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Meta recently conceded that in-app behavioral advertising in the EU can no longer be opt-in by default, marking the end of an era. The regulators won, at least for now. Every few decades, major shifts happen that change how an industry fundamentally operates and who the new winners and losers are. We are in the midst of one such shift in the digital advertising industry. This has been driven by three critical changes in the ecosystem, all privacy-related: Apple announced the in 2021 App Tracking Transparency framework Google is in 2024 deprecating third-party cookies A slew of privacy legislation is either already in place (like the , ) or is about to be in place (like the ) California Privacy Rights Act EU General Data Protection Regulation EU Digital Services Act While the effects of these changes have been felt by the advertising industry globally, the for a few years now. . In the past three weeks, there have been significant announcements from , , and about upcoming changes to their products in the EU. It’s probably fair to say these changes mark the end of an era for behavioral advertising in the EU, and the platforms have made peace with that. EU, in particular, has been at war with behavioral advertising And winning Meta Snap TikTok In this piece, we’ll dive into: How the advertising ecosystem runs (or used to run) Privacy interventions and impact on behavioral advertising EU’s war on behavioral advertising and why platforms are conceding Possible future paths How the advertising ecosystem runs (or used to run) Let’s start with some simple concepts. An ad shown to you can be contextual or behavioral (sometimes both). A is something that is shown alongside organic results (non-ads) in the context of whatever you are doing. For example, if you are on a food delivery app like DoorDash and you see an ad for a restaurant alongside organic results, that is a contextual ad. In that case, your identity doesn’t really matter. DoorDash knows your location and what you’re looking for and therefore shows you a relevant ad. Knowing your identity and interests does help improve the relevance of these ads, but it’s secondary to the context itself. contextual ad A is something that’s shown to you because of your past behavior. For example, you might have visited an office chair brand’s page on Instagram, and therefore you get served ads for another office chair brand; that’s exactly what happened to me with the ad on the right. This can either be based on direct behavior (like the office chair example) or inferred behavior — people like you who looked for chairs also looked for monitors. One step further, people who looked at chairs are also likely to work from home more and therefore be open to lunch service. All of those are potential ads that can be shown to you. behavioral ad A subset of products, most often search products, are perfect for contextual ads — Google Maps, Google Search, DoorDash, Yelp, Thumbtack, TripAdvisor, and Zocdoc, to name a few. The user has high intent to do something specific. However, most high-intent products are low-medium frequency. You are not looking for plumbers every day on Thumbtack, and you are not looking to order food delivery every hour of the day on DoorDash; therefore, the amount of contextual ad inventory is lower — highly effective but lower in volume. On the other hand, social media platforms where users spend hours doomscrolling have a large volume of non-contextual inventory. Random ads are annoying and ineffective, and therefore the most effective way to monetize this inventory is through behavioral ads. Unsurprisingly, . Before ~2018 (when EU’s GDPR kicked in), there was essentially a about you, collected through a long list of highly effective AdTech mechanisms. Some notable examples: behavioral ads require a lot of data, specifically data about you free flow of data Every iOS or Android phone had a unique “ ” assigned to it (and by association, to you). This ID was accessible to all apps on your device, i.e. your Uber app and your Google Maps app both knew you are mobile advertising ID 123 and could easily cross-identify you across apps. mobile advertising ID Most browsers (except Safari and Firefox) support “ ”, which are essentially a piece of data that one site could place on your browser and another site could access. There would be a “cookie ID” associated with you, and you could be easily cross-identified across websites. third party cookies Note that . You could go deep inside your settings and reset these IDs, but most people never do that. This resulted in a couple of second-order effects. these identifiers, for all practical purposes, were permanent First, companies that are “ ” started purchasing data from several different data providers and ; for example, app 1 could tell the broker that you bought an expensive piece of furniture, website 2 could tell them you have an account with a high-end bank, and the data broker could put that together and categorize you as “high propensity of spend” person; note that when I say “you,” that refers to your identifiers (mobile advertising ID or third party cookie ID) data brokers building “profiles” about you As more and more data became available, the profiles had more fidelity to them, and identification became more sophisticated; for example, if app 1 had your mobile advertising ID and website 2 had your Chrome third-party cookie ID, a data broker or an ad platform could compare your IP addresses and know it is the same person. Take this one step further. A data broker could also use a third data source and find an email associated with your IDs. One more step further, they could buy your address from a utility or telecom company and find your address. This might sound far-fetched, but it’s not — are a very commonly used data product in the AdTech stack today, and telecom companies are . If you need a more entertaining take, check out . device graphs notorious for selling your data John Oliver’s episode on