Privacy regulations, Web3, and the digital ad landscape
The Web is changing in fundamental ways. On the one hand, there’s a real push for more privacy online: Users expect it, governments are supporting users’ demands, and even Big Tech is reluctantly listening (although, whether they take real action is another story). On the other hand, the technologies that power Web3—crypto, blockchain, and decentralized apps—mean users can bypass Big Tech and Big Banks altogether.
Add it all up and you’ve got a perfect storm for advertisers: The data that powers Web 2.0 ad platforms is drying up. And users are leaving Big Tech in droves. Ad costs go up, while ROI goes down.
But savvy advertisers aren’t scared: They’re embracing this new Web3 world to connect with audiences on their terms. They’re diversifying and preparing for a user-first Web that respects user privacy.
The Web 2.0 ad model is fueled by user data
As people spend time (and money) online, they generate tons of data. This includes things like what you search, click, buy, watch, share, and more. This data is extremely valuable to the companies that harvest it—in fact, data is now the most valuable asset on Earth, surpassing resources like gold and oil.
Who’s collecting, controlling, and profiting from this data? Who’s behind this so-called “surveillance economy?” Big Tech, of course. The same companies (like Google and Facebook) that helped shape the modern Web.
By amassing huge amounts of users, and swallowing up smaller companies, Big Tech companies have come to dominate the tech space across social media, search engines, cloud computing, software, hardware, and more. They’re the central authorities of almost everything we do online.
To be fair, it’s not like Big Tech is outright stealing. In today’s Internet, users “freely” give up their data in exchange for access to Google, Facebook, and all the rest. People don’t want to pay for these platforms, so they hand over their data as the ticket to play. Some users don’t even realize their data is being collected or how valuable it is.
Whether users are aware of it, data collection (and abuse) is basically built into the core of how Web 2.0 operates. Apps need money; they get that money by harvesting your data and using it to sell highly targeted ad space on their platforms. Sure, Web 2.0 is the “read-write” Web. It’s also the Web where you are the product.
But Big Tech’s source of power is also its greatest weakness: What happens if that data starts to dry up?
The disappearance of data and its impact on the Web 2.0 ad model
Web 2.0 ad tech’s data sources are dwindling, threatening the old model of online advertising. There are three different factors converging to create this threat:
- Consumers taking steps to protect their privacy
- Government legislation in support of user privacy
- Competition between Big Tech companies
Consumer distrust of tech companies
Gone are the days where users surf the Web, blissfully ignorant of how things work. Users know the game now: Their data is being collected and used to put money in the pockets of Big Tech. They know this data model is annoying, creepy, and dangerous. All too often, careless tech companies have been caught leaking sensitive user info.
For all these reasons, many people are taking control of their data. They’re switching from Gmail to ProtonMail. From Chrome to Brave. They’re taking advantage of iPhone’s native privacy features (such as App Tracking Transparency). They’re leaving Facebook altogether. They’re rejecting cookies, and using ad blockers and VPNs.
Privacy and data autonomy, once afterthoughts in the Web 2.0 world, are now front and center. And they’re built into the core of Web3.
Government efforts to protect digital rights
The Web 2.0 economic model has attracted well deserved attention for its monopolizing and data mismanagement. Government regulators are passing new online privacy laws like Europe’s GDPR and California’s CCPA, and antitrust bills focused on restructuring many Big Tech companies. In 2021 alone, the US saw at least 27 bills proposed or passed in state legislatures—all aimed at regulating the data economy and protecting digital rights.
Big Tech companies are limiting data sharing
As more users protect their data, and regulators close in on Big Tech’s data collection, the tech giants are beginning to fight amongst themselves for the diminishing supply of data. They’re creating “walled gardens” between platforms where communication was once seamless. They’re adjusting what can and can’t be tracked, and how (or if) that data can be shared—a huge blow to the third-party data that fuels the Web 2.0 ad model.
For example, you can’t export data from a Facebook ad campaign and plug it into Google’s ad manager. And Apple now gives iOS mobile users the ability to opt out of cross-site tracking (via a feature called App Tracking Transparency). An option that 95% take advantage of.
Collectively, these “self-imposed” changes make ad targeting much more difficult, expensive, and less effective. Platforms that rely heavily on third-party cookies and cross-site tracking—think of Facebook, Twitter, Instagram, Google, and others—are getting choked off from their data supply.
Note that Apple can make such drastic changes because, in the end, it’s a hardware company. It makes money through the sale of devices like iPhones and macOS computers, not ad sales. For other tech companies, the data policy changes are mere lip service to regulators, or designed to give one company an advantage over competitors, or to appear more marketable as “private.” They’re bare minimum changes, rather than a good-faith effort to nurture a privacy-first Web.
Add it all up, and you’re looking at the beginning of the end for the Web 2.0 economic model…and Web 2.0 companies as we know them.
The future of privacy and digital advertising changes
Bear in mind that while Big Tech is phasing out old tools like cookies, they’re busy developing new and and more complex tracking methods like browser- and device-level fingerprinting. It’s the same game, same players, same goals. Just slightly different rules. And users are tired of it. They’re staying one step ahead of Big Tech’s data economy by using tools like ad blockers and VPNs. Or they’re ditching Big Tech altogether, and making the switch to Web3.
This is a challenge for tech companies and advertisers; it’s also a huge opportunity. User privacy can be a selling point for the brands that get it right. Real privacy-protecting features can be a market differentiator that draws new users. Apple can seriously say they’re limiting Big Tech’s data harvest, and their hardware sales keep reaching all-time highs. And 51% of Brave users feel more positively about brands (such as Verizon and eToro that advertise in a privacy-respecting way. In this sense, Web3 holds real promise for privacy-conscious users and brands alike.
