Despite digital advertising revenues increasing as more people shift to online behavior, many tech companies including Google are moving away from the more expensive tracked and targeted ads.
"This change is about reacting to a kind of sea change in how users think about privacy," Google's director of product management, ads privacy and trust David Temkin said. "They don't want to be tracked by entities they can't see."
Google announced earlier this year that its web browser Google Chrome would no longer use third-party cookies. These codes are stored on a user's computer to help them load sites faster and save passwords. And, for the longest time, publishers and brands have relied on them to get more knowledge on a person's behavior to serve them relevant advertising.
But as people become more aware of tracking behaviors, they've also grown more skeptical about whether they need to be followed across the internet. A Pew study from late 2019 revealed 81 percent of those surveyed felt they had little control over what information companies collected over them. A similar number felt any benefits of collecting data were outweighed by the negatives.
"Rewind let's say 11 years. Smartphones were not dominant," Temkin said. "All of tech was a much smaller thing. Was it central to people's lives? Not like it is now. People think really differently about it, and you're seeing because of the prominence of tech in people's lives and because of the long-standing shift in user sentiment, people are just in a different place about it. And one critical concern is tracking. Users do not like to be tracked."
Google is not alone. Apple is now asking users to opt-into its IDFA system, a system that gives advertisers a unique code to follow iOS user behavior on their devices. Apple's Safari and Mozilla Firefox browsers have already moved away from third-party cookie tracking.
But unlike the others, the majority of Google's revenue comes from its advertising business. The sheer number of Google users plus its industry-leading technology has allowed it to become the top digital advertising platform in the world. This past quarter, its advertising revenue grew 34 percent year-over-year to $44.68 billion dollars, according to its latest earnings report.
Its dominant position has drawn scrutiny from federal regulators. The Department of Justice filed a lawsuit against Google in October 2020, saying its anti-competitive practices have allowed it to create a monopoly on the digital advertising industry. Temkin insists Google isn't abandoning advertising or its ability to make sure the right people see the right ads. Instead, it's developing what it calls a "privacy sandbox," where advertisers or publishers won't get access to individual user behavior. It wants to create groups of thousands of users called a Federated Learning of Cohorts, otherwise known as FLoC or "flock."
These cohorts would be given a unique four-digit identifier and constructed based on the URLs they visited or the content of web pages they looked at. For example, advertisers could know that flock XXXX is more likely to purchase sneakers than other groups. They then can serve sneaker ads to the whole group. The company believes it will deliver similar results as targeted ads, minus the privacy implications.
"Yes there's a lot of invention going on here, but we're all in on it and we believe that we're paving a way for the future not just for Google but for all of the participants in the ecosystem," Temkin said. "Advertisers and website publishers as well as our partners will see comparable results to what they're seeing right now under the individual-tracking, third-party cookie technique."
However, some publishers have pointed out that taking away hyper targeting will lower the price of advertising, which in turn could take away their revenue at a valuable time. It also may give Google more control of the system, because they would be in charge of creating the cohorts and other groups could not draw their own insights. In addition, Google's sheer size in the digital advertising space means marketers will have to use them regardless of the changes.
But Google's Temkin argues these changes are more in line with consumer demands, who in turn are the ones who buy and use products.
"We feel like we're creating a level playing field here," Temkin said. "We don't see this as disadvantaging small publishers at all. And again, we're all reacting to a change in user sentiment. We're all subject to that. We're kind of building a best of both worlds approach, effective advertising with user privacy."