Google sent shockwaves through the advertising industry on Wednesday when it announced that it would stop tracking individual users as they browse the web.
It was already planning to strip third-party cookies from its Chrome browser by next year. Advertisers use that data to target and measure ads. It now plans to wipe out any tracking or tools that identify people, which advertisers use to pinpoint ads for specific audiences.
"People shouldn't have to accept being tracked across the web in order to get the benefits of relevant advertising," David Temkin, Google's director of product management of ads privacy and trust, wrote in a blog post. "And advertisers don't need to track individual consumers across the web to get the performance benefits of digital advertising."
Google will still let advertisers target logged-in users across Google properties like YouTube, Gmail, and search and mobile apps, and publishers can still collect first-party reader data and sell it to advertisers.
Such moves by Google, Apple, and others, which come in the face of looming pro-privacy regulation, mean big changes for digital advertising and media companies that rely on advertising's targetability.
Advertisers say it's unclear how Google will replace ad tracking and how much they'll have to rely on Google's data to keep targeting ads at big audiences, as they're accustomed to doing.
"The bomb that they dropped is not that cookies are going away. It's that they're not going to replace it with anything," one agency executive at a large holding company said. "They are not saying that you can't target an individual — they're saying that you have to have explicit consent about what you intend to do with the data."
Ad targeting could get less sophisticated
Google's move is expected to significantly push advertisers toward contextual-based targeting that zaps ads at groups of people based on their behavior, demographics, and interests.
The search giant has an alternative to third-party cookies it calls FLoC (short for federated learning of cohorts), which are audiences of people who share traits like an interest in buying cars or red dresses. Google says these cohorts are 95% as effective as third-party cookies in driving conversions for advertisers.
But several advertisers said it was unclear how much they would be able to mix in first-party data and other types of data that they use, like Nielsen panel data with Google's data.
Madan Bharadwaj, the chief technology officer of Measured, said cohorts had big implications for adtech companies that have long pitched aggregated publisher audiences.
"The fundamentals of all these DSPs are based on the cookie," he said. "Now you have to target based on aggregated cohorts rather than cookies, so they have to retool their datasets. LiveRamp has a big question mark. The Trade Desk has a legitimate opportunity for the rebirth of their business."
According to experts, the bottom line is: Google's move will likely make its already massive ad business more powerful, and brands will need to prioritize collecting information directly from people, such as email addresses and shopping data.
"It gives a whole new meaning to 'walled garden,'" Daniel Pearson, the cofounder and CEO of agency Bamboo, said. "If no company can use cross-site data for personalization, only the big platforms can do great personalization, which is quite the competitive advantage."
"Google has the lion's share of browser activity," Jesse Rosenschein, the vice president of digital and account strategy at Mediassociates, said. If a company doesn't have a first-party data strategy, it "should be developing one. It's king in a world where consumer-privacy balance is restored," she added.
Cookie workarounds are at risk now
The future of efforts by adtech companies and groups like LiveRamp, The Trade Desk, and Prebid to come up with workarounds for third-party cookies are also up in the air after Google's announcement.
LiveRamp, for example, wants to pool audiences for targeting across multiple publishers. Unified ID 2.0 is an industry effort started by the adtech company The Trade Desk to use hashed, encrypted email addresses instead of third-party cookies. The Trade Desk recently handed off the initiative to a publisher-focused group, Prebid.
"There is significant industry focus on building a new identity solution that preserves the value of relevant advertising while protecting consumer privacy," a Trade Desk spokesperson said. "Unified ID 2.0 puts the consumer in the driver's seat, ensures that they are not identifiable, and gives them control over how their data is used."
Chris Kane, the founder and president of the adtech consultancy Jounce Media, predicted the adtech companies developing third-party cookies alternatives would campaign against Google.
"Those companies are going to double down and say, 'Google was never on our team anyway, and we need to make sure that these new IDs are perceived to be privacy-friendly,'" he said.
Advertisers buy programmatic ads through bidding-based open exchanges that are open to all advertisers and private marketplace deals that let publishers choose which ad inventory they sell.
Travis Clinger, the senior vice president of addressability and ecosystem at LiveRamp, helps advertisers target ads using first-party data via Google ads that are bought through private marketplaces. It was unclear if Google would allow IDs within the other part of its adtech business that helps publishers sell ads.
"Publishers — including those who work with Google's SSP — will continue to have control over their direct relationships with buyers and the vendors they choose," a Google spokesperson said.
Google's move has mixed implications for adtech
Some experts said that Google's move could level the playing field for adtech companies.
Tom Kershaw, the chairman of Prebid and chief technology officer of Magnite, said advertisers had long been asking Google to agree to its own cookieless guidelines, called Privacy Sandbox, instead of using the data it collects from people when they log into Google properties like YouTube and Gmail.
"The concern is that Google is forcing everyone to use Privacy Sandbox, and they're going to use log-ins for their own business," he said.
Google nixing tracking could create a larger pool of premium ad space and advertisers for adtech companies to pitch as inventory that isn't touched by Google, Jounce Media's Kane said.
It also could sour sentiment on adtech, with its association with ad targeting. Already, brands like Nestle, Unilever, and Mondelez backed Google's targeting announcement. Shares in The Trade Desk and Magnite each traded down 12.8% on Wednesday, while LiveRamp's shares were down 8.4%, and Criteo fell 1.6%.
"Is P&G next?" Kane said. "The negative outcome is that Google goes on a PR blitz to say that adtech is creepy. If other brands start saying this, it creates a snowball effect."
