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Illustration: Sarah Grillo/Axios

After years of operating with minimal oversight or concern for user privacy, the advertising industry is finally beginning to adopt a privacy-first supply chain that it hopes will gain back the trust of frustrated consumers.

Why it matters: Even though the industry has banded together to push back against privacy regulations at the state level, it's found itself at odds over how it should proactively prepare for a more privacy-focused advertising ecosystem.

Driving the news: Two of the biggest ad trade groups, the 4A's (The American Association of Advertising Agencies) and ANA (The Association of National Advertisers), released a joint statement last week condemning Google's decision to phase out support for 3rd-party cookies in Chrome. Chrome is the last major web browser to do so.

  • Cutting support for the cookies placed by advertisers and other third parties will force the digital ad and marketing industries to be more privacy-focused, although cookie-based targeting is at this point mostly outdated. For decades, advertisers relied on cookies to track users across the web and to retarget them with ads, particularly on desktop. The dominance of mobile-based ads has made that tactic somewhat obsolete.

What they're saying: "Google’s decision to block third-party cookies in Chrome could have major competitive impacts for digital businesses, consumer services, and technological innovation," the heads of policy for the 4A's and ANA said in a joint statement.

  • "It would threaten to substantially disrupt much of the infrastructure of today's Internet without providing any viable alternative, and it may choke off the economic oxygen from advertising that startups and emerging companies need to survive."
  • They say Google doesn't provide a serious alternative, although Google has for months tried to lay out a framework for one.

Be smart: While the industry seems split over the cookie phase-out, it is much more aligned on regulation. For decades, advertising trade groups lobbied furiously against any privacy legislation, fearing that efforts to make it harder to target consumers with ads would put a damper on the industry.

  • But now that states are beginning to pass their own laws, like the California Consumer Privacy Act (CCPA), which went into effect earlier this month, most groups are banding together in favor of a national privacy law.

What's next: Premium web publishers are taking advantage of a privacy-driven advertising ecosystem by creating their own data marketplaces using first-party data, or data that consumers give to publishers when they sign up for things like subscriptions.

  • Some tech companies are also taking advantage of this dynamic. Apple has doubled down on its privacy-first mantra in recent months, as it's begun to roll out more software services to users.

The big picture: Some publishers fear that limits on cookie targeting will force them to depend even more on Google for ad targeting. But most marketers seem to think that these inter-industry struggles will eventually work themselves out, leaving a better experience for consumers increasingly concerned about data privacy.

  • "You've got a climate right now where consumers have increased awareness how data is being used," said Christian Juhl, Global CEO of GroupM, one of the largest ad-buying agencies in he world. "I don't think we've done a really good job of giving consumers the kind of experience they should have based on the data we have and that value exchange needs to be evened out," Juhl told Axios at the Consumer Electronics Show.
  • More than a quarter (27%) of U.S. digital consumers use an ad blocker, per eMarketer.

The bottom line: Despite disagreements over how to get there, most marketers agree that if they don't start to embrace a privacy-driven world, consumers will tune them out.

  • "There's this line of a creepiness which we all know about that some of the experiences that consumers are having with media they find to be very, very invasive," said Florian Adamski, CEO OMD Worldwide, another global ad agency, to Axios at CES.
  • "We need to find better ways, driven by technology, driven by talent, by structure, but also by ethics, on where to draw the line with what we could be doing with programmatic media and with personalization and what probably we should not be doing."

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