Dive Brief:

• Marketer spending on third-party audience data increased 8.1% year-on-year to $13.3 billion in 2021, double the rate increase recorded the year prior, according to findings shared in the fifth annual State of Data report from the Interactive Advertising Bureau (IAB).
• That hike came despite the pending deprecation of cookies, which poses serious challenges to third-party tactics. The IAB depicted the industry as overconfident and unprepared for that shift, noting two-thirds of respondents are not adjusting their measurement strategies while 59% are not increasing their investments in first-party data.
• Sixty-eight percent of those surveyed said they expect revenue will not be affected by the deprecation of cookies and other identifiers, down from 76% who said the same in 2021. But the IAB believes $10 billion in annual sales are at risk if the industry does not get its house in order soon. Ipsos helped the trade organization compile its research, which was based on responses from 200 leaders across brands, agencies, publishers and ad tech.

Dive Insight:

The latest State of Data report from the IAB paints a picture of an industry primed to be blindsided by identifier tweaks coming down the pike, even as marketers have been well aware of those developments and their potential consequences for years now.

The organization reinforced that billions of dollars are at risk if the situation isn't remedied soon, recommending three steps to avoid what it dubbed a "measurement blackout": Developing a common language, universal standards and universal key performance indicators; creating new privacy-minded solutions around measurement and attribution; and wider adoption of existing tech standards — an area the IAB specializes in — along with a push to build out those standards to center more on a cross-channel approach.

Those are tall orders and ones that ostensibly need to be filled on a short timeline, as cookies are expected to be phased out by Google some time in 2023. Other key identifiers, like Apple's Identifier for Advertisers (IDFA), are already undergoing changes that have impacted ad performance and measurement, delivering a blow to digital platforms. Facebook estimates it could lose up to $10 billion in revenue this year due to IDFA becoming an opt-in feature.

"If we don't diversify our approach to the market, soon we’ll be operating by the equivalent of candlelight," said Angelina Eng, vice president of measurement and attribution at the Programmatic + Data Center of the IAB, in a statement attached to the research.

Much has been written about the gold rush for first-party data and cookie alternatives, but the trade group's findings suggest that many companies have not recently upped their investments in those areas. Only 42% of brands and 43% of agencies were "very/somewhat" concerned about not having enough first-party data.

Meanwhile, spending on third-party data actually grew in 2021. That increase suggests that third-party data will still have some place in future ad-targeting strategies, even if it's less effective than in the past and as privacy questions linger. But it's also possibly indicative of marketers having their eyes too firmly locked on what's working for them in the short term.

"Even though people know that [third-party data] may be going away and it will change in terms of scale, if it's working for them right now, and getting results, they need to get results," an anonymous ad-tech executive said in comments included in the report.

Lack of education could also pose obstacles. The IAB noted that under half (46%) of the respondents surveyed had a strong understanding of Google's Privacy Sandbox, an initiative that includes Topics, an attempt by the search giant to replace cookies. Other proposed solutions like The Trade Desk's Unified ID 2.0 and Microsoft's Parakeet carried knowledge gaps as well.