data brokers Second, ; through a combination of technical mechanisms, an advertiser could say you first saw an ad on Facebook, then an ad on Google Search, then a display ad on NYTimes, and eventually bought an item from their website, so each of those three advertising platforms get shared credit. Attribution/measurement of advertising campaigns became more and more precise While this sounds privacy invasive (and it is), this resulted in a highly efficient advertising ecosystem. Advertisers knew exactly which users they were targeting, and since they had all these extra behavioral signals to know how likely a user was to engage, they were willing to pay higher cost per impression (CPM) for ad inventory, thereby generating more revenue for a media publisher. Precise attribution/measurement turbocharged this further. However, you can see how this was . This rightfully raised concerns about data consolidation in the hands of both data brokers and large technology companies, and an intervention was inevitable. It was less a matter of if and more a matter of when. becoming the wild west — highly effective advertising no doubt, but also an uncontrolled orgy of data acquired with non-existent or questionable user consent Privacy interventions and impact on behavioral advertising Let’s dive into each of the three privacy interventions that arose in an attempt to tame the Wild West. First, Apple introduced the . It sounds jargon-y, but the change is relatively simple. Prior to ATT, every app by default had access to your advertising ID, i.e. it was opt-in by default. This meant you could easily be tracked across apps and therefore shown effective behavioral ads. For example, you installed the Strava app to track your runs, you are now on Facebook, and you are shown an ad for Strava Premium. After ATT, the access to this , i.e. an app had to show you a pretty aggressive prompt to get access to your identifier, and you explicitly needed to say yes. The average opt-in rate ended up close to (with a lot of caveats).' App Tracking Transparency (ATT) framework identifier became opt-out by default ~34% We won’t go into much detail here, but this prompt was launched by Apple in the guise of embracing privacy — a smart chess move. The consensus opinion today is that this was an opportunistic move from Apple, which no doubt improves privacy but also heavily hurts Apple’s competitors as they . The impact was that user identity was available much less often. prop up their own ads business Note here that for behavioral advertising to happen in the Strava-Facebook example, there is not one but two apps that need to have received opt-in from you, i.e. the addressable market does not drop to 34%, it drops to 34% * 34% = ~12%. Therefore, . cross-app behavioral advertising on iOS is no longer effective at scale Second, Google announced that it will . The consensus opinion is that the change helps Google achieve a dual purpose: appease regulators who are breathing down their neck for , while taking control back from what’s now a . Google’s post third-party cookies will still allow cross-site retargeting, but in a more private way where all information is stored on-device within the browser, i.e. there are no more cross-site “cookie IDs” assigned to you. While the new mechanism preserves some of the status quo, . deprecate third-party cookies in 2024 potential anti-trust behavior in AdTech fairly bloated advertising tech stack new mechanisms cross-site behavioral advertising is going to have much less fidelity and, therefore, effectiveness Which brings us to the third intervention — . The most aggressive of these is the EU’s GDPR, which went into effect in 2018. The California Consumer Privacy Act (CCPA) went into effect in 2020. While the progression has been gradual, the reason these laws matter for advertising companies today more than ever is because the laws take aim at the (i.e. you do a bunch of different things inside the Facebook app and Facebook gets to use that data to show you behavioral ads within the app). privacy regulations only remaining and mission-critical advertising mechanism — behavioral advertising within companies’ own apps EU’s war on behavioral advertising and why platforms are conceding A primary feature that makes the California laws (arguably the strictest privacy law in the US) less aggressive than the EU’s GDPR is that it . For example, the 2020 California Consumer Privacy Act (CCPA) requires companies that are considered “data sellers” under the law to provide explicit opt-outs on web pages, but the . does not require explicit opt-ins and only requires platforms to provide opt-outs default is still opt-in EU’s GDPR takes this up another notch and requires for behavioral advertising. This consent needs to be . For example, Meta cannot gate content behind a behavioral advertising consent prompt. explicit opt-in/consent freely given, specific, informed, and unambiguous So, the simplistic inference from this is that Meta needs to get explicit consent for all behavioral understanding, including the last remaining mechanism — showing ads within their own platform. If Meta is forced to do this, the opt-in will likely be small (the Apple opt-in rates were ~34%), and this majorly shrinks Meta’s addressable advertising market in the EU. To not meet that fate, Meta made a creative legal argument: GDPR requires any company to have one of ** **if the company needs to process personal data. Paraphrasing, these are — consent, a necessity to fulfill a contract, a necessity for legal compliance, a necessity to protect the vital interests of the user, a necessity to perform a public interest task, and a necessity for legitimate interests pursued by the company. six legal bases Of these six, Meta held the stance that they were processing personal data using “ legitimate interests” (the last of the six) as the legal basis and therefore did not need to show an explicit opt-in prompt. Last month, the Norwegian Data Protection Authority that . Paraphrasing the : provided their