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Under the guise of rising demand for user privacy protection, Google (GOOG) has announced that it will start adding third-party ad targeting restrictions at the browser level in Chrome. This news follows in the wake of similar restrictions to Apple’s Safari (AAPL) and Mozilla’s Firefox. But Google offers users more control over third-party tracking cookies than Safari or Firefox. This control can block many third-party trackers automatically or by default.
In Google’s approach, sites must classify cookies as first- or third-party. Sites must also set up cookies as third-party before they’re usable outside the domain where they’re set. The new Chrome features will allow users to delete or block only these cookies. As a default, all cookies will only be usable in a first-party context.
Google is also pushing back on tracking techniques like browser fingerprinting, reducing the amount of passive information Chrome provides to sites.
The Market Realist take
Third-party cookies are crucial when it comes to targeting ads on the web. Publishers and ad-tech providers use insights from third-party cookies to show more relevant ads to the visitors to their sites. Ad targeting is a huge business for Google and Facebook (FB), where advertising sales account for over 90% of the companies’ total revenue.
Google reaches billions of people across the web through its portfolio of digital properties. Facebook, of course, also boasts a massive online reach. Through its collection of social sites and apps, Facebook reaches more than 6.0 billion people around the world. So these two companies have huge troves of first-party data, which they rely on for ad targeting. Plus, Google and Facebook use many products to collect data from users in order to support their ad targeting businesses. The companies themselves are likely to see a minimal adverse impact on their advertising businesses from Chrome’s third-party cookies restrictions. Google, in particular, generates over 80% of its advertising revenues from its own properties, which provides a further cushion.
A potentital benefit for investors is that Google’s Chrome update could increase trust in the browser. User trust has become a major challenge for Google and Facebook following several data privacy scandals. Facebook is even planning a massive consumer marketing campaign in an attempt to restore trust in its digital products.
Is Google too big a player? Is it time for antitrust action?
US antitrust laws prohibit single firms from unreasonably constraining competition. According to StatCounter, Chrome has a 63% market share globally and a 50% US share. Plus, Google controls the majority share of online ad monetization technology available to publishers today. This tremendous share makes Google an influential contender in the browser privacy arena.
Many participants in the digital ad ecosystem assert that Google’s tracking protection could hurt online advertising rivals and publishers—especially those that rely heavily on third-party cookies.
The Market Realist take
While Google itself stands to benefit from the update, third-party marketing data providers like Oracle (ORCL), Criteo (CRTO), Tradedesk (TTD), and Neustar could take a hit. They will have less data available to help their clients target ads on the web. As a result, their marketing data business could decline, leading to revenue losses.
Oracle could suffer doubly from Google’s cookie tracking restrictions. The update could reduce the appeal of Oracle’s marketing data service, potentially making the service less attractive to publishers and brands. In turn, Oracle would lose revenue—and the company sorely needs cash to grow its cloud business. At the moment, Oracle trails behind Google in terms of cloud market share, according to Synergy Research estimates.
So Oracle investors should consider the risk of an impact on one of the company’s revenue sources. Google stands to benefit from the restrictions since its advertising competitors would have a harder time collecting data—but there are still risks to consider for Google itself.
According to industry pundits, Google could run into trouble if it further develops its own browser ID–based cookie alternative. With its majority of the browser market, 30% of the email client market, and more than 40% of the display advertising market, Google is on the precipice of monopolizing digital advertising and data markets. Google’s dominance and the implications of its tracking protections have already put the search giant in antitrust watchdogs’ crosshairs.
The Market Realist take
On the antitrust front, the US Department of Justice announced today that it’s launching a review of big tech companies. The DOJ didn’t specify which companies it would target in its antitrust review. But its statement shows that Google, Facebook, and Amazon (AMZN) are among the companies on the agency’s list. The DOJ says its review will examine the practices of leading online providers of Internet search, social media, and retail services. Google, Facebook, and Amazon dominate these digital fields. According to the DOJ, consumers and businesses have expressed concerns about these companies’ practices.
