Things of Internet: And so the third-party cookie crumbles
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Let's start with the basics. Cookies are teeny bits of software that help websites retain a small bit of information about you - mostly drawing a profile of you basis what sites you visit. This is not as nefarious as it might seem - cookies theoretically can get users advertising that is more relevant to them. So if you spend enough time browsing, say, scuba diving images from remote Indonesia (who, me?) you might end up being taunted by ads for Raja Ampat homestays on completely different sites. That's cookies working. Creepy? Relevant? You be the judge.
There are two types of cookies - first-party (NY Times knows what you've read before on its site, so can serve up content for you accordingly) and third-party (Expedia knows you've been staring at that gorgeous coral reef way too long and sends you an ad on a completely different site urging you to book flights now before prices go up). Cookies are as old as digital advertising itself, and has a complete industry of Advertising Technology (AdTech) players built on top of it - a system involving things like DSPs and stuff that I still don't fully understand.
Now, Google wants to do away with third-party cookies altogether for all sites visited through Chrome, citing privacy. It wants to replace this decades-old system with an anonymised, "cohort-based" system which, while theoretically less precise, it promises will be as good with time. This new system is called FLoC or Federated Learning of Cohorts, which sounds like an MBA trying to describe a university. Recode explains:
Google will still technically deliver targeted ads to you, but it will do so in a more anonymous and less creepy way. Google claims that advertisers can get nearly the same return on investment from FLoC as they would through cookie-based tracking, and is currently testing FLoC out with advertisers to see if it will work as its cookie replacement.
On the surface, this seems like a good thing - after all, everyone is freshly worried about their data and stuff.
Except, it's worth remembering that everyone - including Google - has their own motives. When Apple says it'll help users be more aware of who's tracking them, it wants to paint itself as the privacy-focused saint and justify charging mad money for phones. When Facebook counters and says this will destroy how small businesses advertise, they're just protecting their own turf. Make no mistake - no action taken by Big Tech should ever be taken at face value.
So, when Google says this...
Last year Chrome announced its intent to remove support for third-party cookies ... Today, we’re making explicit that once third-party cookies are phased out, we will not build alternate identifiers to track individuals as they browse across the web, nor will we use them in our products.
Sure, that sounds nice. But it reeks of PR-speak. What do other people?
Mediacom (a digital media planning company) sounds somewhere between resigned to their fate and optimistic.
So we shouldn’t mourn the demise of the cookie, but we can use its loss as an opportunity to make web advertising better. High quality contextual placement has up to now been the poor cousin of cookie-based targeting, but has the potential to be a better future for web advertising.
Martin Sorrell, the founder of WPP (which owns several major ad agencies), and now founder of a company called S4 is characteristically ruthless in his belief in Darwinism...
Third-party data sources are becoming increasingly irrelevant. Instead of buying what is now useless third-party data, we’ve bought what we think are useful data analysis firms. You don’t have to be an Einstein to figure this out. This is the stuff that needed to be done anyway, just now it has accelerated.
And all this understandably has AdTech players (who could be negatively impacted) a little uncomfortable. Says one...
Google’s “wolf in sheep’s clothing” love of privacy is merely a “land grab” at the expense of competition.
Another is pretty sure a new solution won't be as good as what we have right now.
There's no way it's going to be as precise as third-party-based retargeting or deterministic targeting
And similar worries from one in India...
In the absence of targeting and measurement, inaccurate ads lead to lesser performance for advertisers and thus, lesser revenue for publishers. If ad revenues decline, it reduces the means for publishers (website owners) to produce high-quality content as they could previously.
The award for most dramatic observation, though, might go to Business Line:
Now the whole internet will act as if it has Alzheimer's.
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Well, you see, that's the thing. Nobody really knows for sure. A good place to start might be to see if Google has ulterior motives for effecting this change, after all, they're upending a system that's reliably pumped cash into their coffers for years. So what's the motive for them to change something now?
Ulterior Motive # 1: Signalling that they care about privacy.
This I can understand, everyone wants to be seen as privacy-friendly. And with some nice confusing terminology, the average consumer will just assume some change has happened and move on. Who apart from advertising folks and newsletter writers really analyses what ads are being shown, anyway? So yeah, this is a nice easy way to win some points. That halo will help when all those annoying anti-trust lawsuits come a-knocking. Plus, there is...
