‘Profits over privacy’- the advertising and technology space has the verdict out on the Alphabet-owned Google’s latest decision to continue supporting third-party cookies in Chrome browsers. This doesn’t sound surprising because consider this: in the most recently reported fiscal year, Google’s revenue amounted to $ 306 billion- largely made up of advertising revenue which is estimated to be around $238 billion in 2023.
Google uses third-party cookies for advertising, including serving and personalising ads and reportedly, removing these cookies on their own would result in a 34 percent dip in programmatic revenue for advertisers.
The company has long been committed to phasing out third-party cookies, but the timeline has shifted several times. This delay was apparently because of the increased scrutiny from regulatory bodies and stakeholder concerns about the economic impact.
Background: The tech giant first declared in 2020 that third-party cookies would be phased out by 2022, but then extended the date, mirroring Apple’s 2018 ban on cookies on the Safari browser and Firefox’s 2019 plan to block third-party cookies by default.
The mere announcement of it caused a stir in the advertising industry and prompted advertisers to look for alternative targeting methods and data collection. Meanwhile, investing in new first-party data strategies and identity solutions.
Fair to say that the industry has been bracing itself for reduced ad personalisation, limited targeting, relying on first-party cookies, and finding effective ways to get user consent.
But now as Google scraps its third-party cookies deprecation plans, would the investment in the alternate technologies and solutions cease to exist? Mostly no, because irrespective how consequential the decision could be, it isn’t to restrict advertisers from continuing their bet on the open internet for ‘privacy concerns’, said observers.
“Advertisers’ investments in alternatives to third-party cookies will not be wasted. These efforts are still valuable, as the industry tends to prioritise privacy-friendly solutions and first-party data strategies. Preparing for cookie deprecation has likely positioned these advertisers ahead of the curve, fostering innovation and resilience in their marketing strategies. Thus, their resources are still beneficial for adapting to future changes and evolving privacy standards,” said Prashant Puri, Co-Founder and CEO, AdLift.
According to him, while advertisers will maintain access to third-party data for creating targeted ads, which aids in building detailed user profiles and delivering personalised advertising (leading to higher engagement and conversion rates), privacy concerns persist, necessitating awareness of evolving privacy regulations and consumer expectations.
Therefore, the industry trend is shifting towards leveraging first-party data, encouraging advertisers to invest in building direct consumer relationships and enhancing data collection from owned channels.
“Advertisers should monitor competitors’ adaptations and proactively seek innovative solutions to gain a competitive edge. Overall, this decision provides temporary relief but underscores the need for long-term strategic planning, balancing the use of third-party cookies with investments in first-party data and privacy-friendly technologies,” he suggested.
Preetham Venkky, Chief Digital Officer, DDB Mudra Group, begs to differ. “Any innovation in that space will have to be written off and would be dead at least for now,” he said.
“Most advertisers would largely welcome the reversal as it means lesser spends on performance marketing and it provides some clarity and predictability to their paid strategy. While some who invested early in building their first party data would question their investments, I still feel it’s an investment that’ll only strengthen their marketing efforts,” he shared.
Open Internet to attract ad monies
Marketers now recognise that the fastest-growing segments of the internet extend beyond the Chrome browser. Today, we are engaged on devices, screens and apps across some of India’s fastest-growing platforms – including OTT, CTV, and music streaming – all of which do not rely on cookies. This has paved the way for far more superior identity solutions that aren’t controlled by Big Tech, like Unified ID 2.0, which represents a significant upgrade to the internet.
According to Tejinder Gill, General Manager The Trade Desk, the market has seen rapid growth in alternatives to walled gardens on the open internet. Users in India are spending half of their digital time on the open internet consuming content across OTT, CTV, music streaming, mobile apps, news/websites.
At the same time, data suggests that the open internet may be a much more effective environment for ads.
Despite the notable time spend and better ad effectiveness, only one sixth of India’s digital ad spend is funneled to the open internet. But this is all changing, as ad spend is increasingly shifting to the open internet, he highlighted.
“Savvy marketers in India are acknowledging the limitations of walled gardens, and the open internet is emerging as a compelling alternative for them. It offers more accurate audience targeting by enabling brands to use their own first-party data to precisely reach their desired audiences. In addition, the open internet provides open and transparent granular insights into omnichannel campaign performance because it enables marketers to use a single platform to gain a better understanding of how consumers behave across the different channels on the open internet,” Gill shared.
In a nutshell, the open internet makes it easier for marketers to make budget decisions based on a holistic picture of online media consumption patterns rather than engagement with a single-digital platform. This approach can lead to more comprehensive conclusions about advertising costs, reach, and attention — insights that individual walled garden platforms cannot achieve, no matter how large their user bases are.
The Sandbox or Pandora’s Box?
The Privacy Sandbox- an initiative led by Google, was formed to create web standards for websites to access user information without compromising privacy. The core purpose is to facilitate online advertising by sharing a subset of user private information without the use of third-party cookies. Privacy Sandbox initiative includes various APIs like Topics, FLEDGE, and Attribution Reporting to replace third-party cookies while still enabling targeted advertising in a more privacy-conscious manner.
While Google spent years developing a Privacy Sandbox that wasn’t fit for purpose, according to Gill, the advertising industry has seized the opportunity to build a better, upgraded internet — one that preserves relevance for advertisers, revenue optimisation for publishers, and privacy controls for consumers.
“Google has finally admitted what the advertising industry has long claimed: the Privacy Sandbox isn’t effective. It doesn’t sufficiently protect consumer privacy, gives too much power to advertisers, and likely affects publisher revenue the most”, said Gill.
Venkky highlighted that there is tremendous complexity in developing and testing alternative technologies at this scale, and Privacy Sandbox wasn’t cutting it. The balance of privacy with the needs of advertisers and the pressure around revenue would’ve been the most important factors in the latest decision.
Let’s talk numbers.
Google analysed the impact of removing third-party cookies on advertisers’ programmatic revenue in both Ad Manager and AdSense and compared this to the impact of using Privacy Sandbox as an alternative. According to Google, removing third-party cookies on their own would result in a 34 percent dip in programmatic revenue for advertisers using Ad Manager and a 21 percent dip for those advertisers using AdSense. By enabling Privacy Sandbox APIs, revenues reportedly only dipped by 20 percent (Ad Manager) and 18 percent (AdSense). It is expected that the performance of Privacy Sandbox to “continue to improve over time” as publishers, advertisers, and adtech partners adapt and optimise it.
However, Puri noted that regulatory authorities have closely monitored Google’s Privacy Sandbox initiative, raising privacy and antitrust concerns.
Additionally, tests and studies have indicated that deprecating third-party cookies could lead to significant revenue losses for publishers, as targeted advertising tends to generate higher revenue. The ad industry has also expressed concerns about potential latency issues affecting ad performance. So, while Google emphasises its commitment to user privacy, it also wants to sustain its advertising revenue streams, he said.
“The Privacy Sandbox aims to provide privacy-preserving alternatives for ad targeting and measurement, but these are still being tested and refined to avoid compromising ad performance and publisher revenue,” Puri concluded.