TMW #185 | The tsunami is still coming

Jul 28, 2024

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The tsunami is still coming

In light of Google’s major news regarding cookie deprecation, this essay has been unlocked for all subscribers. Enjoy responsibly! 


This week in an emergency live Martech podcast, host Benjamin Shapiro framed Google’s decision to cancel cookie deprecation as “the tsunami that never came.” 

TMW PRO Forum member Katy Yuan put it this way during this week’s customer forum call: “Google has gotten to a point where the company is sunsetting its own sunsets”

I think Shapiro got the tsunami bit right, but I would have to disagree with his categorization. Despite all the noise and commentary about the situation, nothing’s changed at all. 

Few moments in tech hold enough potential to destabilize the delicate balance of incentives, platforms and infrastructure that makes the internet viable. Cookie deprecation is a threat to upset that balance.

Between advertisers who pay for the content and services we often get to use for free, the platforms that facilitate the transactions, and the open technologies that make it valuable to advertisers in the first place, you only need to take one piece out of this equation and it all falls apart. Especially the part that makes the whole thing valuable in the first place: Open tracking technology. 

And so, marketers have been bracing for a good four years now after Google made their initial announcement, following Apple and Mozilla, to finally put the third-party cookie to death on Chrome… or so we thought. 

In the initial announcement, Google heavily cited consumer privacy concerns as its justification for removing third-party cookies. But when it came time to put their plan into action, Google pushed back cookie deprecation no less than three times until the company finally started to remove third-party cookies from 1% of devices earlier this year.  

But now the waiting is over. This is how Google framed the cancellation of third-party cookie deprecation: 

“Early testing from ad tech companies, including Google, has indicated that the Privacy Sandbox APIs have the potential to achieve these outcomes. And we expect that overall performance using Privacy Sandbox APIs will improve over time as industry adoption increases. At the same time, we recognize this transition requires significant work by many participants and will have an impact on publishers, advertisers, and everyone involved in online advertising” 

In light of this, we are proposing an updated approach that elevates user choice. Instead of deprecating third-party cookies, we would introduce a new experience in Chrome that lets people make an informed choice that applies across their web browsing, and they’d be able to adjust that choice at any time. We're discussing this new path with regulators, and will engage with the industry as we roll this out.”

Google has abandoned their plan. The reason?  This time it’s the regulators, the UK Competitions and Markets Authority (CMA), and noisy industry bodies like the IAB all attacking Google’s cookie deprecation plot in a variety of ways. First is the anti-competitive issue: The CMA argues that Google’s replacement for third-party cookies, the Privacy Sandbox, will centralize more of the ad economy into Chrome, and moved to block Google from removing third-party cookies until the company can satisfy all 39 anti-competitive commitments. 

Then there’s the IAB Tech Lab and Criteo’s challenge to Google’s Privacy Sandbox as a viable solution, arguing that the replacement technology fails to replicate the performance and feature set already in market, presenting a huge step back for the industry if Google pushed on with bringing the Privacy Sandbox online. 

Google says that it is changing course, but even with this announcement, it changes little for the digital marketing ecosystem. 


Wrongheaded 

Judging from most of the commentary online, there’s a mistake in the logic behind Google’s abandonment of third-party cookies as a means to protect its revenue. Yes, it’s clear that the Privacy Sandbox is not driving results comparable with third-party cookies, but display advertising is the lowest margin form of advertising for Google.

In fact, Eric Seufert from Mobile Dev Memo goes so far as to say that Google’s revenue from the network side of the business – which heavily relies on third-party cookies – has been in a long decline, while closed platforms with higher margin and revenue growth like YouTube and Search don’t need third-party cookies to operate:

“So given that Google must have a commercial motivation in deprecating cookies, what is it? The most obvious is simply margin expansion: Google’s network business, which serves ads on third-party websites and apps, will almost certainly suffer if the Privacy Sandbox is less effective for targeting and measurement than cookies (and early indicators suggest it is). If the economics of buying third-party open web inventory through Google’s tools degrades, some of that demand may simply be routed to Google’s owned-and-operated channels. And these channels feature much higher margin for Google than its Network business: Bernstein estimated in December 2022 that Google’s margin on Network revenue is 10%, while it’s 15% for YouTube and 55% for Search.”

It seems as though shifting advertiser dollars into Google’s walled garden was the strategy all along. But now the 180-degree turn to killing cookie deprecation works against that theory. Or does it? 

Well, the IAB’s assessment suggests that Google can’t move to the Privacy Sandbox because the technology just isn’t ready yet. Committing to cookie deprecation is also a commitment to the Privacy Sandbox rollout. And the fact of the matter is that Google just can’t make this unilateral decision across all regions everywhere due to the anti-competitive nature of the rollout. Google really had no choice but to abandon the plan. 

But now Google is somehow presenting an even worse plan. Let me explain. 