enforcement decision Meta’s use of “legitimate interests” as the legal basis is not valid enforcement decision Based on several past court rulings, Meta must prove that legitimate interest “cannot reasonably be achieved just as effectively by other means less restrictive of the fundamental rights and freedoms of data subjects.” Based on another past court ruling, despite the fact that Meta provides a free service, the user of that network cannot reasonably expect that the operator of the social network will process that user’s personal data, without his or her consent, for the purposes of personalized advertising. Four days after the Norwegian Data Protection Authority’s ruling, Meta that they would be changing their legal basis from “legitimate interests” to “consent.” In practice, what this means is that . While Apple’s changes significantly cut down the ability to advertise cross-app, Meta was holding on to hope that it would be able to preserve all in-app behavioral advertising (including in the EU), and the writing is now on the wall. shortly after with their own announcements that non-personalized versions of their products will soon be available to users. A total of are likely to follow suit. announced Meta is conceding that behavioral advertising within their own app in the EU can no longer be opt-in by default and followed suit Snap TikTok 19 platforms that are in scope Possible future paths It is still to be seen what percent of users opt into behavioral advertising. If the Apple opt-in rates are any indication, it may get to the ~34% rate seen there, but it may also go higher if platforms are allowed to be creative about opt-in language and user interfaces. It is hard to say what exactly the long-term effects of ending the opt-in-by-default regime for behavioral advertising in the EU will be, but here are some educated guesses: — Meta has made towards letting users provide inputs to the feed algorithm. I would expect the creation of more explicit preferences/interests that users explicitly select. While it has worked to a smaller extent for some products like , it is likely that the quality of content provided by just preferences will be nowhere close to the relevance of a system that is constantly ingesting data and inferring interests. Explicit preferences instead of inferred interests some progress Reddit : TikTok has announced that they will create a that is based on what’s popular in your region. Most social feed-based platforms will also (re)introduce simplistic ranking options like chronological. I am not bullish that any of these will create an engaging user experience. Non-personalized feeds non-personalized feed : My (potentially contentious) take is that opted-out users will see a significantly degraded experience and eventually decide to provide platforms consent to personalize. The platforms will likely use this mechanism to receive content for all personalization (including behavioral advertising) — It’s unclear if there are any regulatory constraints that force them not to bundle consent for user experience personalization and behavioral advertising. I don’t expect the consent rate to go anywhere close to the status quo, but I think it will be a meaningful bump to what’s seen with Apple’s opt-in rates. Degraded user experience, leading to more opt-in : Twitter launched Twitter Verified a few months back, and Meta is with a similar concept. I am not bullish that a majority (or even a minority) of users will be willing to pay for social media products after years of being conditioned to get these products for free. Experiments with subscriptions experimenting If platforms are not able to effectively monetize the EU market, it is likely that they will start de-prioritizing investments for the EU market, which is a real risk of an aggressive regulatory regime. I don’t expect them to stop supporting EU markets, but every new feature built is an investment, and companies will start heavily questioning if they are willing to do any extra work for this market. For example, if there’s additional work to make a feature comply with GDPR, that might not be worth it anymore. We have seen other equivalent situations of this — several apps have a much better experience on iOS than Android because iOS apps monetize better. De-prioritization of EU markets: Conclusion The advertising market exploded over the last several decades due to the availability of essentially infinite user data, which brought both large efficiencies in advertising and major privacy risks. Regulation was necessary. Great regulation is about finding the balance between promoting innovation/letting new businesses emerge that move society forward and having guardrails so people are protected. Did the EU go too far? I personally think they did, and if that is true, the effects will start showing in a 5–10 year horizon, and course correction will follow. Until then, this is the new reality of behavioral advertising in the EU. The regulators and legislators came all guns blazing, and they won. 🚀 If you liked this piece, consider subscribing to Every week, I publish one in the form of a 10-minute read. Best, Viggy. . my weekly newsletter deep-dive analysis on a current tech topic/product strategy Also published . here

The New Reality of Behavioral Advertising in the EU

How Technology Can Help with Mental Health Diagnosis

