In case you've been away, last week Google announced that it was going to go its own way on user privacy and will not develop its own replacement for 3rd-party cookies.  The AdTech community responded immediately by absolutely losing their minds.  “Are we not going to get a Google-led replacement for the tracking mechanisms on which we’ve hung our revenue streams for more than a decade? Why would Google do this to us?”

Before we discuss why, however, let’s review specifically what Google announced.

What are 3rd party cookies and where are they going?

3rd party cookies are little bits of tracking software that collects and sends information about an individual user’s activities on an internet browser to an outside party -- usually an advertiser or AdTech company. This data is used for a variety of ad targeting purposes and is immensely valuable to advertisers.  It has become the very basis for many media transactions in digital media (paid search, display, video, etc.).

Google announced last year that, in response to digital privacy laws in the EU and California, it was going to remove cookie tracking technology from its Chrome browser in 2022 (Chrome is the most popular browser by far, with almost 64% market share globally). Since that time, the industry at large and specific ad tech companies have been looking for a suitable replacement which would still be privacy compliant (and thus not susceptible to new regulations).  

Many were hoping that Google would lead the way on this initiative, since its business has been so dependent on this type of data. In the meantime, much of the discussion has revolved around Unified ID 2.0, a Trade Desk created solution which features built-in encryption (“hashing”) and user consent, thus theoretically checking the privacy boxes.  Many in the industry hoped that Google and other players would support such an option.

What did Google announce on March 3?

Google announced that it wasn’t going to lend its substantial weight to the Unified ID idea and would instead develop its own solution to the privacy problem. Even further, Google stated its unequivocal position that the Unified ID plan was a half-measure that ultimately will be eclipsed by evolving privacy legislation and advancing consumer sentiment.

Google essentially communicated to the marketplace that it did not see these alternate user-level identifiers as viable alternatives for alleviating privacy concerns.  The company did not go so far as to say that it would explicitly block them from its very substantial ecosystem, however many interpreted the communication as a not-so-subtle warning that it would do exactly that.

As part of a general effort to re-align how AdTech tracks users, Google also announced in March that it would stop using individual browser activity to target ads. Although outshone by the AdTech announcement, this will significantly change search. Since Google began selling ads, one of the value-adding factors that Google touted was its ability to use browsing history to customize and hone search results to the individual user.  This extends beyond paid search to Google’s display network, as well.  This has allowed Google and the rest of the industry to serve users with ads they are more likely to deem relevant, but it has also raised concerns from individuals (and governments) regarding privacy.

What does this mean for advertisers?

Google’s decision may on the surface seem counter-intuitive, given their historical reliance on tracking users to build not only tailored search results but also to feed larger advertising options like Google Display Network and audience targeting. And there is further the potential for Google’s competitors to capitalize on Google backing away from this resource, at least temporarily (until either Google changes its mind or it is proven correct and the alternate practices are deemed not viable due to privacy issues). David Temkin, Google’s Director of Product Management, Ads Privacy and Trust, said this to Mediapost: “We realize this means other providers may offer a level of user identity for ad tracking across the web that we will not — like PII graphs based on people’s email addresses. We don’t believe these solutions will meet rising consumer expectations for privacy, nor will they stand up to rapidly evolving regulatory restrictions, and therefore aren’t a sustainable long-term investment.”

That last sentence is a clue to what Google is thinking: that user privacy is going to become a larger issue – and that laws like GDPR and CCPA are going to spread, with interpretation of the compliance of specific technologies settled in the courts. No doubt, Google wants to get on the right side of the privacy question early, and to potentially forestall some legal arguments they are likely to face when the US Government’s antitrust effort comes to fruition.  

And even better (for Google), they have a proprietary Plan B: “privacy preserving APIs,” which Google calls “FLoC’s” (Federated Learning of Cohorts) and claims will allow them to keep delivering advertiser value while avoiding individual tracking and complying with the demands of increasingly privacy-focused users. Essentially, Google is saying they are not going to build an alternative to 3rd-party tracking but instead aggregate their own 1st-party data to continue providing audience targeting options to advertisers using new proprietary technology. And they get to dunk on their competitors, especially Facebook, at the same time. Already Google is considered the most trusted tech company, and this enhances that at the expense of competitors, who consumers will now see as trying to skirt the rules at privacy’s expense. Temkin hints at such in his most recent blog post, touting the idea of trust while gently denigrating alterative cookie ideas, and a Think With Google piece by Sean Downey backs up Temkin and reiterates Google’s stance.

Many have immediately characterized this as a power grab by Google.  Regardless of their motivations, ultimately, this all but guarantees that targeting will be very much a mixed bag for the foreseeable future, with data rich walled gardens such as Google leveraging market dominance and technological prowess to develop solutions that can only be deployed within their fiefdoms, while other players either develop similar solutions, continue down the path of hashed user IDs (a la Unified ID 2.0), or leave clients and their agencies to rely on their own data.  The extent to which all of this improves consumer privacy remains to be seen, but it will almost certainly ensure that tasks like targeting, transacting, tracking and attribution remain challenging for marketers for years to come.

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