People want data protection and privacy. Governments are backing them. Tech companies are (reluctantly) falling in line. The future is a world where users have full control over their data and expect robust privacy protections. The Internet will no longer be dominated by ad tech, but there’s still room for it, if brands learn to adjust, adapt, and take on new strategies.
The shift to Web3 won’t happen overnight, but it’s already happening. This gives brands and advertisers a chance to test different Web3 strategies now, and hone them before other brands arrive.
Privacy-respecting strategies to connect with Web3 users
The job of digital advertisers is about to get a lot more difficult as the ad tech landscape is forced to deal with a privacy-first Internet. To survive in the Web3 future, brands and advertisers must radically change their strategies for attracting new users with ads.
Here are three Web3-friendly strategies that brands should be exploring right now:
- Zero-party data
- First-party data
- Privacy-respecting ads
Zero-party data: direct user input
Zero-party data comes directly from users. Brands often collect zero-party data via surveys, quizzes, forms, and questionnaires. It’s data that’s generated from asking people their opinions, preferences, habits, or interests, and recording their responses (sometimes—though not always—anonymously). It opens a direct line of communication between brands and users in a way that fosters community.
Many brands are integrating zero-party data requests into their sites and apps, and people are incentivized to supply the data because it results in a better user experience. Think of Yelp!, for example, which asks users for their dietary preferences and restrictions, and lifestyle info like if they own a car or have a pet. This allows Yelp! to recommend businesses that better fit a user’s needs using data they volunteer. Most people don’t view this as invasive, and appreciate the opportunity to freely supply only the data they want to share—in a transparent dialogue—to make their own experience better.
Some examples of prompts that generate zero-party data:
- How much are you looking to spend?
- How many people are you shopping for?
- Which types of products are you interested in?
- How likely are you to try a new product?
Users are more likely to share input with brands they trust. That means it’s important for brands to build lasting relationships with their users and customers. This takes time (it’s not as simple as buying third-party data), but the payoff is much greater.
It supplies direct information (e.g. “I’m shopping for a family of five, prefer laundry detergent in pod form rather than liquid form, and have sensitive skin”) and not proxy-based (e.g. “this person recently bought a washing machine, so maybe they’re also interested in laundry detergent”).
First-party data: user web activity
Companies collect first-party data when users interact directly with their own sites and apps. This type of data can be—though isn’t always—collected in ways that preserve user anonymity. It includes things like:
- Which pages you visit on a site
- How much time you spend on a page
- How far down a page you scroll
- How many pages you visit before making a purchase
- Clicks (on a page, or from marketing tools like emails)
- Device information
- Browser information
- Localized data (e.g. language and region)
- Purchase history
First-party data is valuable with users who regularly use a site or app, or who are returning customers. And because it’s gathered by a company or brand itself, it’s essentially free to collect, and often much more reliable than third-party data. It also has a competitive advantage over third-party data: First-party data is controlled solely by the company that collects it. Third-party data, in contrast, is almost always leveraged by multiple parties (meaning your competitors could have the same data as you).
Like zero-party data, first-party data is highly accurate and reliable. The major difference is that first-party data doesn’t necessarily aid with community-building as it’s collected from passive user interactions rather than direct dialogues.
Note: with recent privacy legislation, some users will be asked for permission before a site can use anything other than strictly necessary cookies. These “cookie consent forms” often appear as pop-ups—and given the choice, many users opt out (or won’t see them at all, if they use Brave browser).
Brave Ads: privacy-respecting advertising
First- and zero-party data are important marketing tools for brands that are looking to gain insights, start conversations, and better advertise to their existing user base. But they can fall short when it comes to facilitating growth and acquiring new users that aren’t already visiting your website or using your app. This is typically when brands turn to third-party data that’s generated by tracking users across sites—the practice that users are rebelling against.
There is, however, an opportunity for privacy-respecting advertising that reaches new audiences: Brave Ads.
The Brave Browser blocks third-party ads, trackers, and cookies by default—helping privacy-conscious users (who are becoming the norm) become unreachable via typical ad channels. But Brave also offers a new, privacy-preserving model of advertising. Brave Ads is the first global digital ads platform built for privacy and a cookie-less future. Through the Brave Browser, users can choose which types of ads they want to see, if any. And users who do opt in receive a portion of the ad revenue in exchange for their attention.
Brave offers access to otherwise unreachable audiences. They use Brave, which blocks ads across the Web. 80% don’t have paid cable or satellite TV. Only 51% use Facebook. Only one in five use Snapchat, TikTok, or Pinterest.
And instead of collecting data without user consent, Brave integrates users into the digital ad economy. It’s honest, opt-in advertising without the trackers, cookies, and other creepy stuff that follows you across the Web.
Note: Brave Ads aren’t replacements for the on-page, third-party ads that Brave blocks. Instead, they’re small, unobtrusive ad units woven seamlessly into the browser itself.
Advertising in the privacy-focused future
Users are adopting Web3 and private Internet tools which make them unreachable by Web 2.0 ad tech standards. The future is one that values privacy and respects data autonomy, and this signals a massive change for the digital ad industry. This new privacy-focused Internet is all about trust and consent. It’s about being honest with users, and letting them make their own decisions about tracking, cookies, and how their data can be used.
The time is now for brands and advertisers to get ahead of the curve and build Web3 strategies. To focus on first- and zero-party data. To build communities, engage directly with customers, and explore new ways of advertising that respect user privacy.
And with revolutionary new ad platforms like Brave Ads, brands have an opportunity to engage with privacy-conscious users and continue to grow in the Web3 world. Ready to get started? Check out Brave Ads and discover the ad model of the future.
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