An Appeal For The Open Internet
Welcome to the latest installment of Gareth Hates Ad Tech. Today I want to step a little outside of ad tech into a wider topic that encompasses ad tech – a discussion of the open internet.
I was inspired to write this article by a few things, but most importantly, by Eric Seufert’s article, The Open Web Is Whistling Past The Graveyard. I’m writing this not because I necessarily disagree – but because if he’s right, we need to reflect deeply on what we might be losing. I also think that we need to develop solutions to fix the problems he outlines, and I am happy to tell you all about my current project dedicated to doing so (so this is also a soft pitch, but I’ll try not to make it too unbearable, and focus on the why and not the how).
Let’s start with Eric’s twitter post, and then I promise to stop co-opting his content and I will launch into my own diatribe :)
The open web seems to be whistling past the graveyard in the face of third-party cookie deprecation. The economy of the open web, empowered through third-party cookies, is not too big to let fail.
In my view, the collective, unwarranted optimism of the open web with respect to third-party cookie deprecation in Chrome is anchored to three core misapprehensions:
One: Privacy Sandbox will ultimately deliver advertising targeting and measurement functionality that is comparable to cookies.
Two: Alternative identity solutions will meaningfully supplement the loss of user-level addressability instituted through third-party cookie deprecation.
Three: The open web is so vital to the consumer internet experience that it simply won’t be allowed to wither and deteriorate.
First, let’s lay out some table stakes –
What is the open web?
The open web as defined in this article refers to the spider web of websites accessible via web browser using DNS (Domain Name Service) to access the website you’re looking for. DISCLAIMER ENGINEERS PLEASE DON’T COME FOR MY HEAD,
What’s the Domain Name Service you say? I’m so glad you asked! It’s actually a wild service administered by the US government that maps all of the word-names of websites (ie. cnn.com) to the servers that resolve to where their content is hosted (ie. 192.241.241.134, aka an IP address). The Domain Name Service, interfaced with on your behalf by a number of DNS providers like Amazon or Namecheap, allows you to register the names of your websites and the servers they need to resolve to, and then actually routes them accurately! It’s pretty insane that this piece of vital open web infrastructure is controlled by a country, but I digress.
After DNS registry is done, you type cnn.com into your browser and your browser gets redirected to the servers where the content is hosted. Nowadays, almost everyone uses a CDN – a content delivery network – to house their content. CDN’s are special because they’re companies that specialize in distribution – IE. instead of a few central servers that everyone’s computers need to communicate with (if you’re in Ad Tech, you’ll be familiar with the notion of “Data Center,” Data Centers house servers) CDNs have bazillions and bazillions of data centers and servers all over the place, so they’re close to the users who are trying to access the content and it delivers more quickly. This comes with some caveats in their functionality and flexibility (which is evolving right now l, and is a very cool space), but they’re real good at loadin’ websites. They’re a fascinating form of “decentralized centralization,” which is a good reminder the “centrality” is a spectrum and not a binary.
What role does a browser play?
So, in this summary of the internet, we have the domain name service mapping website names to servers, and those servers loading the content via CDNs. That is our high level architectural map – but even more important, how do end consumers access this infrastructure? The answer is a web browser – a fundamental piece of internet infrastructure that has been a warzone since its inception. It’s a warzone because of the tremendous amount of influence it wields – the web browser a user is utilizing is basically the tool by which they engage with the internet. That’s why netscape was worth a bazillion dollars, why Microsoft was so insistent on bundling in IE with their operating system, and why Google went to tremendous (read: sketchy) lengths to get Chrome installed absolutely everywhere they possibly could (bundling, etc).
Browsers, when they connect to these servers, literally download files (html, css, javascript, stuff) and then assemble those files on your behalf. Then, poof, magic, a website shows up in front of your face! The reason I’m highlighting this is that this abstraction, this concept, is often poorly understood – browsers literally download and assemble files to create websites. They’re not magic windows into some magic thing that exists somewhere else – that’s not how they work – they’re downloaders and assemblers.
Why is this architecture important?
