This excerpt was originally published by the Wall Street Journal.

This year companies are expected to spend $333 billion globally on online advertising, with plenty of that spending driven by advertisers’ ability to target consumers based on their web-browsing histories, physical location, app usage, income levels and other information.

But a surge in privacy regulation around the globe has marketers, publishers and platforms scrambling to make sure they are compliant with new laws and pending regulations.

Last year, the European Union began enforcing a sweeping set of data privacy rules called the General Data Protection Regulation, which restricts how companies can collect, store and use personal data. In the U.S., the California Consumer Privacy Act, which gives residents the right to know what data businesses collect about them as well as the ability to request that they delete the information, is expected to take effect in 2020. And other states such as New York are considering their own privacy legislation. Meanwhile, advertisers and others are pushing for a new federal law governing the way advertisers and others collect and use consumer data, in an effort to pre-empt regulation by individual states.

As regulations mount, big questions remain about how the highflying digital ad business will be affected.

What will marketing look like a few years down the road when privacy regulations fully take hold around the world? Will new restrictions hurt advertisers’ ability to achieve marketing goals, and what is coming next?

Erin Matts

Chief Executive Officer, U.S. unit of Hearts & Science, an ad-buying firm owned by Omnicom Group

If consumers were more aware of how advertisers are using data, they might accept some level of tracking. I, for one, do not want to get erectile-dysfunction drug ads anymore because I have gone onto too many sport sites and the assumption is I am a 64-year-old man.

The more education that we can give to consumers, the better. We need to let them know how we are handling their data and how we are improving their advertising and content experiences with that data. I could be Pollyanna about this, but I think everyone wants a better experience overall.

Look at what Apple and Google are doing with privacy restrictions such as dismantling completely or limiting the ability to use third-party tracking cookies. [A cookie is a small text file stored in an internet browser that lets companies silently follow a user around the Web, gathering information such as which sites a person visits and what ads they have viewed or clicked.] It’s designed to protect consumers, but I don’t know if it’s going to improve the consumer experience. The challenge is, if we go back to the inability to use third-party cookies, that could be extremely challenging for advertisers who are going to be faced with a lot of waste in terms of ad dollars.

I think the walled gardens, Google and Facebook, benefit from stricter privacy regulation because they solved the identity issue. If you are an advertiser and you haven’t made a commitment to an e-commerce approach or a first-party data ecosystem, your reliance on third parties is to your detriment. That is the biggest challenge.

For some advertisers such as retailers, who have long been able to manage their own internal databases, this is less of an issue. For those who don’t have first-party data, they will have to do advertising the way we did it 25 years ago, which was find relevant environments to put their ads, regardless of who they are reaching. You want to reach basketball enthusiasts, so you put your ad on ESPN.com. If you are using targeting such as third-party cookies, you are able to find those people in other sites, which could be more efficient than buying ESPN.

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