That’s the Way the Cookie Crumbles

Google looks to compete with Apple and others for trust

Last week, Google announced that it will no longer build or use alternative user-specific identifiers to track web-browsing traffic after it begins phasing out cookies from its Chrome browser in 2022. The move is expected to reshape the online advertising business, an industry expected to hit $400 billion in revenue in 2020.

For years, brands have been using cookies to track website visitors, improve user experience, and collect data that enables marketers to tailor ads to each user. And like gum on the bottom of a shoe, cookies have a habit of following web surfers from site to site, providing a larger picture about their behaviour, often without people being fully aware that their use of other sites is being so heavily monitored.

Given the widespread use of cookies and their importance to their enablers and to advertisers, Google’s strategy to phase out third-party cookies on its Chrome browser by early 2022 could significantly change the digital ad game.

The announcement is a clear indication that regulators and privacy advocates have hit a nerve. Serious misgivings about the scale and scope of user tracking have given rise to privacy-focussed browsers such as Brave, search engines like DuckDuckGo and a host of browser extensions such as Adblock Plus. Regulators are increasingly concerned about tracking across sites where users haven’t explicitly given permission for that, and about business models that depend on comprehensive user profiling.

We believe Google’s move also shows that the company is concerned about its losses of Android users to Apple, which is taking a stand that “privacy is a fundamental human right”. If Google has a reputation of stalking and profiling, Apple says it’s working hard to protect users’ digital lives.

In particular, Google has been losing smartphone customers in the US, where iPhones are dominating the high end of the market, pulling in many former Android users as they upgrade to 5G, while keeping just about every user they already have. Google and Apple have very different and sometimes conflicting business models, and Apple often sets itself apart as the good guy in a dangerous digital world.

One example is Apple’s new App Tracking Transparency feature, which is set to be automatically enabled on iOS in the coming weeks. This requires app developers to explicitly ask users for permission to track and share information for each app from which they wish to collect data for cross-platform ad targeting.

This privacy arms race, sparked by the triple crown of competition, regulation and growing consumer apprehension, will have a major effect on other companies that lean on trackers for revenue. The ramifications will be particularly felt by Facebook, which is all about serving targeted, online ads to its users. Google’s move leaves Facebook out on a limb as the only web giant advocating industrial-scale user data collection and profiling.

However, this cookie-killing is only going so far: Google says it’s only planning to scrap third-party cookies on its web browser. First-party cookies that track basic data about a website’s visitors are still safe and fair game. It’s possible to use and target Google Ads without Chrome-based third-party cookie data, thanks to first-party cookies and Google’s Privacy Sandbox tools.

Regulators around the globe have been investigating data privacy issues for several years now, and implementing some noticeable requirements. The EU’s General Data Protection Regulation is the prime example, requiring people to consent to the use of cookies when they visit a website. If a user doesn’t approve, the site can’t receive, use or track any of their cookie data. For now, in the US, regulation is largely made at the state level, although the change in presidential administration leaves room for new data and privacy protection rules from federal agencies.

As Internet users adopted cost-free web services as part of their everyday lives, there was an understanding that the fee was to receive advertising. A half-trillion-dollar industry was built on this deal, and the fine print, read by few, was there all along. However, the amount of data collection, profiling and sharing across companies has gone beyond the level that many people regard as reasonable — it’s no longer a little loss of privacy, but more like global surveillance. The world is changing quickly and players should be prepared to adjust their business models for the cookie trail is about to go cold.