The cloud has been a hot topic for the last several years. However, it is not always easy to understand how to use this particular tool because of information overload and massive marketing activities performed by vendors. Any successful startup founder should be actively seeking ways to reduce costs and increase efficiency. Cloud tech has long been advertised as a silver bullet for solving these tasks. Is it true? Which approach is best to use and what mistakes should be  avoided while choosing cloud technology for a new company? I had the opportunity to sit and talk about these issues with Serhii Korniushov, an IT manager and engineer with more than 10 years of experience in multiple industries, from GameDev to blockchain. To start, are real startups using the cloud, or is it for big companies only? Well, if we speak about cloud infrastructure, there are lots of hot tech startups that build everything using the cloud (there are still non-cloud ready tasks like marketing and sales, though). For example, Amazon Web Services (Amazon) has companies such as Airbnb and Zocdoc as their customers. They do not buy hardware and manage it themselves, they move everything to the cloud, and it works. Some companies have switched to the cloud during their history, as it was with Netflix. It started moving toward the cloud more than ten years ago, after the significant incident with their infrastructure. One of their database servers corrupted and the whole company could not operate for a day or two – they were sending DVDs at the time, and could not do it. So, their online streaming service was initially developed to live in the cloud and they have a partnership with Amazon. Okay, but what exactly do these companies seek in the cloud? Why is it that a  business might decide that is the right way to build everything? First of all, there are no ideal solutions, just suitable and not suitable ones. Sowe need to start from the beginning, i.e.look at the business goals. If the company works in a competitive industry, it means it has to be fast: releasing new services and products, running experiments, improving product-market fit, etc. This is like owning an apartment versus renting it. If you work worldwide, travelling back and forth, exploring new interior design trends, and so on, it might  just be tough to do when you buy the apartment. When we speak about technical infrastructure, things get even more complicated. There are several ways of doing things. First, you can rent a dedicated server and set it up, or buy your own hardware and invest time and money in backing up, cooling, upgrading resiliency, etc. Or you can use Amazon Web Services(AWS) / Google Cloud Platform (GCP) / Azure / Heroku and in a couple of clicks get the initial infrastructure (server nodes, database, data storage, DNS, etc.), scale it quickly when needed, and reduce it when the workload decreases. This is the way that provides maximum flexibility and an ability to run experiments. When you have physical hardware bought for a specific project, if the project does not take off as expected you might end up worrying about what to do with all these idle servers. You might sell them for a discount and lose money, or re-use them somehow. When you rent dedicated servers, you should sign up for a long period (a month or even a year). Also, you need to set up, scale, and support everything by yourself. Cloud services are much easier and faster. It seems too sweet, and what about security and control concerns? Isn't it risky to trust everything you have to a third-party vendor? Well, these are two different questions: security and control. My opinion about the protection is that if you use a product from a well-known big vendor, that you have less risk compared to what you will get when building everything by yourself. Amazon, Google, and Microsoft all have security departments- white hat hackers that test their software and hardware daily. Also, they run bug bounty programs and pay independent researchers for vulnerabilities they find in their products. Will you be able to cover all these things as a startup? I don't think so. The startup nature stimulates security risks. You have to be fast, and when you code quickly there is a higher chance of errors that can be exploited. Also, almost for sure, you won't have the resources to work on security and programmers might not be familiar with OWASP. So the cloud is, on average,  more secure. But according to control, everything is not so straightforward. There can be real problems. One of them is vendor lock-in. Let's outline it by example. AWS has a solution called SQS (Simple Queue Service). It is convenient, but there is a problem: the feature is available only in their cloud. If you want to move out of them, you will have to rewrite the code of your applications, or it stops working correctly. This is a real problem that you should be aware of. How can that be avoided? Be cautious when choosing cloud tech and invest time in comparing different options. Going back to this SQS example, there are a lot of enterprise-grade alternatives like Apache Kafka or RabbitMQ which offer more freedom and do not lock you in their developer's ecosystem. You should spend some time in the beginning, but after that you will be able to explore the main benefits of the cloud, including speed. Let's finish by talking about the price. I've heard that very often cloud services turn out to be more expensive than non-cloud. Can you give some advice on how to build a startup's infrastructure without overpaying? The primary advice here is to use the correct calculation model. You should evaluate savings using a long-term approach. If you take a month or two, cloud infrastructure might be more expensive, but at the distance of a year, owning infrastructure will be way more costly. You will have to spend resources on staff, updates, support, repairs, etc. So, to accurately assess real pricing you need to take all of these aspects into consideration. Also, as a startup founder, you should understand that finding the best deals is your task. In the cloud, very often, you can get a better deal by using the service in a different region. However, the reduced price may come at the cost of a set of available services or their performance. Here is a for AWS. price calculator Another way to save is by using a Reserved Instances, which implies renting cloud infrastructure for an extended period (1-3 years). Sure, you should also implement monitoring and sophisticated real-time scaling mechanisms for fighting cloud waste (paying for unused resources) or limiting the number of instances that can be used (to avoid spending a fortune during load spike).