The reason I think this is so important is because of how flexible it is. Because they’re downloaders and assemblers, the contents of those files can be virtually anything within the confines of supported web languages and market (ie. html CSS and javascript). This provides content creators with a tremendous amount of flexibility. Combine this with the fact that you have tons of DNS vendors, tons of CDN providers, and multiple browser options, and you get to what I want to be the brunt of this section – the architecture of the modern open web is decentralized and democratized. Website owners have nearly unlimited power to choose their own destiny. They can choose how their websites look, what they do, how they’re monetized, everything. They can also, very importantly, provide access to anyone using a web browser, with open standards.
This stands in stark contrast to what I would consider closed platforms. There are two types of closed platforms that jump immediately to mind for me, but there are probably lots more –
Walled Gardens - Twitter, Facebook, etc. These are platforms that have significant limitations around how content is discovered, displayed, and monetized – as the experience is mediated by a single platform.
App Environments – App Environments tend to be owned by OS providers – which is actually interesting semi-vertical integration compared to the desktop software distribution model. This means those providers get tremendous say in similar realms to the closed internet platforms - discovery, functionality, and monetization.
Why does closed vs open matter?
In 2024, everything is trending towards closed, and I think beyond sucking for Ad Tech (where I spend a depressing amount of my intellectual energy), it is going to suck for society and the world. With the rollout of privacy sandbox, Google is trying to vertically integrate monetization with their browsing environment, essentially making Chrome into a centralized monetization platform on top of the decentralized nature of the open web. It’s the first step in turning browsers into an increasingly closed environment, with the rules written by Google. It has the lovely side effect of significantly reducing the amount of revenue that independent site owners can generate from their websites, which alongside content summaries directly in google search results or feeding their LLMs with the crawled internet, looks to me like a giant middle finger from Google to the publishing and independent site world.
But this article isn’t just about Google! Let’s try to talk through some distinct ways in which Closed environments are just, like, super lame dude for lots of use cases:
Closed Environments Exert Control Over Information
One of the hallmarks of a closed browsing environment is they control who sees what, when. When you log into facebook, facebook controls what posts you see. When you log into Twitter, twitter controls what shows up in your feed. When you go into the app store, the app store controls which apps you see. If you search within facebook, a centralized authority chooses what pops up in that search – with the ability to choose what appears or doesn’t appear. There’s no such thing as a “non facebook facebook search engine.”
This is a scary future. We are already struggling to deal with understanding the effects of these systems on our psyches – this closed architecture means that companies, and in some cases individuals, have the ability to exert control over information in their platform. We certainly don’t need more of this.
The architecture of the open web stands in stark contrast to this. Anyone can access anything they like, and there is simply safety in decentralization – taking a website off of the internet requires significant intervention into tech companies that have zero stake in controlling content and actually differentiate themselves on their neutrality. You have to work pretty hard to get “de-platformed” from the internet.
Additionally, if we feel like the results we’re getting from our search engine are biased or not what we want, we can just use a different search engine. Poof, problem solved. Google’s search dominance is a result of people wanting to use it, not a result of there not “being any other way to search.”
Closed Environments Insert Themselves as Economic Middle Men
Another hallmark of closed environments is when they involve themselves in the financial transaction generated as a result of the usage of the platform. In facebook, for example, often content creators actually get no money at all. In Twitter, they’re rolling out a monetization strategy, but other platforms are more generous, like Youtube, where content creators get a meager cut of the money generated by ads shown to their users. App Stores, similarly, take revshares on money generated by payments processed through their systems, and are notoriously greedy.
This model, which underpins most of the closed systems, creates strange bedfellows and incentives. Firstly, it means that these platforms are constantly doing a balancing act between surfacing content to their users that their users actually want to consume (more consumption leading to more revenue) with surfacing content that makes them more money within the parameters of the closed environment (some pieces of content lending themselves to revenue more effectively than others). This battle, which exists in all publishing, and let's be clear these content platforms are publishers, is magnified exponentially in these large scale platforms, where I’m sure they have entire teams dedicated to doing the math here. And once you’ve committed in some way to using a given content platform, these biases become inescapable (and strangely influential in your life).
It also means these platforms typically engage in sketchiness around monetization. When they become the bidding platform, the auctioning platform, and the entire ecosystem for tracking campaign performance, you encounter all sorts of shenanigans. You get facebook gaming video quality metrics, you get Google manipulating auctions to make more money (seems to be a topic du jour, but they’ve always done auction madness), and in general, you get non-transparent systems that the greater internet community will have less and less of a say in.
