein: So, you know, you can create different products that can do different types of targeting using AI, so it could be more predictive in nature.
You can look at the behavior that maybe your user on a publishing platform does, and you can create segments around them, but without collecting any personal information. And so the power of AI is going to be really strong, whether you’re creating creative type of solutions, you’re creating solutions around data.
I mean, there’s more data now than ever and it’s really hard to process a lot of data. AI allows you to do that, process all that unstructured data, to make better sense of that. So having solutions that have that as a backbone, I think are really important.
The other thing is, you know, AI at its core is meant to not have bias, which today, especially with things that are going on in our world, that’s really important. Now the AI has to be of quality. So not all AI is equal, but, you know, as part of IBM, AI is one of our two core competencies, so we are really going to make a really strong pivot in a leadership role here, in helping to create some of those solutions.
John Koetsier: So that sounds really interesting. And of course, you’re not just leading Watson Advertising, you’re also leading The Weather Company, which is a major publisher, right?
So what I’m hearing you say is that the AI is looking at people, their behavior, the context of what they’re doing as well, on a platform. So you’re mostly talking first-party data, is that correct?
Sheri Bachstein: Yeah, definitely first-party data, but let’s look at something like social. And so social influencers, you know, it’s a really beneficial tool for marketers and advertisers, but finding that right influencer can be really challenging. So maybe as a company, you know about a handful of them, right?
But what AI can do is it can look at all those conversations of those influencers and it can make the right match that’s brand safe. And so that’s a way that an AI solution can be used off-property as well, looking at all of that data and helping a brand to pick the right influencer through either tone or sentiment, or the content that they share.
John Koetsier: Interesting. It’s a different approach.
Let’s talk a little bit about ad-supported services. And of course, we know, we have a rich array of services. I’m just talking from a consumer perspective today that we use every day. You might use Gmail, you may not. You might use Google … DuckDuckGo. You might use Facebook or other social networks, other things like that. TikTok, even, which is in the news a lot recently.
All of those are freely available and ad-supported. How are they impacted by these changes in the ad ecosystem and ad technology?
Sheri Bachstein: Yeah. So definitely it will be an impact as far as being able to target those users if they don’t have some alternative solutions. So I think that that’s important. I think there’s a couple things, you know, as a publisher, that can be done. As an ad service, it’s really kind of about the value that you’re creating with the customer. So all of those platforms you name in those social platforms, you know, people freely give their data, right. So being transparent with that data and how it’s being used is really important. But then what’s the value exchange for that user in sharing that data? So I think companies that build that communication and that relationship between their customer will do really well with the changing environment.
John Koetsier: It’s interesting what you’re talking about here, because we’ve gone through a period where, in some sense, a lot of power has shifted to ad tech companies and ad networks, because they’ve been able to draw connections across networks, across websites, apps, platforms, and identify users.
Used to be the case, right, you wanted the Wall Street Journal audience, you could only get that in one place. Today you can get that in Angry Birds, right?
Sheri Bachstein: Right.
John Koetsier: ‘Cause somebody who’s a corporate executive still likes to have some fun at night. Is this going to kind of revert power back to quality publishers?
Sheri Bachstein: So I think in the beginning, they’ll still be some linking. It might be a different way of linking versus, you know, using these traditional cookies or some of the mobile identifiers.
But there are companies out there that are building some really interesting products that build almost a universal identity, that won’t be linking.
And I think in the short term, at least from a cookie perspective, that those are really great solutions. From a perspective of maybe what Apple’s doing, their guidelines seem to be a little bit more strict around ad targeting across apps. It might not be the right solution. So I think there’s a different array of solutions with ad tech companies and the ad networks.
I think what’s really important though, is going back to that transparency, right? So as a publisher, as you mentioned, I’m going to be more selective, certainly the partners that I use, to make sure that their products are privacy by design, and it’s part of their fundamental part of their process. And so, even in my own business, whenever I put out a product or a feature, everything goes through a privacy review board. And so I think companies have to prepare for that, and especially as a publisher, you know, going to be asking for that.
But I do feel like there are some unique solutions out in the marketplace. Some companies are coming up with some very creative solutions around the cookie. And then I think, you know, the AI solutions I spoke about will be the future.
John Koetsier: It’s interesting what you talked about there, because you talked about that as IBM and as The Weather Network, you went through an extensive privacy process, right? And you can do that because you’re first-party, and you can do that because you control what is on your platform.
What we’ve seen in the ad tech universe is a lot of intermingling, right? On DSPs, SSPs, on mediation platforms, right, a mediation platform that takes in SDKs from all kinds of different ad networks recently. And I recently reported on one that was actually fraudulent, and through a mediation platform it got into a lot of different places where you wouldn’t have expected.
And as a publisher, you wouldn’t have wanted it either. How do you prevent against that? How do you stop that from happening?
Sheri Bachstein: So I do think you have to have more rigor, right, in your processes and how you review partners. You know, I think a lot of us in the publishing world think that some of these SDKs they’re kind of black boxes, you don’t really know…
John Koetsier: Yes they are.
