How The Cookie Crumbles: AI and Targeted Advertising

Have you ever been scrolling through social media when suddenly you’re served an ad for a product that you bought a few days ago? Or what about browsing a website and seeing a banner ad for a something you sent to a friend the other day? Targeted advertising often makes it feel like you’re being spied on, so it’s no wonder many consumers are concerned about the privacy of their data. However, with the demise of third-party cookies and the advancement of Artificial Intelligence technology, a shift in how advertisers reach consumers is on the way.

AI and Advertising Now:

For some, AI brings up nothing but visions of sentient robot overlords in a dystopian future. Thankfully, we can be more optimistic about what’s in store with this technology and the advertising industry. Currently, AI is already being used by advertisers and brands across many different platforms and industries. Chatbots are one of the most popular, providing consumers with 24/7 customer support on many business’ webpages. Another current use for AI in advertising is optimizing ad spend. AI programs are able to watch a variety of factors to examine how ads are performing before delivering a detailed plan on channels, timing, and how to spend a campaign budget. It’s clear that incorporating AI into advertising shows no signs of slowing down. In fact, it was estimated that AI marketing would experience growth of 53% in 2021.

A Massive Change From Google:

Google has led the charge on AI targeting by announcing in March 2021 that they would be ending the use of third-party cookies across their services. The decision was made in an effort to move towards “A more privacy first web”, something that many people are becoming increasingly concerned about due to a lack of trust in big tech companies. This change will undoubtedly cause the biggest shift in the industry as Google chrome hosts about 60% of all web traffic. The consumer benefit of switching from third-party cookies to an AI model is that it still allows marketers the ability to serve relevant ads, while making an individuals data unidentifiable.

How does it work?:

How this technology works is by analyzing local data of Google Chrome browsers. It then places users into cohorts, groups of a few thousand people who share similar traits. The AI program then makes an encrypted copy of itself, erases the original and sends the encrypted version back to Google, leaving only the cohort number behind. But how does it perform against the old-fashioned cookie? Google reports that targeting through AI cohorts realizes “95 percent of the conversions per dollar spent when compared with cookie- based advertising”. Switching to AI targeting could have a huge impact on how the public views digital marketing. If the technology is explained transparently, consumers will likely have elevated levels of trust and will see targeted ads as being less invasive with fewer privacy concerns. And for marketers, It still allows for them to reach their desired demographics in an effective way.

Moving Forward Without Cookies:

The biggest takeaway is that developments in AI are guaranteed to continue changing digital marketing practices. From Chatbots to campaign optimization, there is no telling how else this technology will be incorporated into the industry. As big tech scandals continue to come to light and data privacy becomes a requirement instead of a feature, moving to an AI targeting model provides consumers with a more secure web experience. The key to building trust will be to clearly explain how this method of tracking works, and how user’s privacy is protected. While bringing more data privacy to consumers, marketers will need to adjust in order to effectively reach their target. AI might not be an option for all agencies, however, focusing on an increase of contextual advertising alongside investing in first-party data could provide an alternative.