There are some great examples of the lengths to which these closed platforms are willing to go to exert their economic control. One that pops immediately to mind is Epic Games, the creator of the ubiquitous game Fortnite, enjoyed by 500 million human beings across the globe. The structure of Apple’s App Store is such that they demand a percentage of subscription revenue for apps delivered via their platform, and that percentage is meaningful. Epic told them to take a hike, that ruins their unit economics, and Apple held strong. They’re in a lawsuit - but my goodness – the most popular game on the planet is not available in the App Store because the closed environment is that serious about its stranglehold on the economics. There are examples of this all over.
Closed Environments Stifle Innovation
Most importantly, I’m a believer that the nature of these closed platforms inhibits innovation. When content can only be delivered via a social network, there are significant limitations on how that content can be displayed and what it can contain. These limitations are not up for debate and it is inherent to the construction of the central platform that they’re not democratic. How things show up in Facebook is dictated by Facebook and Facebook alone – and you don’t need to be a believer in Marshall McLuhan’s the medium is the message to see how placing limits on the various mediums that can exist for delivering content can meaningfully alter the effect that content has on our psyches (imagine a world where all we had was twitter and tik tok – what would conversations look like? What would humanity become? I shudder to think.)
This is true in App environments as well – Apple and Android both exert significant control over the types of applications that are allowed in their app stores, which means that lots of new app developers spend significant cycles just trying to figure out how to keep Apple and Android happy. There are also plenty of examples of Apple and Android de-listing apps “because they didn’t like them,” and I’ll spare you the chat gpt lookup of “examples of popular delisted apps” because nowadays you can do that yourself and by giving you the query I’ve basically delivered the content 🙂.
The fact of the matter is that not only is the open web a flexible platform for developing new media and methods of delivering information and activity, it’s an open and flexible platform for distribution of software. It’s like a giant, relatively free system that allows builders of things or writers of stuff to freely deliver that stuff to anyone who can click a link. We need to keep this around, and in order to do that, we need to make meaningful improvements to how site owners make money.
So what do we do?
To bring this full circle, I’d look to loop back to Eric’s post and dissect it :
The open web seems to be whistling past the graveyard in the face of third-party cookie deprecation. The economy of the open web, empowered through third-party cookies, is not too big to let fail.
One: Privacy Sandbox will ultimately deliver advertising targeting and measurement functionality that is comparable to cookies.
Two: Alternative identity solutions will meaningfully supplement the loss of user-level addressability instituted through third-party cookie deprecation.
Three: The open web is so vital to the consumer internet experience that it simply won’t be allowed to wither and deteriorate.
I’d like to synthesize this a bit – really, the brunt of this post is that the economics of the open web are reliant on cookies. The explanation for this reliance would be that in order for site owners to generate money, they need the performance benefit provided by persistent cross site tracking to advertisers via cookies in order to generate CPMs to stay viable businesses.
This is not an unreasonable supposition. CPMs have been going down as it is, and online businesses have been failing. A big hit to CPMs, some estimates have on the order of 40%, might just sink the internet altogether – and in his words, it’s not too big to fail, and if we just keep cramming on more ads to make up for the decreased CPMs it will get so shitty to be on the web that everyone will just stop.
This is the pessimist’s take.
HOWEVER – distilling this even further, what he’s really saying is “a 40% hit to CPMs is coming and the web might die” That, my friends, sounds like a problem that we can figure out some solutions to. It’s time to fill that glass up halfway, so let’s do some things.
Increase CPMs on the open internet
I have a lot of blog posts written about this already. But the method by which we auction programmatic ads, the data included in those auctions, and the tools we implement (ad units, placement IDs, identifiers) are in a savage state of disrepair. I don’t think it’s unreasonable to think that we could meaningfully increase the CPMs of every website on the internet by fixing the infrastructure itself. I’ll put this into bullet points, but probably best to read some of my other articles, and then readers of this please go start some companies :
Standardize inventory classification using a stable, persistent, performance-difference indicating inventory identifier. Give advertisers something meaningful to optimize against over time.
Standardize how we pass third party sources of information.
Make sure your auctions are not staggered, supply path optimization does not matter if you do not have a single, centralized auction where everything competes on bid price.
