Battle over the Cookie

March 5th, 2007

The latest craze in online advertising nowadays seems that everyone wants to build an ‘exchange’ or a ‘marketplace’. Sure, there are certain efficiencies that a marketplace provides, but in all honesty, it’s all about the cookie.

You see, there’s no need for more marketplaces, there are plenty of them — Adsense, Ad.com, Tribal Fusion, and any other ‘ad-network’ that you can think of. The problem with each of them is that they are ‘closed’ marketplaces. Not just from a ‘business’ perspective, but from a technology perspective as well. Sure, anybody with credit and a legitimate offer can buy from any ad-network, but lets say you want to buy based on your own data. It’s simply not technically possible to do that today. Well, sorry, it is technically possible, just a royal pain in the a$$ if you do.

Lets say you’re a marketer and you have some information about a set of online visitors that is extremely valueable. E.g., lets say you know for a fact that they want to buy a car because they took part in one of your promotions. Now, first off, lets just assume that every network has behavioral capabilities (which they don’t). If you wanted to buy your users when they hit inventory that’s available on one of the many marketplaces (networks) out there, you would have to pass that data into your users’s cookie for each marketplace’s cookie. You see, when you come to this site, you get a cookie from mikeonads.com. I can write whatever I want into that cookie. I can’t see any of your others cookies nor can anybody see my cookie when you go to other sites. So, how do you get data into each Marketplace’s cookie? Sadly, this is not something you can “push out” to the user, you can only set or change cookie information when a user comes to you. E.g., if after-the-fact you decide you want to work with Marketplace D when you’re already working with A,B & C, then the only way in which you can tell put your data into Marketplace D’s cookie is when the user comes BACK to your site!

So how do you actually set information in another person’s domain if you can only access information in your own cookie space? Rather simple actually, anywhere on your page you include a link to a tiny 1×1 gif image to the 3rd parties server with some information attached to it. For example, you could put:

http://ad.someadserver.com/setbehavior?site=marketer1&behavior=likescars

Someadserver.com would then interpret that as “marketer1″ just told me that this user “likescars”, let me store that in my cookie. Can you imagine putting 20 pixels on your promotion page just to gather data? Well, that sounds like a pain doesn’t it? Well it is — and hence, most people don’t do it. So, you say, I hear there are these new ‘exchanges’ out there (e.g. Right Media has one, DoubleClick is building one, and several others are trying). Well, what really defines an exchange? It’s a platform that lets buyers, sellers and brokers all work together using the same system. And what is the only way that will work in online advertising — a single cookie domain.

If all the mini-marketplaces out there worked on the same platform, then our marketer earlier wouldn’t have much of an issue reaching his audience. He would simply put his data into the exchange cookie and then buy from whichever sellers on the exchange have ads to show to his users. It’s not just behavioral targeting that benefits from an exchange, many other factors as well.

Lets say a second marketer wants to reach as many unique users as possible with his new ad campaign. So, he goes out to all the major ad networks and places a buy with the top 10 networks and portals and informs each of them that they are only to show each user his ads once and only once. Well, ignoring the fact that some people clear cookies and hence they lose the ‘frequency cookie’, how many different ad networks serve you ads on a given day? If you go to one site, they might be working with Ad.com, another with Tribal Fusion, etc. etc.. Well, if this marketer is paying big bucks, each network will choose to show you this ad, but only once of course! The problem is, none of these mini marketplaces knows about the other, so nobody will know if you first saw the ad on the NY-Times from Ad.com when you show up on Yahoo. The end result, you might actually end up seeing the same ad many times! Guess what — a unified cookie solves that problem!

So why the title “Battle over the Cookie”? Well, people are starting to catch on that if they own the cookie, they own the market. Think about it, if one exchange succeeds in capturing a massive percentage of the market, the barriers to entry will be practically insurmountable. What value is your exchange if you can’t provide services like global frequency caps, cross publisher behavioral targeting, etc. etc.

So who’s fighting? Well, my employer (Right Media) for one. Doubleclick is said to be launching a marketplace, AdECN is another. I’d expect others to start soon — as long as someone hasn’t won, there’s still a chance.

Doesn’t it sound scary that an entire industry is so dependent on a little piece of data that many users hate? How many spyware-detection programs flag cookies as ‘desktop software’? Well, in case it hasn’t gotten to you, it’s terrifying and the industry is scared. If Congress were to pass a law that said 3rd party cookies are illegal, what would we do? There are some interesting technology solutions out there that claim they can identify you by your computer ‘fingerprint’ that might be able to help, but in the near-term, the industry would be screwed.

So kids… hate online advertising? Clear your cookies. Like the websites you vist? Keep ‘em =).

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