How Google’s cookie plan affects the ad tech industry?

Google’s decision to phase out third-party cookies in its Chrome browser has sparked a lot of debate and uncertainty in the online advertising industry. The tech giant claims that its Privacy Sandbox initiative will offer more privacy and control to users while still enabling relevant and effective ads. However, some ad tech players are not convinced that Google’s cookie plan will support some of the key practices and features that they rely on.

What is a privacy sandbox?

Privacy Sandbox is Google’s proposal to replace third-party cookies with new technologies and standards that aim to preserve the benefits of online advertising, such as ad personalization, measurement, and fraud prevention, without compromising user privacy. Google says that Privacy Sandbox will use anonymized signals and on-device processing to deliver ads that match user interests without revealing their identity or browsing history to advertisers or publishers.

Some of the main components of the Privacy Sandbox are:

• Federated Learning of Cohorts (FLoC): This is a method to group users into cohorts based on their browsing behavior without sharing their data. Advertisers can then target ads to these cohorts rather than to specific users.
• Federated Identity (FID): This is a way to allow users to sign in to websites and apps using a single account without sharing their personal information with third parties. FID will use a cryptographic protocol called Secure Remote Password (SRP) to authenticate users and grant them access to online services.
• Trust Tokens: These are tokens that publishers and advertisers can issue to verify the authenticity of users and prevent bots and fraudsters from manipulating ad metrics. Trust tokens will use a cryptographic technique called blind signatures to ensure that users cannot be tracked across sites or domains.
• TURTLEDOVE: This is a mechanism to enable interest-based advertising without revealing user data to third parties. TURTLEDOVE will use two separate ad auctions: one on the publisher’s site and another on the user’s device. The latter will use the user’s browsing history and preferences to select the most relevant ads without sending this information to the ad server or the advertiser.

What are the challenges and concerns?

While Google claims that Privacy Sandbox will offer a more privacy-friendly and sustainable way of online advertising, some ad tech stakeholders have raised several issues and questions about its feasibility and impact. Some of the main challenges and concerns are:

• Lack of transparency and collaboration: Some ad tech players have accused Google of being opaque and unilateral in developing and implementing Privacy Sandbox without sufficient consultation and collaboration with the industry. They have also criticized Google for not providing enough details and documentation about how Privacy Sandbox will work and what its implications will be for various ad tech functions and features.
• Loss of functionality and performance: Some ad tech players have argued that Privacy Sandbox will not support some of the essential practices and features that they depend on, such as frequency capping, attribution, retargeting, cross-device tracking, and audience extension. They also have doubts about the accuracy and effectiveness of Privacy Sandbox’s methods and metrics, such as FLoC, FID, and Trust Tokens. They have warned that Privacy Sandbox will reduce the quality and value of online advertising and harm the revenue and growth of publishers and advertisers.
• Dominance and competition: Some ad tech players have alleged that Privacy Sandbox will give Google an unfair advantage and further consolidate its dominance in the online advertising market. They have claimed that Google will use Privacy Sandbox to favor its products and services, such as Google Ads, Google Analytics, and YouTube, and to limit the access and influence of other ad tech platforms and intermediaries. They have also accused Google of using the Privacy Sandbox as a pretext to evade antitrust scrutiny and regulation.

What are the next steps and alternatives?

Google has announced that it will start testing Privacy Sandbox in early 2024 and that it will phase out third-party cookies in Chrome by the end of 2024. Google has also invited feedback and suggestions from the ad tech industry and other stakeholders, and it has said that it will continue to refine and improve Privacy Sandbox based on the results and learnings from the trials.

Meanwhile, some ad tech players have started to explore and develop alternative solutions and strategies to cope with the cookie-cutter future. Some of the possible options and initiatives are:

• First-party data: This is the data that publishers and advertisers collect directly from their users and customers, such as email addresses, subscriptions, purchases, and preferences. First-party data is considered to be more reliable, relevant, and compliant than third-party data and can be used to create and target personalized ads and offers.
• Contextual advertising: This is the type of advertising that matches ads to the content and context of the web page or app, rather than to the user’s profile or behavior. Contextual advertising can use natural language processing and machine learning to analyze and understand the meaning and sentiment of the content and deliver ads that are more relevant and engaging to the user.
• Unified ID 2.0: This is an initiative led by The Trade Desk, an independent ad tech platform, to create a common and standardized user identifier that can be used across the online advertising ecosystem. Unified ID 2.0 will use encrypted and hashed email addresses as the basis for the identifier and will require user consent and opt-in. Unified ID 2.0 will also be open-source and interoperable, and it will allow users to control and manage their data and preferences.