After 15+ years working in ads, we’ve come to realize that a lot of people don’t really understand how digital ads work let alone where things are headed. We've debated this a lot so we thought we’d share some thoughts.
Before we get to where things are headed – that payments are the new cookies – it’s helpful to revisit how a good ads business used to work.
1️⃣ Getting the Inventory. Bring together content and viewers and you’ve got inventory. Take it one step further and get your viewers to create content too. Now you have endless inventory!
2️⃣ Placing the Ads: Now you need to decide where to put ads. Between posts, in-between videos, on the sides of pages, pop-ups, or just about everywhere?
3️⃣ Watching What Happens: This used to be pretty straightforward when you could follow people online to see what they did after they saw an ad. Thanks to privacy changes, it's not so easy anymore.
4️⃣ Building the Auction: This is where the PhDs come in, crunching numbers and coding to predict which ads should be shown to which people to get them to buy stuff.
5️⃣ Auction 2.0: Now that your ads are humming it’s time to use data to make your auction even better at getting people to buy stuff and get brands to pay you even more.
6️⃣ Now the fun part: 💰💰💰: Let the machine run. More advertisers, more money, and a whole lot of passive income.
A lot of businesses made a lot of money using this playbook, and it’s basically what we implemented while at Snap helping grow the business to over $1B in under 3 years.
Thanks to Apple’s privacy changes this changed over night. Less data meant auctions became less efficient and ad spend went down. While a lot of businesses struggled through this, Amazon’s ad business seemed unaffected. Their ads business was just like everyone else’s with inventory, ads, and auction, but with one key difference: they facilitate payments.
Facilitating payments means they don’t have to ask users whether they can watch what they’re doing, because the payment is the action and its core to the experience.
Most other ad supported platforms (i.e. Snap, Pinterest, Twitter, Roku, etc.) are missing a payment mechanism. Since Apple’s changes, however, nearly every platform is trying to add in payments to have a product that does it all: create inventory, serve ads, and measure outcomes. On the flip side, platforms that were originally built to facilitate payments are now trying to build ad platforms (👋 RMNs).
Yes cookies are going away, but what Amazon’s model has proven is that tracking isn’t going away with them. Payments have taken their place and businesses can monitor behavioral and transactional activity better than ever before. Payments will help platforms build a holistic identity about all of us that is more accurate to the individual, non-expiring, portable, and ultimately data that can be used across the entire advertising ecosystem.
Welcome to the “Payments are the new cookies” era.
