Ad tech’s multi million-dollar quandary: Balancing budgets amid Google’s Sandbox uncertainty

It’s a tough time to be a chief technology officer in ad tech. 

They’re stuck between a rock and a hard place. 

Do they splurge millions on developing tech for Google’s cookie alternatives, gambling on regulatory approval? Or do they stick to their guns, risking being left in the dust by a potential industry-wide shift? 

Whatever they do there’s no clear payoff.

“The performance of those alternatives is unclear and it calls for more than a thousand days of development work on our side just to participate in this small test,” said a chief technology officer, who exchanged candor for anonymity. 

This “small test” refers to Google’s Chrome browser, affecting only one percent of traffic since the start of the year. It’s a chance for CTOs like this one to validate their long-held hopes and suspicions, albeit at considerable cost and effort. They have had to divert developers from crucial projects on product roadmaps, locking them into updates planned until 2026. 

But that’s just scratching the surface.

According to the same CTO, the full-scale support for the sandbox over the next three years would demand up to 8,000 days of effort, roughly translating to $800 per day. 

When you crunch those numbers, it’s estimated to cost this CTO around $7 million to develop the tech needed to support the sandbox beyond the test. And that’s not even considering the additional costs of maintenance, support, and consulting needed to bring such a monumental project to market.

Few ad tech vendors are equipped for such an undertaking. 

As the CTO emphasized, the real cost isn’t just in building it — it’s in sacrificing improvements to their regular ad tech offerings, as those 8,000 days could be better spent elsewhere.

“The problem with the sandbox is that it’s an investment that is extremely uncertain,” continued the CTO. “What company would want to take so much away from its own innovation road map and invest it into something that might get upended by regulators in six months?”

Not many, as Digiday’s conversations with other ad tech executives, and the people who advise them, have revealed.

Last year, the engineering lead at an ad tech company allocated two engineers to develop tech for the sandbox. 

This year, the team has expanded to three, with colleagues from the international team providing support on data and reporting needs. 

So far, they’ve collectively invested close to 3,500 hours. This includes time spent connecting backend infrastructure, building initial controls for publishers and reporting, as well as supporting Prebid and collaborating with external teams to educate, align on standards, validate test implementations, and engage with the industry.

“By the time we finish implementing private aggregation (for long-term reporting needs), trust tokens (for traffic quality), bidding and auction services (to minimize browser load and latency), we will have more than doubled our time investment,” continued the exec. 

Add it all up and it nets out around $6.5 million in costs, said the exec. 

And that’s just the engineering effort. Other teams are investing significant time as well.

Suddenly, that $5 million offer from Google last year to wannabe sandbox testers doesn’t sound so outlandish. If anything, considering the broader implications, it appears quite reasonable. 

With critical business functions like real-time auctions, ad serving, and reporting no longer fully under their control due to the sandbox and Chrome browser, it’s no wonder ad tech vendors are cautious.

“Like most players in our industry, we are carefully observing developments around Privacy Sandbox, but we’re skeptical over whether Google can overcome the significant technical and regulatory hurdles that Sandbox faces,” said Kay Schneider, svp of global product and business development at video ad tech firm ShowHeroes. “We therefore have never been convinced to actually invest in developing technologies to test or support the initiative.”

Other ad tech execs tread a similar fine line, somewhere between their own commercial needs and those of the industry.

“We’re a profitable company with a free cash flow, so diverting investment away from core operations is always made more difficult by a high-opportunity cost (cost of capital),” said an engineering lead at an ad tech vendor who exchanged anonymity for candor on the topic. “We believe in the mission of the Privacy Sandbox, and the competency and capabilities of our partners, so we feel good placing a larger bet on this existential opportunity.”

That’s not to say that executives like these shy away from tough decisions. 

Ask an ad tech CTO about situations like this and they’ll likely tell you it’s all about weighing the impact against the effort involved to determine its worthiness. However, the sandbox adds an extra layer of complexity to the equation.

On one hand, it’s tough to predict what the sandbox’s impact will be on the industry right now. It’s still in its early testing phases, after all. Plus, the tools inside it can’t even track non-consented inventory, and even those who do agree to it might not draw enough advertisers.

On the flip side, amassing the effort to support the sandbox is no small feat. It means overhauling how advertising systems operate today, which is no easy task. And to make matters worse, the sandbox keeps evolving, with plans extending all the way out to 2026. It’s like trying to hit a moving target.

As the product lead at an ad tech vendor explained on condition of anonymity: “That’s why it’s quite complex to put Privacy Sandbox on top of product roadmaps today and it’s probably more efficient for now to focus our efforts on alternative solutions that brings more certainty and value (Alternative Ids, Contextual, Seller-Defined Audiences, etc.).”

No wonder there’s a growing consensus that ad tech is devoid of innovation. 

With companies diverting resources to adapt to the sandbox, there’s less room for innovation within their own technologies.

“A lot of people have thought, from its inception, that Google’s privacy sandbox was something of a ruse,” said Mark Naples, managing partner of the PR and corporate strategy firm WIT Strategy.  “The suspicion has been that they didn’t create it to solve any problems concerning privacy. They created it to give privacy advocates and others something to chew on – to distract them with free tools for developers.”

These concerns are hardly novel. The Trade Desk and various other ad tech vendors have been voicing them both vocally and quietly for quite some time now. But they persist, particularly with the absence of third-party cookies now impacting one percent of traffic in Google’s Chrome browser. Ad tech vendors are compelled to address these concerns seriously, even if it means going against their instincts.

And failure to do so could result in missing out on significant revenue and competitive advantage, especially if ad dollars eventually converge around the sandbox.

https://digiday.com/?p=536574

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