Make sure your ads are viewable, lazy load ads, think about the things that will improve advertiser outcomes not things that you think “look nice.” There’s a lot written on the internet about “ugly ads performing better,” in my experience, the same holds for websites, ugly websites tend to perform better for campaigns.
Run everything on earth through a single, optimized prebid instance managed by someone who knows what they’re doing.
One of my overarching themes for this is that websites need to work for performance advertisers. Most of the bellyaching I see on linkedin is about “brands” being defrauded, or not trusting programmatic, or programmatic blah is doing this to big brand x. This is all a distraction. Closed platforms don’t succeed because they work well for brand advertisers, even though they do. They succeed because they work for performance advertisers – simple, post click, performance advertisers. If your website works for that, it works for everyone. This is the goal we need to achieve for programmatic to survive, not to roll out some bullshit enhancement that incrementally improves a deck built by a trader for an agency shown to a CMO somewhere.
Site Owners need to rethink their businesses and incorporate unit economics
Prepare thyself for a soft pitch of my new company, which makes this blog post our official exit from stealth mode. The open internet, as it has existed to date, is lacking something that every closed ecosystem has and is actually the foundation of most of their businesses - unit economics.
What are unit economics you ask? Unit economics is the study and understanding of the cost and revenue associated with a single customer for a business. So, in simple terms, how much money do you make from each user vs how much money does it cost you to acquire that user and then provide whatever services you do for them.
For advertising in apps, this is the lifeblood of the app install industry.
For meta, they can tell you this with excruciating detail.
For the ad-driven open internet, this data is nearly impossible to get. If you are a site owner reading this, I put to you this question - how much money do the different types of users who visit your site generate over their lifetime? What’s the difference between logged in users and not logged in users? How about users who read your sports section versus your entertainment section? Or users who found you through search vs social media? And I don’t mean estimates, I mean for each of these different subsections, what does the distribution look like and how long does it take to reach the asymptote of revenue generation over the lifetime of a user?
If you can’t answer those questions, easily and offhand, how can you possibly profitably grow your business?
I would argue that cookies have been a crutch – that website businesses haven’t “gotten with the times” the way that app businesses have because they haven’t had to. The old school mad men days of “well, we just need to charge higher prices for our inventory and do more sales” compared to how much you pay your content creators, combined with free traffic from organic sources (which, lo and behold, is drying up) gave them the semblance of being reasonable businesses, when in reality there were some major blind spots in how to logically scale and operate the business. AKA - Free Traffic + Unsophisticated Ad Dollars from Brand Advertisers = shitloads of low-complexity revenue that looks extremely profitable.
This is why we started Gamera. Gamera is a Google Analytics competitor / alternative / complement (they’re not mutually exclusive at all) that incorporates the notion of value into your site analytics, especially for companies with on-site advertising revenue. We don’t think that it’s a coincidence that the most popular website analytics platform was built for things that primarily benefit search engines and tangentially site owners – that site owners have been told to purely optimize to experience and behavior without demanding any insight into revenue and value. We don’t think that company necessarily has your best interests as site owners in mind, through no fault of their own, I wouldn’t expect them to do extra work for no real benefit on their side.
The foundation of Gamera is that we provide you with precisely these insights – we don’t just think about single user sessions, we don’t just think about bounce rate – we answer questions like :
For your consumers with the highest lifetime value, what parts of your website do they regularly engage in ?
Who are these users? Would you like to segment them and do stuff with those segments?
How do you get more users that are exceedingly profitable on a user by user basis, not by comparing aggregates with other aggregates that don’t actually tell you how to grow your business?
Which users will have a net LTV benefit to paywall? What are the tradeoffs in various forms of paywall for the bottom line of my business, not on an aggregate basis, but user by user?
I think we actually need these analytics in order for site owners to properly improve the performance of their websites for advertisers – because there’s no better feedback loop than yield!
If you’re interested in learning about value analytics, and LTV, please reach out! We’re entering a closed beta now, and I am personally working with our first cohort of customers. You can find more information here : https://gamera.app/value-analytics/overview.html
It’s time for a new generation of thinking – the good old days of scotch and compelling powerpoints are not going to protect the internet against the walled gardens. We hope to be one brick in the foundation of a new (very not exclusive) clubhouse for the open web.