Ulterior Motive # 2: WE WANT MOAR OF ADVERTISING DOLLAR$$$
If you sift through everything, including Google's new proposed FLoC system, you'll notice that far from being noble, Google actually ends up holding way more cards. Mostly because it still collects data on its own. So basically: Google doesn't need third-party cookies because it has more FIRST-party cookies than anyone else!
Recode sums it up nicely:
Google will still collect your first-party data — that is, what you do when you’re using its products, like YouTube and Search — and it will target ads to you based on it. That first-party data becomes even more valuable to advertisers as third-party data sources dry up. This is great for Google, whose platforms get billions of hits per day. In fact, the bulk of Google’s revenue comes from ads on Google Search — more than half of it, according to its most recent quarterly earnings report, and far more than it makes from its ad network that currently relies on third-party cookies. And because Google Search won’t be affected by the cookie ban, that data-based revenue stream will continue to flow.
Several others agree and are far less charitable in their assessment. Among them, for some reason, is Oracle, who churned out a rather colourful op-ed titled "We’re all FLoCed":
Of course, if Google were genuine in its privacy conversion, then it would apply its rules uniformly and apply those same rules to itself. It would stop tracking individuals browsing on Chrome and on Android. It would offer consumers opt-in control over their data. It would stop sharing data across its platforms. And it would stop tracking individuals across devices. But, of course, they won’t.
Ouch.
(BTW, still not sure what dog Oracle has in this fight but it's sure as hell entertaining to watch)
This might also encourage more publishers to rely less on advertising and try to go more subscription-led (more on that here), a trend that was happening anyway. This is an issue I am personally conflicted on. While I believe in journalism should be supported by readers rather than advertisers, this will exclude many people who can't cough up money for news. Perhaps a good compromise might be limited free articles (WIRED, Medium, The Hindu) or a free-for-everyone-those-who-can-afford-please-pay (The Guardian, The Wire). The same could be true of free apps that erstwhile relied on advertising for revenue.
In sum, this issue might be complicated now, but with compounding effects, could change the very nature of the "free" internet in a few years'. Time and Big Tech will tell.
Welcome to the club. The next few months will see how this plays out. But as of now, let me try to summarise:
If you're an advertiser: Wait and watch for what Google says about this FLoC experiment of theirs. To be honest, with initial reports, things are unlikely to change for you too much if you still use the Google Ads system a lot.
If you're a publisher: See above. Also, consider alternate revenue streams like subscriptions and how to get more first-party cookies. Reference: NY Times.
If you're an AdTech player: Now would be a really good time to build products that reduce dependencies on Google or... Heck, anything. (This space is something I don't really understand all that well, so if you work in AdTech and have an opinion on this, please write back)
If you're a regular user of the internet: Almost nothing changes for you. You can feel marginally better about not being tracked and maybe seeing slightly less relevant ads but hey you installed an ad blocker long back so ¯\_(ツ)_/¯
If you're Google: Can't speak now, I'm too busy buying your stock.
If you're Bing: lol
If you're Oracle: Please keep writing more angry op-eds, it's the most interesting you've been in years.
If any of my readers have a more nuanced opinion of this than me, please hit me up. For now, I don't want to see the phrase "third-party cookie" unless it involves someone sending me SHM's Nutella Sea Salt.
I hear you. Here you go.
Adidas vs Nike in a digital arms race. Useful read for digital transformation and all. (link)
LEGO wants to hire a kid as a creative director and that's the most LEGO thing ever. (link)
A good piece about how restaurants are using AI / tech for quicker drive-thru orders. Ah, the sweet smell of digital transformation in the morning. (link)
Swiggy's "intentional accident" Suryakant campaign to promote its new Super offering is clever bait and switch. (link)
That Meghan-Harry-Oprah interview had some valuable HR lessons. (link)
Yeah so a Banksy got burnt and that became an NFT and I have no idea what is happening anymore. (link)
Israelis in "non-conventional unions" are turning to Utah-based Zoom weddings. Brilliant. Who says only Indians can jugaad? (link)
Finally, a really good, sobering piece about how advertising is sexist as hell despite all the perfunctory campaigns you saw last Monday. (link)
That's it for today. See you next time, then. A reminder again to sign up for our chat with Shashank of The Whole Truth if you're interested. In the meantime, I'll be dreaming of diving in Raja Ampat. :(