Ad Tech Is Facing the Loss of Another Important Signal: the IP Address

Ad tech’s privacy era is here. Third-party cookies are disappearing, and mobile ad IDs aren’t far behind. Now, add IP addresses to the list of vanishing signals used for targeted advertising. IP addresses are fundamental to the functionality of the internet, allowing information to be based between devices on a network. But they can also be used to serve people targeted ads and build digital profiles on users without their knowledge. At the Worldwide Developers Conference in June, Apple announced it’s taking measures to hide IP addresses on Safari and its mail app. Google issued a proposal in January called Gnatcatcher that would similarly hide IP addresses in Chrome. And internet service providers, the companies that ultimately control IP address, are at the beginning stages of making the signal harder to use for advertising purposes. “Generally, digital media has become unbelievably effective because of its precise targeting, and IPs play a key role in that. When you begin to take that precision away, it's not a stretch to think that effectiveness starts to deteriorate,” said Vic Drabicky, founder and CEO of agency January Digital. CTV challenges Hiding IP addresses makes it harder for companies to aggregate disparate data signals that ultimately add up to an individual or a household. But it’s also likely to make connected TV advertising more challenging. The large walled gardens, such as Roku and Amazon, execute deals based on their proprietary device IDs and don’t pass along sensitive user information like IP addresses. But outside of those platforms, in apps that often don’t require user logins, IP addresses are the main signal used for targeted advertising. The CTV device can also act as the anchor point for many vendors’ identity graphs. Since the big screen typically doesn’t move, ad-tech companies map other devices on the same network back to the CTV device to identify a single user or household. Travis Clinger, svp of addressability and ecosystem at identity company LiveRamp, said these privacy efforts “effectively kill more CTV graphs” since they rely on IP addresses to map together devices within a household. “CTV providers are looking at identity as a must-have. They realize that the IP address is starting to go away,” Clinger said. IP addresses have typically been stagnant, only changing when a router is reset. But internet service providers are starting to take more proactive approaches to hiding their customers’ information. Louqman Parampath, vp of product management at Roku, said the company has noticed IP addresses change much more often than two or three years ago. Clinger also said internet service providers are talking about churning IP addresses more frequently. The rate at which IP addresses rotate depends on the internet service provider, but it’s clear that giant broadband companies are taking steps to obfuscate data for privacy reasons. Plus, changing the IP address associated with a device more often could limit malware attacks, freeing up bandwidth that was otherwise used by bad actors. A privacy-first trend One source involved with knowledge of advanced TV ad buying experiments, who requested anonymity, said tests to check the efficacy of frequent IP address rotation have already begun and that there’s an appetite to implement such privacy-first changes. However, a scaled impact would be felt if similar moves are embraced across multiple internet service providers. But Apple and Google don’t need to wait for such changes. Their decisions, pending or imminent, to hide IP addresses are part of a larger privacy-first trend bearing down on ad tech. Within the past two years, serious measures have been taken that impact targeted advertising across desktop, in-app, email marketing and CTV, with the ultimate goal of forcing ad tech to gain explicit consent from users to track them. Apple and Google’s move to hide IP addresses within their ecosystems still impacts CTV advertising, even if the ad request isn’t coming from an Apple or Android TV, since marketers today are focused on omnichannel advertising. If someone saw an ad on their smart TV and then looked that product up in Safari on their Mac, an ad-tech company using IP addresses to connect devices will have a harder time measuring attribution. “Those things become harder, so it will have a downstream effect in terms of attribution for even connected TV,” Parampath said. Privacy changes are unlikely to stop here, especially as federal and state legislators increasingly look to pass digital privacy acts. Ad tech is essentially being squeezed from all sides. “It's changing super quickly,” Drabicky said. “None of this was even a conversation, say, even two years ago.”