The GDPR, Europe’s sweeping new data protection laws, could upend the advertising technology industry – or at least prompt a reverse in strategy.

The GDPR (General Data Protection Regulation) went into effect May 25, and as expected, it is posing a major challenge for all companies with a digital presence in the EU – especially internet companies like Facebook, which are in the business of collecting, storing and/or processing copious amounts of information on EU citizens. The laws also represent a dramatic shift for healthcare providers, insurers, banks and other companies that routinely handle sensitive personal data.

But nowhere is the GDPR more daunting than in the advertising technology or “ad tech” sector, the raison d'être of which is using data to target potential customers with online advertising. Because personal data is shared so widely and the science of matching ads to people has many moving parts, this is a highly fragmented and complex industry. It is also one of the most obvious targets for data privacy advocates. Brian Wieser of research firm Pivotal says the industry was already in trouble before the GDPR, with an “ad tech bubble” on the verge of bursting.

In its early days, the ad tech industry believed people would welcome “relevant” ads. It was wrong. On top of this crumbled premise, omnipresent entities like Facebook and Google grew into their own online advertising ecosystems, leaving little room for rivals. The ad tech industry started consolidating in response. The GDPR will likely accelerate this, as ad tech firms will have to get consent from users to process their data. Johnny Ryan of ad tech firm PageFair reckons that only about 3% will.

In reaction to the GDPR, some ad tech companies have left Europe altogether. Others hope to claim “legitimate interest”, a legal basis for processing personal data allowed by the GDPR, though the EU’s forthcoming ePrivacy directive could foil this strategy. Meanwhile, the European arm of the Interactive Advertising Bureau, a lobbying group, has disseminated technical standards regarding user consent across the advertising supply chain, The Economist notes.

Google is seizing upon an opportunity offered by the GDPR: Websites and apps that use its ad tech tools need to get people’s consent, and if they use Google’s consent tool, they will have to limit their use of other ad tech vendors. Publishers, worried that this will make Google even more dominant in online advertising, hope the GDPR will help them. As Jason Kint of Digital Content Next explains, it could enable them to regain more control of customer relationships, since the laws will make it harder for advertisers to target them directly.

However ad tech companies ultimately adapt to it, the GDPR is a landmark, as it pushes advertisers back to targeting websites and apps, rather than people.

This website uses cookies to ensure you get the best experience on our website. Learn more