New regulations and consumer attitudes mean Facebook and Google’s industry dominance will eventually end, according to the former New York Times programmatic advertising director, Matt Prohaska. However the regulations designed to reel in the tech giants may be having the opposite effect initially.
According to Prohaska, now CEO and Principal of Prohaska Consulting, the industry’s biggest players – Google, Facebook and Amazon – have “ridiculous, deterministic footprints”. But tightening regulation like GDPR will eventually close the gap on the tech giants, which take the lion’s share of digital advertising dollars, arguably contributing to the demise of several traditional publishers in the process.
However, before parity improves there will be some “short term pain”, according to Prohaska, who is in Australia this month to run programmatic courses for buyers and sellers.
For example, as GDPR was enforced in May, Google moved to to restrict log data access and “took the legs right out of brands and agencies”, Prohaska said.
“A lot of brands and agencies that do not have the resources or the time and the skillset to come up with a plan B or to go to plan B, which is non-Google stack, have simply said ‘well, alright I guess I might as well go all in with Google’.”
Unable to compete directly or lacking confidence in smaller partners struggling with compliance, sticking with the Google stack is often the “easier and faster path” for brands, meaning Google and the other tech giants are winning short term post-GDPR. While the new legislation does provide a directive for Google to restrict data access it is also a “pretty convenient commercial reason,” Prohaska said.
Initially, this creates an environment where digital advertising giants like Google, Facebook and Amazon add to their already considerable dominance, but Prohaska says eventually GDPR will achieve its desired impact.
“We believe that we are moving to a fully deterministic, fully opt in world across all media,” Prohaska told Which-50, explaining that world means smaller companies will gain access to valuable first party data, provided consumers understand their value proposition.
“If everyone else works towards an open garden rather than a walled garden, then it allows marketers to spend more dollars with the non-big three.”
That future is difficult to conceive given the current domination of tech giants – Google and Facebook are considered an duopoly by many – but Prohaska argues “it’s a long race” and Facebook’s “horribly irresponsible behaviour” certainly isn’t helping them.
In recent years Facebook has been exposed in several scandals including the misuse of user data. While it appeared they had weathered the storm initially, cracks are beginning to appear. Facebook’s share price tanked last month when it failed to hit revenue expectations and user growth slowed.
“Facebook lost $100 million in half a day because they finally showed user decline. We’re not suggesting they’re going to become Myspace in the next six months, obviously not. But consumers will go where consumers are treated appropriately and where they get a great experience.”
Prohaska says the recent scandals add to the “clamouring need for consumers to understand what is happening to their data and how they can at least understand what the game is and change it if they want”.
In a post GDPR world where playing fields level and first party data access increases for brands, several may look to bring programmatic in-house. Indeed many brands claim they have already found success by doing so.
“It is a growing trend but we think the pendulum will end up swinging back in mature markets by the end of next year,” Prohaska said.
“A lot of brands are realising it took me a lot to get my team lined up myself, it took me a lot to get my own first party data asset and then bridge into second and third party data, and, geez, it took a lot to recruit people to do this in-house.”
Those challenges persist as agencies “reinvent” themselves in response to an increasingly aware market with rising standards, according to Prohaska.
“In a world where transparency is way more than just a buzzword now and, fortunately, more of the way business is conducted. Agency contracts with their brands are being revisited and revised to be more transparent, to build more trust back into the relationship and have brands recognise that agencies can leverage self service tools better on there own.”
Take Lenovo as an example, its APAC marketing team achieved improved efficiency, viewability and reduced CPMs by bringing programmatic in-house but couldn’t justify the costs on an ongoing basis and the decision was made to go back out to its agency partners.
In-house programmatic requires a significant amount of resources and expertise, and “not everyone can be Netflix”, Prohaska said, in reference to the streaming giants successful in-house programmatic strategy. However there are elements of what Prohaska calls “tech, target and talent” that brands should be taking more ownership of.
“When brands have approached us about whether to go in-house or not, we have recommended getting the most out of their tech, target and talent first, before deciding to yank cords.”
That assessment means brands usually maintain their relationship with the agency “in some way” as agencies adapt to brands’ needs, according to Prohaska.
“When things get revisited under a different light, it’s amazing how agencies can change their operations.”