How Google’s privacy moves will spur changes to ad tech

Google’s latest anti-tracking privacy tools update hold the potential to remake the world of digital advertising — and entrench power with its powerbrokers.

The ad industry has braced for a Google Chrome update that closely mirrors Apple’s ITP anti-tracking updates for weeks. But, unlike Apple, Google’s business model centers on ad revenue. Google’s update doesn’t involve a hard block on all third-party cookies, rather it gives users the choice to block or not. They won’t be automatically blocked (like with Apple ITP), which will make a big difference for other ad tech vendors.

There is some debate on the exact ramifications of the changes, but the general industry consensus is the move will further the trend in the direction of data transparency kicked off by the General Data Protection Regulation while hurting middlemen without a direct consumer relationship and which are over reliant on third-party cookies. And, as is par for the course, giant tech companies like Google and Apple, are likely to come out ahead.

“Some companies have been amassing large volumes of user data across loads of domains for years, and users have no idea,” said an ad tech executive who spoke on condition of anonymity. “They’ve built multimillion dollar businesses off the back of that. But it’s not their data — it’s publisher data. There will be hundreds of companies affected by this [update] but it has been bubbling for years. GDPR raised awareness of the problem.”

Some marketers and ad tech vendors are vexed by what they believe seems on the surface to be a cynical move from Google.

“This move by Google is very bad as it’s highly anti-competitive,” said Andrew Buckman, COO of ad tech vendor Sublime. “They control about 80% of the global market with Chrome and they seem to be proposing that users block tracking on every other tech vendor but Google. It’s another example of Google abusing their dominant position.”

That said, just because users will have the ability to block cookies, doesn’t mean they will. Take ad blocking: the growth of people blocking ads has slowed, hovering around the 20% to 25% mark in most European countries. That’s simply because there may be a finite number of people who care enough about their privacy to proactively alter the settings.

“It all depends on how Google decides to promote it,” added Buckman. “If they have a big button saying “Block Cookies” or if it’s a setting in some sub-menu somewhere then the uptake will be very different.”

Prabhakar Raghavan,  svp of Google Ads and Commerce wrote in a blog post that the digital ad ecosystem is opaque and non-transparent, which must be addressed if users are to feel reassured they’re in control of how their data is used.

“The new information will include the names of other companies that we know were involved in the process that resulted in an ad, he wrote. “For example, ad tech companies that acted as intermediaries between the advertiser and publisher, and companies with ad trackers present in an ad.”

Pressure from European regulators continues unabated for Google. The tech platform has accumulated quite a handsome batch of fines from Brussels for what the European Commission has ruled an abuse of its monopolistic position in online advertising. In January Google was fined €50 million ($56 million) by the French data protection authority CNIL, for violating GDPR. Fines of this value aren’t likely to make much of a dent in Google’s bottom line. But accumulated, Google has had to fork out for anti-competitive fines to the tune of €8.2 billion ($9.2 billion) in the last few years. That’s begun to drag.

“Their [Google’s] pot of money won’t be endless,”said Alistair Dent, managing director of iCrossing U.K. “It’s easy to say it’s a cynical move that consolidates their business but they’re not in a position to do that as strongly as they may have been before. The scrutiny in Europe is very aggressive and the EU has shown they’re willing to revisit these decisions and check they’re being followed properly. Google has to walk a very fine line.”

Google and publisher relationships have a checkered history, but this update hasn’t caused the hand-wringing that many of the tech giant’s previous updates have. In fact, many have regarded the updates as an opportunity and an incentive to push forward with their own alternatives to using third-party cookies to boost audience targeting.

“We can forget in our industry, that Google is a consumer company as well as an ads business,” said Amit Kotecha, marketing director at DMP Permutive. “This is about giving users more control of their data, but it also gives publishers more control of their own data. There has been too much reliance on third-party data as a way to understand audiences. This puts the power back in publishers’ hands.” His reasoning: If third-party cookies are blocked, the only way to find an audience outside of Google and Facebook is to go direct to publishers and use first-party data to find audiences.

However, publishers must work harder to prove to the buy side, that there are options and value to be had from working with publishers to use first-party data or other ID-based solutions to target audiences. Omnicom Media Group CEO Scott Hagerdorn, said Apple’s ITP updates and Google’s Chrome plans render DMPs almost useless.

“It’s a scary thought if all that [80% of] third-party cookie and therefore targetable inventory is suddenly gone,” said Kotecha. “But perhaps buyers aren’t fully aware of the alternatives, and that’s what publishers need to do more on.”

Ad tech consolidation has been anticipated for years, as martech and ad tech continue to collide. Plus, more advertisers have sought out single-stack solutions to avoid complexity. Google’s decision to let users block third-party cookies from other ad tech vendors, may compound that trend.

“My fear is that the user experience will be dilapidated, due to multiple technologies building their walled gardens higher, making it harder to use tools such as multi-touch attribution, dynamic-creative tools and sequential messaging, unless we use one tech stack.” said Yawar Karim, head of ad tech consulting at Publicis Media. “Brands will be tied into a single technology solution which often isn’t right for all especially those SME clients who need flexibility.”

However, other ad tech vendors believe the move will allow for a needed course correction in ad tech.

“It will only hurt those that have taken the easy way out and not kept up with the times in terms of privacy,” said Ken Leren, founder of performance marketing firm Marketing Town. “Consumer sentiment has changed. There are companies that still rely too much on farming people’s data from all over the place to create profiles. Vendors who don’t explore new ways to monetize first-party cookies, context and content, will be punished.”