Pixels Are the Next Digital Advertising Workhorse Facing Tougher FTC Scrutiny

One of the most ubiquitous pieces of ad tech is under the scrutiny of federal regulators.

The FTC recently published a deep dive into pixels and their potential risks to consumers, noting that “companies using tracking pixels that impermissibly disclose an individual’s personal information (which may include health information) to third parties” may be in violation of a host of state and federal laws.

The explainer came after the regulatory body slapped fines on discount drug provider GoodRx in February and digital therapy firm BetterHelp earlier this month, for $1.5 million and $7.8 million respectively, both for sharing sensitive customer information with third parties like Google and Meta via pixels.

Cookies are usually at the center of conversations about the nefarious impacts of digital advertising on privacy. Pixels are often lumped with other ills of social platforms. But pixels are broader and more fundamental to digital advertising functions than cookies: pixels are a common process by which websites allow cross-site tracking, while identifiers like cookies, IP addresses and email addresses help brands tag the customers they encounter across the web.

“They’re not new. They’re not limited to Meta,” said Alex Cone, co-founder of ads privacy learning platform Coir. “It is such a common implementation of collecting data that nearly every ad-tech company [incorporates pixels].”

And despite the enforcement actions, advertisers aren’t abandoning them any time soon: three ad buyers told Adweek that their clients could not successfully advertise without pixels. As advertisers have lost access to many of the other tools they once relied on for targeting and attribution, access to pixels, which exist on thousands of the most-trafficked websites, has been a lifeline for marketers adapting to a new digital advertising ecosystem.

“Pixels are a necessity,” said Ivonnie Dulce, senior director of paid social at agency Dysrupt. “It is something within our checklist that we always have to set up before we launch any campaign.”

Previously positioned as benign

Pixels are web requests that a user’s browser makes for the purpose of tracking, according to Irene Knapp, a former Google engineer now working with tech privacy watchdog Tech Inquiry. They started as tiny transparent images appended to websites, though now they are embedded into HTML and JavaScript online and in emails in less noticeable ways.

“If you were standing at a doorway and sticking stickers on people who walked in so that you could identify them later, the pixel is your hand reaching to put something on the person,” Cone said. “The cookie is the sticker.”

Large publishers like Meta and Google and major demand-side platforms offer their own pixels, as well as many other entities. Often a company might not know the exact ramifications of the pixels they append to their websites; the tech is often sold as a solution to make advertising more effective, and privacy concerns are typically not mentioned, said Adam Heimlich, a programmatic veteran and CEO of Chalice Custom Algorithms.

“It’s positioned as something very benign,” Heimlich said.

Pixels haven’t attracted as much regulatory scrutiny, until now, in part because they represent an agreement between two companies. Other identifiers like cookies are given by publishers or browsers to consumers, sometimes with their knowledge.

“The structure of American business law favors private transaction and the placing of the pixel and the handing over of data from one company is generally not a concern,” Heimlich said.

The best means of attribution

Advertisers, especially for performance marketing, rely on pixels to measure the effectiveness of their ads and then to optimize and target future ads based on these learnings.

While their effectiveness has been dampened by the loss of signals, especially Apple’s mobile identifiers, pixels are still the best means of attribution, said Kevin Renwick, media director at Mekanism.

“They’re essential,” he said. “This represents the best solution that we have in market.”

Brands can use pixels with their own first-party data instead of cookies to still track their ads’ performance. But this doesn’t always mitigate privacy concerns if that first-party data is particularly sensitive, as it was in the case of GoodRx and BetterHelp.

With Meta (and other walled gardens), even if a brand does not have first-party data, an advertiser can use a pixel to learn who bought a product and then build a look-alike audience based on this data to target future ads, all within the walled garden, Dulce said. Here, the advertiser does not get to see the individuals in the data set but can use Meta’s data to make up for some of the signal loss with cookies.

Despite the recent federal government actions, multiple sources said the compliance risk of using pixels still feels low, especially for smaller brands.

But all brands risk losing business to their competition by sharing customer data via pixels, which gives the wider web access with walled gardens like Facebook. For example, if Serta tells Meta that you are one of its customers, Meta is likely to tell competitor Tempur-Pedic that you buy mattresses and serve you Tempur-Pedic ads.

In lieu of pixels, other technologies like data clean rooms or new identifiers like UID2 can provide a more secure way to ferret information between parties, though they are generally more expensive, and are not free of privacy risks. But for most brands, the benefits of pixels outweigh their costs, for now.

“[Brands] prioritize the weight of the information over the potential of being targeted by a competitor brand trying to steal business,” Dulce said.