The DOJ review will look into whether and how these practices are stifling competition and harming consumers. The agency suspects that big tech companies may become irresponsive to consumer demands once they amass a huge market share.
In addition to dominating the Internet search market, Google is also extending into additional business areas. The company has ventured into making smartphones as well as providing cloud computing and mobile payment services. Facebook and Amazon are in similar positions. They’ve dominated social media and online retail marketplaces, respectively. Facebook has ventured into making hardware products. These products include virtual reality headsets under the Oculus brand. Plus, Facebook has ventured into the financial services sector. Last month, it unveiled a cryptocurrency product called Libra and a digital wallet called Calibra. For its part, Amazon has diversified outside its e-commerce domain into cloud computing and digital advertising.
As we’ve seen, Google, Facebook, and Amazon boast massive consumer data troves. They can leverage this data to better compete in new industries or markets. The DOJ now wants to find out if these companies’ practices put their competitors at a disadvantage.
The DOJ’s review comes as some politicians in Washington propose breaking up Google and other big tech names. The argument is that breaking up big tech would help control their power and influence. Moreover, the DOJ review comes after Congress suggested that tech giants require more oversight to preserve competition in the sector.
The DOJ intends to prosecute tech companies that its review finds have violated antitrust law. Shares of Google parent Alphabet, Facebook, and Amazon tumbled immediately after the DOJ announced its review yesterday.
The end of cookies?
Others see Google’s browser privacy measures as the act that will finally bring an end to cookies altogether, likening Google’s move to how Apple killed Flash. For some time, cookies have been on the decline, largely because they’re not compatible with smartphones and mobile apps. So tools from the next generation of ad targeting—such as advertising IDs and location and contextual data—have been gaining traction as cookie alternatives.
If cookies do come to an end, programmatic advertising will most likely take the hardest hit since it relies on third-party cookies for user-level targeting and measuring. Even as the next generation of ad targeting gathers momentum, the collapse of one pillar of digital advertising will undoubtedly rock the ecosystem.
Apomaya, Inc understands the dangers of diminishing cookie generation. It’s crucial for publishers to keep a steady flow of revenue through programmatic advertising. Apomaya’s IDBoost technology aims to restore publishers’ tools to target users and continue to improve their business models.
IAB tech lab brings transparency to third-party data
While Google announced that it would bring greater transparency to browser privacy, the IAB Tech Lab released a new standardization system that will bring transparency to third-party data segments.
The standardization system includes an auditing and credentialing program for data sellers. It aims to shed some light on the type and quality of audience data in a given segment. The new data transparency standard will also include information such as the date when a user ID was collected, the URL, location data, and whether the segment includes lookalike modeling.
Unlike previous IAB Tech Lab efforts to bring transparency to third-party data marketplaces, an annual auditing program strengthens this latest standard. The Data Transparency Standard Compliance Program will certify whether data providers correctly label their audience data.
The standardization system and auditing program are good news for publishers, which rely on third-party segments to meet campaign goals. Publishers can only gain from greater transparency in segments where their readers are mixed with data from across the Internet.
Your options after Google’s update
Apomaya IDBoost utilizes a mechanism to allow third parties to continue working effectively despite the increase in cookie obstruction tools. With results in higher CPM, fill rate, and revenue, these tools no longer require you to upend your business model to make ends meet. Level yourself in the playing field among the giants. Take control of your revenue.
- Marketing Land, “Reported Google Browser Change Could be Final Death Blow to Cookies”
- Business 2 Community, “What the Death of Browser Tracking Cookies Means for Marketers, Part 1”
- Ad Exchanger, “IAB Tech Lab Releases Data Transparency Standard, With Audits to Give It ‘Teeth’”
- Relevant, “Google Chrome’s Privacy Changes—how will they impact the online advertising ecosystem”