By Sam Schechner and Keach Hagey
Google plans to stop selling ads based on individuals' browsing
across multiple websites, a change that could hasten upheaval in
the digital advertising industry.
The Alphabet Inc. company said Wednesday that it plans next year
to stop using or investing in tracking technologies that uniquely
identify web users as they move from site to site across the
internet.
The decision, coming from the world's biggest digital
advertising company, could help push the industry away from the use
of such individualized tracking, which has come under increasing
criticism from privacy advocates and faces scrutiny from
regulators.
Google's heft means the change could reshape the digital ad
business, where many companies rely on tracking individuals to
target their ads, measure the ads' effectiveness and stop fraud.
Google accounted for 52% of last year's global digital ad spending
of $292 billion, according to Jounce Media, a digital ad
consultancy.
About 40% of the money that flows from advertisers to publishers
on the open internet -- meaning digital advertising outside of
closed systems such as Google Search, YouTube or Facebook -- goes
through Google's ad buying tools, according to Jounce.
"If digital advertising doesn't evolve to address the growing
concerns people have about their privacy and how their personal
identity is being used, we risk the future of the free and open
web," David Temkin, the Google product manager leading the change,
said in a blog post Wednesday.
Google had already announced last year that in 2022 it would
remove the most widely used such tracking technology, called
third-party cookies. But now the company is saying it won't build
alternative tracking technologies, or use those being developed by
other entities, for its own ad buying tools to replace third-party
cookies.
Instead, Google says it will use new technologies it has been
developing with others in what it calls a "privacy sandbox" to
target ads without collecting information about individuals from
multiple websites. One such technology analyzes users' browsing
habits on their devices, and allows advertisers to target
aggregated groups of users with similar interests, or "cohorts,"
rather than individual users. Google said in January that it plans
to begin open testing of ad buying using that technology in the
second quarter.
Google's planned change elicited some concerns in the ad world.
At the moment, advertisers use the data harvested from people's
browsing across the web to figure out whom to serve ads to, and
whether a targeted user went on to buy the advertised product.
After Google's change, advertisers won't be able to get as detailed
a picture of either. Still, other ad industry executives said the
change is good for consumers and expressed hope that Google's new
targeting technologies will still help brands achieve their goals
in online marketing.
Google's latest move and the concern about its potential
implications underscore tension in the digital ad industry between
protecting user privacy and promoting competition. Smaller
digital-ad companies that use cross-site tracking have accused
Google and Apple Inc. of using privacy as a pretext for changes
that hurt competitors.
Among the tech giants, Google and Apple have signaled they want
to rein in user tracking in various ways. Facebook Inc. has struck
a different tone, arguing that individualized ad targeting helps
small businesses that otherwise would struggle to find
customers.
Some analysts said Google could stand to benefit from the end of
cross-website tracking because it doesn't rely much on data from
other companies. Instead, it collects a large amount of data
directly from users of its services, such as YouTube or Google
Search. Google says it will still use that data, called
"first-party" data, when targeting ads to be shown on its own
websites. Many large advertisers also have a lot of first-party
data on their customers.
"If you can only target based on first-party data, then the
people with the most first-party data do best," said Benedict
Evans, an independent analyst.
Google says its new technologies, such as the cohorts that will
be calculated on users' own devices, have worked nearly as well as
one-to-one targeting in its internal tests.
The company said its announcement on Wednesday only covers its
ad tools and unique identifiers for websites, not mobile apps,
meaning a substantial slice of the digital ad ecosystem wouldn't be
affected. Mobile ad spending accounted for 68% of all digital ad
spending in the U.S. in 2020, according to eMarketer, a
market-research firm, though that figure includes advertising on
the mobile versions of websites, not just mobile apps.
The Google plan is the latest sign that the tide might be
turning on user tracking more broadly. Apple plans to limit
tracking of app usage by requiring developers to get opt-in
permission from users before collecting an advertising identifier
for iPhones. At the same time, European Union privacy regulators
have fielded multiple complaints about the information that
websites share with third parties about what content users are
viewing as part of such tracking.
Facebook Chief Executive Mark Zuckerberg in January said in an
earnings call that "Apple has every incentive to use their dominant
platform position to interfere with how our apps and other apps
work."
In the U.K., the Competition and Markets Authority, the
country's top antitrust regulator, last month opened a formal probe
into Google's phasing out of third-party cookies from its Chrome
browser. The probe stemmed from a complaint from a group of
marketers that argued Google's plan would cement the company's
clout in online advertising.
A Google spokesman said the company has been briefing the U.K.
regulator on its plan to end its own use of unique tracking across
multiple websites.
Google's announcement complicates advertising industry efforts
to come up with an alternative, more privacy-friendly technology
for targeting individual consumers, such as the one being led by
the Partnership for Responsible Addressable Media, a group of
advertisers and advertising technology companies. That plan would
rely on new identifiers, like strings of numbers and letters
derived from users' email addresses.
Google acknowledged that others may push ahead with different
ways to track users. "We realize this means other providers may
offer a level of user identity for ad tracking across the web that
we will not," Mr. Temkin wrote in the blog post. "We don't believe
these solutions will meet rising consumer expectations for privacy,
nor will they stand up to rapidly evolving regulatory
restrictions."
Jonathan Mayer, a professor of computer science and public
policy at Princeton University, said Google still has to fill in
many details on its plans.
"These are proposals that read like a company that's under
enormous regulatory pressure and is trying to find a last-minute
plausible compromise to stave off regulation," Mr. Mayer said.
"They've done the easy stuff and they haven't done the hard
questions."
Google says that its new ad targeting technologies will promote
privacy by design and the company has already chosen to make a
long-term bet on privacy at the cost of user-level precision.
Write to Sam Schechner at sam.schechner@wsj.com and Keach Hagey
at keach.hagey@wsj.com
(END) Dow Jones Newswires
March 03, 2021 18:30 ET (23:30 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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