Why You Need To Use Cloud Tech For Your Startup And What Mistakes To Avoid [Interview]

Fun little experiment to try out: go to your browser’s address bar (works best in desktop Chrome) and record your top websites that autocomplete for each of the letters . And if you’re feeling especially brave, share the results with the world… 😈 a-z My Google Chrome autocomplete results for A-Z. My Results A) - no surprises here. 🛍 amazon.com B) - mirror for the torrents. baypirateproxy.org thepiratebay C) - for all your anime needs. crunchyroll.com D) - kinda old school, but I prefer checking it to any personalized newesfeeds for generic news. digg.com E) - Useful TODO list app (I’ve recently switched to and couldn’t be happier). en.todoist.com todoist notion F) - Duh, though I’ve disabled my FB news feed with the chrome plugin so I don’t visit nearly as often as I used to. facebook.com News Feed Eradicator G) - Open source work consumes a lot of my time. ⭐️ is a reasonably distant second place here. github.com grubhub.com H) - Netflix’s younger cousin.. cause some stuff’s only available on Hulu. hulu.com I) - Really interesting new design tool that aims to make design + dev collaboration much easier. interplayapp.com J) - Very useful curated list of high quality React components. js.coach/react K) - Old KickAssTorrents mirror that is out of date. katcr.co L) - Ahh the joys of local web development. 😄 http://localhost:3000 M) - I use FB Messenger a lot more than SMS ever since I spent a few years living abroad in Thailand. International SMS is clunky but internet messaging platforms always “just work”. And of those platforms like Line, Wechat, etc., the only one where 99% of my friends have accounts is FB Messenger. messenger.com N) - Hacker News! 😎 I was a little surprised didn’t make it as my #1 but these days I stream more from external devices than my primary laptop. Also rounding out my top 3. news.ycombinator.com Netflix nytimes.com O) - Cause some companies force you to use Outlook 🤷‍ outlook.com P) - As a serial entrepreneur, Product Hunt’s a daily visit for me. producthunt.com Q) Leaving this one out as it’s an admin dashboard for async jobs for a recent project of mine. R) - The constant rabbit-hole of Reddit. :sigh: reddit.com S) - Torrent directory listing. seventorrentsmirror.info T) - This one’s probably my most visited. FOMO for better or worse… twitter.com U) - Excellent royalty-free stock photo site. unsplash.com V) - Crunchyroll’s cooler sister made by the same peeps. Anime streaming central. vrv.co W) - Reasonably unbiased news. wsj.com X) This was the only letter that didn’t autocomplete to any website for me… no seriously, it didn’t autocomplete even though there were results… I wonder if this is a built-in privacy mechanism of Chrome because I definitely don’t use Incognito mode... 🤷‍ Y) - I spend a lot more time on here than I probably should. :sigh: youtube.com Z) - Cause health’s important yo. zocdoc.com Categories These results can be roughly grouped into the following categories: Streaming (Hulu, VRV, YouTube, Crunchyroll, and various torrent sites) Software (localhost, GitHub, ProductHunt, js.coach) News (WSJ, Digg, Twitter, Hacker News) Social (Twitter, Facebook, Messenger) Insights I stream a LOT of video and ❤️ torrents (shout out to ). WebTorrent I’m pretty surprised there’s nothing NSFW on this list. 🕵 I’m sure there are a few results on here that would be novel and/or surprising to you and vice-versa. Conclusion So what is your alphabet of most visited websites? If you’re feeling brave, share some standouts from your list in the comments below or mention me @transitive_bs on Twitter! Hopefully this was a fun little experiment for you.. in a similar vein to ProductHunt sharing the most sticky apps that people use a lot but most people don’t know about ( ). example Also, gimme some of them claps 👏 👏 👏 Cheers!

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