Abdicating responsibility

What Google now plans to do is to abdicate responsibility for the mess they’ve created. The master plan is to shift the burden of phasing out third-party cookies onto the users of Chrome. What this will look like is a big red shiny button on every Chrome browser to remove third-party cookies from your browser forever. Sounds pretty good right?  

So as TMW researcher Keanu Taylor suggested earlier this week, this is really just cookie deprecation by another name… And a way to get around regulators that say Google is making unilateral industry decisions for everyone else. 

“Although many marketers will have seen the headline and breathed a sigh of relief, this doesn’t mean we’re going back to the 3PC open season of yesteryear; it just means that Google is absolving itself of responsibility by letting consumers act as judge, jury and executioner for 3PCs. It will depend on the UX and wording of the one-time consent prompt but it’s likely that most users will opt out of the cross-site tracking and stalking ads that are associated with 3PCs. So, if most users choose to opt out, the end result won’t be much different to Google shutting them off on users’ behalf; the only difference is that users made the decision, not Google.”

This is a parallel move that Apple was successful in implementing, Apple Tracking Transparency, which has resulted in an 80% opt out rate for app tracking for some countries, causing a real shift in data privacy practices on the web. 


Speaking with analysts this week, the general consensus is that – following the example of ATT – 70% of people will opt out of third-party cookies on Chrome if presented with a blanket choice. That means that cookies will be severely diminished, to the point of the technology being unworkable for advertisers. 

This is also in line with the impending APRA regulation in the United States, which seeks to revive a 2009 idea to force browsers to implement blanket tracking blockers: 

“But the most interesting shift has been to resurrect the failed “Do Not Track” permissions on web browsers introduced back in 2009. They are now calling it “Do Not Collect,” which is a privacy control script users will be able to activate to block websites from tracking them altogether. If successful, this will become something mandated on browsers, apps, and other internet-connected devices as a permanent user feature.”

A big red button to block trackers in a browser reflects a common problem with internet platforms. How much should users be responsible for here?

On the one hand, user choice and control are good things in most cases. On another, it gives the platforms an out when facing regulators on the choices the platforms are making that impact the entire digital advertising industry. “It’s not us, the consumers want it!” companies like Google will protest to regulators. It’s a strong argument, but it doesn’t hold Google to account for the choices the company has made up until that precise point that precipitates a choice in the first place. 

If the big red button goes ahead, it’s very easy to see that the feature design and rollout will be heavily scrutinised by the industry for everything from placement to communication to enforceability. Downloading an app is not like using a browser; an app does one thing, but a browser gives access to limitless apps. 

But the main point here stands: Google still gets to have cookie deprecation, while also making progress towards its goal of shifting more users from the open web to closed advertising ecosystems. It’s the same direction on a slightly different path. 

Open programmatic advertising, which relies on third-party cookies, has already been on a long decline in favour of the walled gardens. This inexorable death march will continue whether you like it or not. 

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Bathwater, not baby 

Cookie deprecation is one of the most important shifts in the past 10 years of the web. It’s inspired entire categories like Data Collaboration, Data Clean Rooms, and new concepts and ideas for tracking like UID 2.0 and ID5. 

Most of the discussion has been to replace third-party trackers with first-party data, with all the bridge building to connect data from brands to publishers and ad networks and internal data transformation that has to happen in order for data to be in a usable state.

Google’s news should not stop this progress towards moving away from third-party cookies. In fact, we should be innovating more on technologies that help fund the internet while preserving user privacy! But as we’ve mentioned in the past, it’s wrongheaded to think that anything could replace the scalability of third-party cookies

“The sad thing about the depreciation of third-party cookies is that almost every AdTech vendor appears to be shifting to first-party data instead of reflecting on why third-party cookies have to go away in the first place. In the same way that cookies were not fit for advertising purposes (it was a happy accident of invention and opportunity), first-party data seems less fit for the kind of scalability needed for advertising, but also it reveals far more sensitive information about people. A cookie stored on a browser is more about the device than the person, but an email address is a window into an identity.” 

First-party data is not the right tool for the job in most cases, and while it does play an important role in the future of targeted advertising, we must be careful to avoid this data source from suffering the same fate as its third-party cousin. 

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With impending data privacy regulations like the APRA, Google shifting cookie deprecation responsibilities to users, and the increasing reticence by marketers for using third-party cookies, there’s already enough there to stay the course and move away from third-party cookies altogether. 

But we must preserve the baby. Third-party cookies are going away because a handful of companies abused the golden child of the free internet. If anything, we don’t need cookie deprecation to inspire a bigger shift; we need a good long hard look in the mirror and an ethical revolution in marketing and advertising in order to build the next thing that will fund the next 100 years of a free and open web. 

Clearly, Google is not up to the task of ushering us into that future. Which leads me to my last question: Who will? 

 

Stay Curious,


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Want to share something interesting or be featured in The Martech Weekly? Drop me a line at juan@themartechweekly.com.

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