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Google has a 90-plus percent market share in the world of online search and facilitates over one trillion searches a year.
That breaks down to 3.5 billion searches a day and 40,000 searches every second. There are over 60 billion visits to Google each year and the average person uses Google 3-4 times every day. Because of all this, Google makes a lot of money. In 2020 alone, Google generated just shy of $150 billion in ad revenue through its Google Ads service.
A Quick Primer on Cookies
HTTP cookies, also known as internet cookies, are files that provide websites with data about you as a user. They provide websites with information about who is using the site and remember data about a user’s last session. They are stored locally on your browser and when you visit a site through that browser, the site reads what’s called the name-value pair that the cookie stores to see your history on the site.
Cookies serve several purposes on the internet. Some of these purposes are purely for ease of use and convenience. Other purposes bring up questions of user privacy. Cookies are used to remember passwords so you don’t have to sign in every time, and preferences so you see more of the content you are interested in overtime. They also personalize the ad experience so you see ads that are more relevant to your interests.
Tracking cookies are the ones that are problematic to some. These cookies keep a detailed record of products and pages you have visited. With first-party tracking cookies, which are kept by the site you are visiting, they can be helpful to identify things like related products you might like.
The issues that many have come with third-party tracking cookies. These are cookies that are stored by other sites that advertise on the page. This means that if there are five ads on a webpage, you may be storing five cookies for sites you have never visited. This allows these third-party sites to track your browsing and create a user profile based on your habits, even if you never click on their ads.
The big announcement from Google is that they are eliminating third-party cookies from their Google Chrome web browser. After this change, Google will shift the way they do ads and run their personalized advertising infrastructure through Chrome. This has implications for user privacy and the way both Google and advertisers will operate and do business in the future.
Without third-party cookies, which most experts agree are one of the biggest impediments to privacy in modern history, users’ privacy online should improve. The third-party advertising world is somewhat akin to the Wild West right now, and this new policy will help bring that under control. It does raise other questions about consolidating user information into one company’s control, which we’ll address below.
Under the new way of working, instead of allowing third-party companies to create user profiles based on personal habits, Google will use an AI machine learning system known as the Federated Learning of Cohorts or simply, FLoC. This technology will group users together based on broad interests which will allow advertisers to advertise to these specific groups. For example, if you like to browse for car parts, you’ll be grouped with other users with the same habits and AutoZone or NAPA can buy ads that your group will see.
What this does more than anything is consolidate Google’s already considerable stranglehold on the online ad industry. They will now be the gatekeepers of all their user’s online habits, and any advertising companies that trafficked heavily in third-party cookies may now be in danger of going out of business.
Websites can still use first-party cookies to sell and trade with ad agencies for personalized advertising, but this will increase the cost of these cookies and make it more expensive for online ad agencies to do business. Also, it doesn’t do much to limit Google’s incredible influence on the space because guess who the two biggest trackers of first-party cookies in the world are. Facebook and… you guessed it, Google.
How Soon Will Google’s Changes Go into Effect?
This seismic shift in Google’s cookies policy was announced in January 2020 and is scheduled to go into effect in 2022. In 2021, as we stand approximately halfway between the announcement and the effective date, there is currently no reason to believe that this policy won’t begin as scheduled.
Still being months away though means that there are things that could pop up in the meantime that could delay this shift. The change relies heavily on browser updates and the FLoC algorithm so any technical delays with these could push the date back. Also, with governments around the world taking a growing interest in regulating big tech in 2021, any number of legal or regulatory issues could change this policy’s start date.
Advertisers and Marketers
Most people believe that the group that makes out the worst with this policy change are the advertisers, marketers, online advertising agencies, and anyone else involved in this business niche. Third-party cookies are an incredibly accurate way to get your advertising in front of the exact target market you want.
The FLoC algorithm is similar to the Netflix algorithm. Advertisers will certainly get their target audience to some degree but others in the group may not be as interested in what you are selling. Also, Google has not announced what the groups are yet. When they do, advertisers’ products may not fit perfectly into one category or another leading to a lot less precision.
