How Google's snub of tracking will upend the industry
The advertising industry is gripped with fear over new moves from Google that could minimize or even cut out other ad tech players from the market. Earlier this week, the search giant announced a new policy position to restrict personalized advertising online, which could cement Google’s ad tracking system as the industry standard, forcing other players to compete for table scraps in the ad market.
Google drew a line in the sand this week, explicitly saying it would steer away from personalized advertising technology that has been the backbone of the internet ad industry for decades. While some see this as a win for consumers and privacy, for others it’s just another way for Google to gain even more power.
“People are a little shocked at how definitive [Google has] become for their vision of the future,” says Andrew Frank, research VP at Gartner, a research firm. He says Google’s outsize influence (and revenue) in the advertising industry could squeeze ad tech players building their own solution. “Google’s scale is so gigantically enormous that barring some major [government] intervention, whatever Google does it’s not going to be engineered to diminish its revenue from advertising,” says Frank.
Google is of course the largest internet ad company in the world, reporting fourth quarter ad revenue of $46.20 billion. It has an extensive empire that ranges from Android phones to YouTube, the Chrome web browser and more. Its dominant market position means its policies can affect the whole industry.
“If there was any doubt before today, it is crystal clear from this announcement that Google maintains its stranglehold on the future of [marketing technology]. It is difficult to foresee how this announcement won’t immediately impact plans that are already being put into practice, as marketers prepare for a post-cookie digital universe,” says one media executive at a major advertiser.
The industry is moving away from “third-party cookies,” files that websites save on user web browsers to help identify the same user across websites and serve up targeted ads. Cookies have fallen out of vogue in the wake of a privacy backlash as more consumers and governments take privacy more seriously. This has forced the ad industry, dependent on lucrative ad targeting, to scramble for a replacement that does not rely on cookie technology and provides more privacy. Google’s announcement this week makes clear it will ditch highly personalized targeting tools, like ones that rely on personal email addresses—an alternative way marketers can target people.
If Google reinforces its own ecosystem and does not “play well” with other ad tech companies developing new ways of ad targeting, it could cut those companies off from Google’s ad platform, rendering their tools useless. Apple demonstrated how a hardline stance can disrupt the ad industry with its movement to ban internet-tracking on Safari and more stringent controls on IDFA—Apple’s Identifier for Advertisers. For those concerned about privacy, these have been welcome changes that lockdown consumer data, but for online advertisers it means businesses must adapt.
“We’ve been planning for cookie deprecation for years now,” says Scott Hagedorn, CEO Omnicom Media Group, North America. “We’ve been future-proofing our strategy for 10 years.”
Publishers with direct relationships to consumers will be one of the beneficiaries in the future of internet advertising, says Andrew Casale, president and CEO of Index Exchange, which is an ad marketplace. Google’s move “raises the value of publisher first-party data that much more,” Casale says. “That’s effectively the strategy Google will use too, and that’s a positive event for all premium pubs that have the best first-party data.”
For the ad tech industry, though, Google’s move directly snubs Unified ID 2.0, an industry wide initiative that has attracted a number of ad tech companies and publishers. Unified ID 2.0 sought to create a cookie alternative that could compete with Google. Ad tech players like The Trade Desk, Prebid, Criteo, LiveRamp, Magnite, and publishers like The Washington Post, announced support or contributions to Unified ID 2.0. AT&T’s Xandr and FuboTV recently said they would support the technology.
On Thursday, The Trade Desk accused Google of seeking a monopoly on targeted advertising. “They want to be the only one to provide targeted advertising and they’ll base it on their 2 billion-ish email-based logins (something they don’t want others to do),” The Trade Desk said in a statement. “It’s almost as if Google wants fewer cars on the road: The world will be safer; we'll keep our Ferrari; and with proposals such as FLoC, everyone else can have a bicycle.” Google's FLoC, or Federated Learning of Cohorts, is a potential cookie replacement that creates aggregate sets of users based on their browsing habits that can be targeted for ads.
Brands say there is room in the market for multiple ad targeting products. “If anyone thought we were going to get to one [identity] graph, that’s optimistic,” says Jonathan Halvorson, VP of consumer experience for Mondeléz. Advertising will involve multiple solutions in the future, “just like how companies operate on multiple clouds,” Halvorson says. “You’re going to see advertisers who have a dominant solution but have to work with different ones.”
Avocados From Mexico has been building its first-party data the past few years and is prioritizing media partners that allow them to activate its first party data IDs into their platforms. "Those that allow us to do that become our preferred partners and our list includes Google, Facebook and Viant among a few others," says Ivonne Kinser, head of digital marketing ans e-commerce at Avocados From Mexico.
"On the one side where I see the silver line for us, (and for companies like ours that own their first party data) is that now we will be able to add our first party data clusters to the FLoC cohorts or interest groups and get the best of both words," Kinser says. "On the other side, we won’t longer have the option to A/B test our campaigns to compare the performance of our first party audiences against the platforms’ audiences based on the demographic profile of our target."
Kinser sees a near future where brands return to the pre-programmatic age, "where we will need to consider building, re-building or strengthening our relationships with partners with endemic environments that can offer second-party data alternatives. For example, the Merediths of the world."
Ad tech companies remain resolute on creating an alternative to the third-party cookie—with or without Google’s help. “The design never assumed any of the big giants would be on board initially,” says Index Exchange’s Casale. “Google was never involved in [Unified ID 2.0], so this doesn’t change anything.”
The importance of first-party data has created an undercurrent of paranoia in the industry. Critics say that Google’s go-it-alone approach raises flags, but there are also concerns that other players might not take privacy into account with their next-level IDs. “People are suspicious about other approaches, and [also] how much this will reinforce Google’s scale and scope advantages,” Gartner’s Frank says.
Others say that Google is confidently flexing its muscles with its new stance against personalized ads. “[The announcement] means that Google as a whole feels really good about their business in their owned and operated properties like search and YouTube, and wants to push everyone to adopt or at least chime in on what they're proposing in the privacy sandbox,” says an executive at an ad tech company that partners closely with platforms like Google and Facebook.
Contributing: E.J. Schultz and Jessica Wohl