ONLINE ADVERTISING – HISTORY, EVOLUTION, AND CHALLENGES

Abstract

The rise of the Internet was closely followed by the emergence of a new advertising medium – Online Advertising. Its rapid growth owes much to the tremendous advancements of the so-called Advertising Technology or AdTech. The AdTech improvements led to a substantial reduction in the cost of targeting and, consequently, to increased media investments from advertisers. Programmatic advertising, the most technologically advanced form of online advertising, makes use of advanced media trading algorithms, including machine learning. It involves a high degree of technological complexity coupled with a lack of transparency and has many advertisers complaining that it works like a ’black box’. The main technological evolutions that shaped the industry will be critically analysed, with a focus on the effects of this growing technological complexity over the market structure. The emergence of ever-more complex industry algorithms was fuelled by a growing quantity of user data and led to complaints from the general public and, recently, to legal actions against the two companies that dominate the market, Google and Facebook. Following an overview of the settled and ongoing legal cases, we conclude that the impact of the rulings, especially the potential ban on the use of 3rd party cookies, could present a huge challenge for advertisers and completely transform the industry. Non-cookie based solutions will need to be developed, but this could negatively impact the advertisers’ results. The Online Advertising industry, as a whole, will need to completely rethink its way of functioning, evolving towards a more sustainable and privacy-respectful business model. Our paper aims to present the emergence of Online Advertising, its evolution in the past three decades, the role of Advertising Technology (AdTech) in shaping the industry s practices and the impact of the legal actions it is currently confronted with.