Third-party cookies could also easily be collected, processed, and brokered by just about anyone on the internet. There are entire companies that do just this these days. Now that Google will take all this in-house, it may mean the end for many of these companies. Chrome has about 2/3 of the browser market share and when you add Safari and Firefox which have also stopped third-party cookies, you get to approximately 85% of the world’s browsers no longer allowing these cookies. Click To Tweet
The initial reaction to this announcement from Google from internet privacy watchers was to herald it as a major win for individual privacy. Technology civil liberties expert Bennet Cyphers told Wired magazine recently that third-party cookies “were the most privacy-invasive technology in the world for a while.”
This new policy will give far fewer people far less access to users' browser history than ever before. Regardless of the other arguments against the change, this is a major victory for user privacy. That said, the changes to the policy also bring up other questions, especially in relation to the FLoC algorithm.
Some people are worried that the FLoC algorithm has the potential to lead to discrimination. Any time you group people together, there is an opportunity for certain groups to be treated differently. Will some ads be shown to more men than women? Will people be grouped (either intentionally or unintentionally) by race, religion, or sexual orientation, and have their ads increased or limited based on that? These are major questions that Google will have to answer as the new policy takes shape.
Google already has a more than 30% share of online ads in 2021. This should only serve to increase this percentage in the coming years. Advertisers are now almost required to purchase ads through Google if they want targeted ads to appear on over 60% of browsers that Chrome accounts for. This will certainly be good for Google’s considerable pocketbook in the short-term but may lead to long-term problems.
The U.S. Department of Justice is currently pursuing an antitrust case against the tech giant and consolidating the majority of online ad revenue into its own coffers could prove problematic when the case finally reaches trial which is expected sometime in 2023. By that time, the policy will have been in effect for at least a year and may prove as, or even more, monopolistic than anything else the conglomerate has done.
It is hard to say how Google’s decision on third-party cookies will affect other providers and platforms. On one hand, it could give other platforms cover to outlaw third-party cookies as well but since the next two largest browsers have already done it, this may not make much of a difference. On the other hand, it may be a boost for other browsers that still allow third-party cookies. These platforms may draw advertisers who like the old system and don’t want to deal with Google.
What Questions Still Need to Be Answered About These Changes?
As we are still about a year away from the policy fully taking hold, there are several questions that we still have about this policy shift. Here are just a few of the top questions we don’t yet have answers for in 2021.
How exactly will the new advertising algorithm work?
The information FLoC will use and the groups it will create are still up in the air. These are the most important questions advertisers have about the technology.
How will Google measure and track the effectiveness of the new algorithm?
Third-party cookies present a very accurate, very measurable picture of who is being advertised to and what the effectiveness of the ads are. Will the new system provide the same level of data or will it be more of a crapshoot?
What are the privacy implications of one company owning all your data?
While it’s great that so many companies won’t have your personal browsing data, what does it mean that one company controls it (almost) completely now? It’s not impossible to imagine certain scenarios where this is even worse for long-term privacy than the old way of tracking.
Will there be unintended consequences for the end-user?
Whether it is the privacy concerns mentioned above or a less personalized, convenient online experience, no one truly knows how this experiment will work out for the users. The one thing we do know is that the experience will become very homogenous for the huge group of Chrome users and that usually isn’t a great thing.
One year after Google announced it is getting rid of third-party cookies in Google Chrome, we are now less than a year away from this taking effect. This policy shift is heralded to be a major step forward in internet privacy and a major power grab for Google to increase its stranglehold in the online ad world.
This policy shift will change the way we see ads and change the way that advertisers get their marketing in front of qualified potential customers. It may be great for users or it could significantly downgrade the online experience. It could propel Google to even loftier financial heights or it could cost them their antitrust case.
What we know in 2021 is that this policy is coming and that it still creates more questions than answers. We also know it will be incredibly interesting to continue to watch in the coming months and years.