New privacy laws are having a big impact on how companies market to their customers

LABS recently met with Arena and Admetricks to better understand how recent changes to privacy laws like opt-in tracking are impacting online advertising and the millions of businesses of all kinds that spent nearly $500 billion on it during 2021, a record year.

Michael Chua

20.Mar.2022 13:23 BRT
UPDATED 22.Mar.2022 12:00 BRT

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It seems today that privacy is king. In the last few years, the global online marketing sector has begun to shift away from the classic “cookie” — used for many years by advertisers around the world to better understand consumers’ behaviors across websites and devices.

While it’s been clear the “death of the cookie” was eventually coming — the emergence of new data-privacy laws in the E.U. and California, Apple’s championship of privacy, and Google announcing a ban on third-party cookies this year — have collectively signaled there is now a massive shift underway for an industry that had a banner year in 2021. Last year, nearly $500 billion was spent on online advertising worldwide, per eMarketer/Insider Intelligence – as companies competed for consumers’ attention on a planet with more inhabitants than ever hooked on digital commerce following two years of a global pandemic.

The shift towards consumers’ right to privacy vs. advertisers’ interests in tracking people online to understand buying behaviors and how and when to sell to them is already having a major impact on businesses of all kinds, but especially for smaller businesses that have fewer resources to figure out new ways to engage with their core audiences.

Despite one forecast that global ad spending is on pace to hit $766 billion in 2022 and surpass $1 trillion by 2025, according to GroupM, an ad-industry giant, it’s no wonder that advertisers and businesses alike pay special attention to changes in the privacy laws.

While the European Union and the United Kingdom have historically maintained stronger stances on protecting the privacy of their citizens – via laws like their General Data Protection Regulation (GDPR) – recent shifts in U.S. laws and a change made by one mobile platform leader, Apple, have catapulted internet and mobile privacy to the forefront of a heated debate. The voices of two titans in this space, Apple and Facebook, pierce through the cacophony to frame their diametrically opposed stances.

The tipping point to consumer privacy vs. online ad insights

Before this massive shift towards more consumer protection and away from the technology that’s led to more targeted advertising for decades took shape, our data and behaviors as enacted across the landscape of our phones and computers were akin to the “Wild West”: Every app, website and online platform could harvest personal data with impunity, and sell that valuable information that details the inner workings, or “footprints,” of our daily lives to the highest bidder.

In this veritable free-for-all, companies like Amazon, Google, Facebook, and YouTube amassed fortunes by using their considerable hoards of user data to help businesses target their ideal clients, all without implicit permission from their users.

But suddenly, all that changed.

Within its operating system’s iOS 14.5 update, released last April, Apple included a controversial new feature that turned the digital advertising landscape upside down called “App Tracking Transparency.” This new feature granted users the novel power to overtly and actively approve or reject any or all app and website tracking by way of a simple pop-up.

Apple’s championship of consumer privacy

Tim Cook, Apple’s CEO, summed up the tech-industry bellwether’s position in one, short tweet:

At Apple, we’ve always believed that you should be in control of your data — what you do with it & who you share it with should be up to you. App Tracking Transparency in iOS 14.5 gives you the choice to share the data that’s being collected about you across apps and websites. pic.twitter.com/EbfN8CtiKd
— Tim Cook (@tim_cook) April 27, 2021

This move showed Apple’s unquestionable power as 62% of its users opted out of tracking. While seemingly altruistic, Apple notably did not raise awareness about its own advertising business. According to famed Bernstein analyst Toni Sacconaghi Apple’s search advertising, for example, generates $4 billion annually, accounting for about 60% of the app search ad market share on iPhones.

Facebook retorts

Meta, Facebook’s parent company, approached the global stage via a blogpost in staunch opposition to Apple’s move, highlighting the importance of the targeted ads that App Tracking Transparency hinders:

“Every business starts with an idea, and being able to share that idea through personalized ads is a game-changer for small businesses. It has helped make advertising affordable for small business owners … and helped people discover products and services they might not have otherwise … Limiting the use of personalized ads would take away a vital growth engine for businesses.”

Two Brazilian experts weigh in on the industry debate

To make sense of this grueling battle between two tech titans and what lies ahead for digital advertising, LABS met with two leaders in the business/customer engagement space.

Admetricks and Arena, two Latino-founded martech firms set to succeed in this new, privacy-conscious world, helped make sense of the reshaped competitive landscape and the reinvention of online advertising this year.

Paulo Martins, founder and CEO of Arena. Photo: Courtesy.

Paulo Martins, founder and CEO of Arena, created a platform that drives engagement, transactions, and retention through a chat widget, chat API, and software development kit. Arena is an example of a new type of ad-tech innovator focused on driving real-time engagement using live chats, live blogging, and data insights based on user behaviors on websites and online channels owned by its customers that are from companies such as Etsy, FOX Sports, Globo (LatAm’s largest media group), Greenpeace, Microsoft, South by Southwest (SXSW) and Stanford University.

