June 7, 2018
The balancing of the privacy-personalization paradox will be the defining dynamic impacting digital ad spending over the next several years. Future growth in digital ad spending is heavily based on the expectation that as targeting capabilities improve, marketers will be able to justify paying a higher price per ad, which will lead to higher overall spending. This dynamic is already unfolding for Facebook, where ad price growth of 29% in 2017 was a key driver of its 49% growth in global advertising revenue.
Such targeting improvements presume that consumers are fine with sharing their personal information in exchange for better ad experiences. But the foundation for this presumption is beginning to crack. According to Forrester Technographics® survey data, users are increasingly prioritizing the protection of their personal information over more relevant advertising.
So far, there is no indication that this shift in sentiment is impacting ad spending. In our “Forrester Analytics: Online Display Advertising Forecast, 2018 To 2023 (US)” report published this week, the outlook remains healthy, with spending expected to grow by more than $11 billion over the next five years at an 8% compound annual rate. Mobile will account for 71% of the incremental dollars added over this period. Partly underpinning this growth are expectations of improvement in mobile measurement and contextual targeting — two areas where mobile advertising is currently lacking according to survey data in Forrester’s “The State Of Mobile Advertising: Context And Measurement Wanted” report.
However, advertising improvements such as these and the resulting spending growth can only materialize if users feel comfortable enough sharing the personal data needed to make them a reality. The GDPR regulations that went into effect in Europe at the end of May do not directly impact digital ad spending in the US. But US companies that serve European users still need to comply and build safeguards to manage data lawfully. And even if US marketers and publishers are only targeting US users, they should take note of the message that GDPR sends, which is that attitudes are shifting to place greater emphasis on privacy.
Before trust erodes further, marketers should heed the advice in Forrester’s “The New Privacy: It’s All About Context” report to practice “contextual privacy,” in which the collection and use of personal data is consensual, within a mutually agreed-upon context, for a mutually agreed-upon purpose. Doing so is not only the right thing to do; it also makes business sense. Firms that institute contextual privacy measures are better able to build stronger customer relationships — giving them the information they need to better serve and retain their customers.
For more on how consumer attitudes are shaping the outlook for digital advertising spending, be sure to watch the replay of my webinar, “Tune Up Your US Digital Advertising Budget.”
Many thanks to Fatemeh Khatibloo for contributing to this blog post.