What’s next for advertisers as Google shifts course on cookie alternatives again

For the third time, the new year means new plans for Google as it continues to modify its plan to phase out third-party cookies in Chrome. On Jan. 25, the tech giant introduced a new privacy sandbox proposal called Topics that will replace Federated Learning Cohorts (FLoC) — exactly one year after putting its weight behind the proposal.

While Google promised that FLoC would deliver at least 95% of the conversions per dollar spent that advertisers get with cookie-based advertising, many in the advertising world doubted these claims and wondered if FLoC would ever take off. . Despite these concerns, the replacement of FLoC by Topics represents another complication as advertisers continue to understand what the cookie-free future will really look like.

“The industry has taken a lot of whiplash around IDs, cohorts and cookies,” Sheri Bachstein, managing director of IBM Watson Advertising and CEO of The Weather Company, said in emailed comments. “The devil will be in the details, but on the face of it, Topics seems to most closely reflect the contextual advertising that has been around for some time,” Bachstein said. “While this approach has value, the marketing and advertising industry is looking for more innovation.”

The challenges of the subjects

Instead of putting anonymized users into interest-based cohorts, a user’s browser will determine a handful of topics that match the user’s top interests for the week based on browsing history. Topics are only kept for three weeks and are then deleted, and only stored locally. When visiting a site, Topics chooses one topic from each of the past three weeks to share with the site and its advertising partners. While doing more to protect user privacy, topics may not be doing enough to meet advertisers’ needs.

“The evolution of the FLoC API to Topics is indicative of the identity challenge the industry faces: respecting consumer preferences and creating a better exchange of value, while mitigating and maintaining relevance and reach of advertisers and publishers,” said Iván Markman, Chief Commercial Officer of Yahoo. comments sent by email.

With respect to these consumer preferences, Google will allow users to view and delete topics or disable the feature altogether. If opt-in rates are just as low as seen after Apple’s recent iOS privacy update, the lack of data will be painful for big brands and potentially fatal for small ones, which could also drive Google to kill Topics, said Emad Hasan. , CEO of customer intelligence platform Retina AI, in emailed comments.

“Google may try to require consumers to agree to share their data to use Chrome, but the uncertainty will have dramatic effects on marketers and the brand’s advertising strategy,” he said. .

“With FLoC, Google was trying to secure its continued dominance in the advertising space, and consumers and the advertising industry answered with a resounding no.”

wayne coburn

Product Director, Iterable

While FLoC was already less accurate than third-party retargeting or deterministic targeting, Topics should be even less accurate. The Topics API uses website hostnames rather than sub-interest pages and categorizes users into just 350 categories.

“We know that content alone doesn’t provide the level of precision that the combination of contextual and real-time data signals provides,” Markman said. “We believe the industry will need greater granularity and better alignment with user relevance.”

The technology behind the Topics API also adds another wrinkle to the privacy landscape. While eliminating the need for individual FLoC IDs, Topics requires a taxonomy lookup table that will need to be created and maintained by a third party, adding additional issues around ownership and bias.

“The most important question is who will be responsible for mapping topics on a page, an algorithm or the editors themselves? Answering this question is absolutely critical before we can enter a meaningful testing phase,” said Łukasz Włodarczyk, vice president of programmatic ecosystem growth and innovation at martech firm RTB House, in comments via email.

Lessons learned

Google’s replacement of FLoC with Topics indicates how the company listens (or doesn’t) to consumers and advertising stakeholders, and how the balance between competing imperatives around privacy and personalization is shaping the development of the post-cookie ad targeting.

“Google’s pivot – from FloC to Topics – shows consumers have lobbying power and a voice they’re not afraid to use. People understand their data is valuable and they’re taking action to preserve value of their assets,” Wayne Coburn, chief product officer at marketing platform Iterable, said in comments via email. “With FLoC, Google was trying to secure its continued dominance in the advertising space, and consumers and the advertising industry have responded with an emphatic no. With Topics, Google admits they need to do more to preserve and protect life. privacy of consumers.”

It remains to be seen whether Topics will be enough to satisfy the various stakeholders, or even feasible, given that it represents a high profile shift that comes just months before publishers and the advertising industry tentatively begin to migrate services in late 2022 and ahead of a three-month cookie phase-out scheduled to end in late 2023. Google first announced it would block third-party cookies in January 2020, submitted its FLoC proposal in January 2021 and changed its original timeline regarding the disappearance of third-party cookies last summer.

Meanwhile, Google continues to face antitrust pressure over its Privacy Sandbox proposals, with German publishers and advertisers joining the chorus of voices demanding regulators stop Google from blocking all third-party cookies. Additionally, the advertising industry has begun to coalesce around other solutions, like The Trade Desk’s Unified ID 2.0, which have begun offering consumers and marketers, noted Retina AI’s Hasan.

“Expecting Google to craft a strong, neutral internet privacy policy is like asking Al Capone to write the tax code.”

Eric Schmitt

Analyst, Gartner

It’s unclear if the mounting pressures will keep Google on schedule, or if the continued uncertainty could lead to further delays in phasing out third-party cookies. Cookies only affect in-browser advertising – not paid search, social media, audio and video streaming or connected TV, giving marketers the ability to recalibrate and reprioritize these other channels. Other players won’t be so lucky.

“The point is, don’t lose the ad forest for the ‘open web’ programmatic tree and keep in mind that independent ad tech tools like DMPs, DSPs, data providers, d “Identity and attribution are likely to suffer the brunt of the fallout when cookies disappear from the auction stream,” Gartner analyst Eric Schmitt said in comments via email.

Ultimately, Google still drives a slew of ad sales from its other properties, including search and YouTube, some of which use first-party data generated from Gmail. So whatever shape the cookie-free future takes, Google will likely come out even stronger.

“Ultimately, expecting Google to craft a strong, neutral internet privacy policy is like asking Al Capone to write the tax code,” Schmitt said.

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