With the support of this new, no-code platform, Martins believes that the advent of novel privacy rules in the U.S. and around the world may actually help his business because Arena doesn’t rely on third-party data – instead, it aids companies in increasing their engagement and understanding of their users, firsthand. In a sense, Arena allows its users to create their own solution for immersing customers in their brands and to collect data that might inform their business’ actions.

In Martin’s words: “Those insights are from their own customer base, and that’s helping them understand their data and the intent or purpose of the purchases from their customers.”

This approach develops and enriches the direct, business-to-consumer relationship. Rather than placing faith and money in social networks, like Facebook, Twitter, or YouTube, Arena goes beyond the banality of tracking cookies – which Martins thinks will disappear in the next 18 months – to make better use of a rich source of data businesses strangely, but commonly, overlook: their own customers.

“The best way to bring that audience is to create meaningful experiences with the product,” Martin explained, “Online marketers can then be more interactive, more social, and more engaging. And naturally, those users will spend more time on those marketers’ online properties as a result. Through real-time engagement, they can build more credibility and loyalty, and eventually, be able to convert them to subscribe to new services, purchase more products, or even donate to causes.”

And this strategy seems to be working, with business owners around the world flocking to Martins’ platform to enrich their brands’ connection with customers. Today, Arena boasts 24,000 customers on the platform in 150 countries. “Build a community,” said Martins about the key to capturing the hearts of consumers, “and allow the customers to be part of that community alongside other customers that have things in common.”

Martins sees this change in privacy rules as the impetus for a shift he has noticed across the industry: the move from pure advertising-monetization strategies towards a subscription model.

For businesses facing this decision, Martins suggests they focus first on creating experiences that can stand on their own, independent of reliance on advertising and social networks. While these channels might be leveraged to attract a customer, explained Martins, once you have their attention, you’ll need to be able to hold it with a meaningful experience. Furthermore, he warns against trying to sell a product right off the bat, as savvy, modern consumers are accustomed to ignoring hard-core sales pitches.

Felipe del Sol, co-founder and CEO at Admetricks. Photo: Courtesy.

Felipe del Sol, co-founder and CEO of Admetricks – a company that helps businesses monitor their competitors’ ad spend, reach, and frequency – views advanced privacy laws as being “business as usual.”

Since Admetricks operates in mostly all of the Latin American countries, del Sol admits that the privacy laws that Admetricks must follow significantly lag behind those of Europe and the United States; however, as the company exists in a global world and as most advertising solutions were originally created in Europe and the U.S., advertisers tend to comply with advanced privacy laws by default.

“In our field,” del Sol explained, “we don’t capture personal information. Instead, we capture the ads.” So the privacy laws don’t impact Admetricks directly. Rather, del Sol believes things will be easier for his company because changes in laws will likely lead to less ad spend on user-behavior-related tracking, one of the more complicated types of ad campaigns to track.

This means, however, that businesses seeking to target their advertising will need to find workarounds or utilize other services, like those provided by Admetricks, to understand the competitive landscape and hone their messaging. “It will adapt,” del Sol proclaimed of the advertising world.

When asked what advice he has for companies struggling with shifts in privacy rules, del Sol recommends going back to the basics. “Understand your funnel, from where you get attention until where customers buy and try to optimize every step along the way. Understand their behavior and try to show potential customers something that will interest them,” he said.

For advertisers, del Sol’s advice is to be as transparent as possible regarding the technology, processes or methodologies being used as a way to preserve reputation and brand loyalty.

Looking to the future, del Sol identified one trend, related to privacy, which he thinks will be pivotal: the ever-increasing fragmentation of the market. Without tracking, businesses will find it difficult to identify trends and know what’s going on across the scattered parts of the digital ecosystem – making ad-tracking services, like Admetricks, all the more important.

Overall, del Sol sees more privacy as extremely positive. In his mind, the advertising market already has a bad reputation for being annoying, intrusive and even downright scary – as if advertisers are actively listening to you and following your every move online, which in a sense they are. Advanced privacy rules will ensure that the advertising industry evolves to be more mature and professional.

Summing it all up

Both of our experts agreed that privacy is here to stay, and the extent to which these laws will impact the world is likely to only get more pronounced soon – one even positing that tracking cookies will be gone completely in as little as just 18 months.

The advertising industry must, and will, adapt to these rules.

Based on their counsel, the best and most viable path forward is to work on creating more engaging experiences with online sellers’ products or services and overall brand to attract a more loyal customer base, to use transparency as a method of building trust, to focus on the data already available from customers, and to bring things back to basics by analyzing and optimizing the sales funnel.

With trending shifts towards a subscription-based service and revenue model and the increasing fragmentation of the digital ecosystem around the world, companies must look to workarounds, like direct business-to-customer engagement platforms or competitor tracking services, to better understand their customers and be able to sell to them in the more private world of tomorrow.