Sheri Bachstein: … what’s going on, right? And so, that comes down to that relationship with the partner, you know, are they willing to tell you what they’re doing with the data? How does that work?
And so as a company, I think you have to have more rigor around that and you have to ask those questions. I think, you know, when programmatic first came out and were starting to see all of these ad networks, I think you just didn’t really ask those questions as much as you should have, but now, asking those questions will be acceptable and companies have to be able to answer them, because otherwise publishers aren’t going to want to do business with them.
John Koetsier: Yes. Let’s talk about valuing ads for a little bit and…
Sheri Bachstein: Sure.
John Koetsier: … you know, really arcane subject for most people. I totally get it and I totally understand, but it’s actually core to the internet and services on the internet that we use, also the mobile games that we play, right? A lot of them are ad-supported and they’re looking at an IDFA-less future. They’re looking at an identifier-less future in which it’s very hard for them to value their inventory.
What do you see happening to the value of ad inventory, maybe for you personally on your platforms, but also more in general over the next, I don’t know, 18 months or so.
Sheri Bachstein: So I’m not sure like it’s a one size fits all. I think it really depends on the publisher or the developer, the app developer. I think there’s a few factors.
So one, we’ve kind of talked about, like your first-party data, how strong is that data? ‘Cause if you have good strong first-party data, you know, that’s very valuable, right?
The second thing is that relationship with your customer.
So in my case, it’s a little different because we offer very important information — in some cases, life saving information — from a weather service. So our users, and we’ve asked them, will you underwrite the service with advertising? And we prefer it to be targeted advertising because you actually have a better experience, right? You get relevant ads. And they’ve told us they prefer relevant ads versus something that doesn’t apply to them. And so there’s that value exchange that you can build with your customer, and you can give your experience based on the value they are willing to give to you, right?
And so a customer that’s willing to give you that data, which is almost currency to you, you know, maybe they get a different experience than someone that maybe doesn’t. And I think that that’s something that publishers should look at. And I think that’s a fair exchange, because when you’re offering free services — and look, I have 200 meteorologists supplying the weather, I have to pay for them, right?
John Koetsier: They don’t work for free?
Sheri Bachstein: They don’t work for free, I can promise you. So like, I have to underwrite them either with advertising or I have to underwrite them by one of my users saying, hey, we don’t want advertising, but we will pay for your service.
John Koetsier: Yeah.
Sheri Bachstein: And that’s where our subscription service comes in. Which, you know, for us we moved to about a year ago, and I think it was a really great pivot at the right time for us, because it certainly helps us to maintain that value to a user. So I think it really kind of depends on some of the mitigation that publishers are putting in place now. And hopefully people are looking at this very seriously and have been preparing for it.
We’ve been preparing for it for quite a while now and building out these AI solutions as well.
And what’s interesting is because I’m a publisher and I also have an advertising business, all of my advertising solutions I can use on my publishing platform, make sure that they work, right, make sure that they deliver for the marketers. So it’s actually a really great scenario for me as I sit kind of on both sides.
John Koetsier: That makes a lot of sense. What else has struck me as you were talking there, is the value of brand. And that’s quite interesting because there’s a relationship, it’s a long term relationship, there’s a value exchange in that relationship, and having a brand, you can ask things from your customer.
It’s a little more challenging for a mobile app that just starts somewhere and you don’t know the person from — you don’t know the producer of it, you don’t know the brand … there’s no brand behind it, it’s self-published, all those other things. Much harder to say, ‘Yes, I trust you. Yes, I know you and I will give you that data that you’re asking for.’
That’s an interesting scenario there. I wanted to ask as well, you talked a lot about AI and you’ve talked a little bit about what you’re doing at Watson Advertising. Talk to me, what’s the future look like for Watson Advertising?
Sheri Bachstein: Yeah, so I think the future is very bright. You know, we have made this pivot to building these AI-driven ad tech solutions. And these are solutions, like I said, can be used on our platform or they can be used on any platform for our marketers and advertisers.
And because AI is a core competency for IBM, you know, we really feel like we can really make a big push in the industry and have a bolder leadership role here. And as IBM we’ve transformed other industries, you know, banking, insurance, using AI. And so we think the time is right now for the advertising industry, as programmatic is definitely being stressed by these changes. So it’s really almost like this new category of advertising will rise, and we think that could be AI.
John Koetsier: Excellent. Excellent. Well, Sheri, thank you so much for spending this time. I really do appreciate it.
Sheri Bachstein: Yep. Nice to see you, John. Take care.
John Koetsier: Absolutely. For everybody else, thank you for joining us on TechFirst. My name is John Koetsier. I appreciate you being along for the ride.
There’ll be a full transcript of this podcast in about a week at JohnKoetsier.com. The podcast will appear on the TechFirst podcast almost immediately, and the story on Forbes will come shortly thereafter. Of course, the video is always available on my YouTube channel. Thank you for joining. Hey, maybe share with a friend.
Until next time … this is John Koetsier with TechFirst.