I missed this great piece on the tension between digital privacy and firms on Madison Avenue from Brian Chen of the New York Times when it was published late last month.
Chen summarizes the recent privacy changes implemented by FANG companies and the impact on the effectiveness of digital marketing for big and small businesses.
In April Apple implemented the ability to turn off tracking for particular apps on iOS devices. Google announced plans to block cookies to its Chrome web browser in June. And Facebook announced last month plans to target ads to users without knowing any user specific information.
These changes have come about through a willingness of governments to regulate big tech more, the most well-known example being Europe's GDPR legislation, and through shifting consumer preferences toward privacy.
However Chen rightly points out that this change impacts the effectiveness of digital marketing spend, providing the example of Georgia pastry shop Seven Sister Scones whose Facebook advertising became significantly less effective after Apple's iOS changes, resulting in a drop of monthly revenue from $40,000 to $16,000 in May.
Naturally the implications here are that if digital marketing becomes less effective, then naturally more spend is required to sustain the same conversions and revenue, and thus cost of acquisition increases. For businesses with tight margins, this may mean switching to more traditional forms of marketing in preference to digital, or if that is untenable, price increases. Indeed, Seven Sister Scones raised prices 25%.
In this respect, these privacy changes couldn't come at a worse time for the economy, as treasury bond yields begin to increase and inflation fears begin to take hold.
Advertising revenue sustains a great deal of the internet, so the question becomes - if digital marketing becomes too expensive, who pays for advertising-supported digital products and services?
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