When Google announced its extended deadline for the phase-out of third-party cookies (from 2022 to 2023), ad tech stocks surged, indicating the industry’s positive reaction to the news. The new timeline allows the industry to engineer permanent solutions for third-party cookie alternatives versus the current band-aid solutions that AdTech and MarTech players have been grappling with.
In preparation for their retirement, digital players have spent much of the past 18 months wondering whether ID solutions, including Universal IDs, can maintain current capabilities. Universal IDs allow individual identification across the advertising supply chain without syncing cookies and are therefore seen as the savior of digital.
A Universal ID is a single identifier that recognizes the user in the digital marketing ecosystem and allows the information associated with the user to be passed onto approved partners in the supply chain. Unlike third-party cookies, Universal IDs open up the ability to create and share an ID with first-party information for the needs of the entire digital advertising ecosystem while respecting privacy.
However, will the expanding patchwork of identity solutions help or hinder advertising’s progress? How long will the alleged viability of Universal IDs last with the rapid rate of change in the digital landscape?
Google’s proposed alternative to third-party cookies
Notorious for its changeability, Google’s Privacy Sandbox proposals are an ongoing endeavor to update targeting methods across Chrome and wider media properties. No longer based on third-party cookies, they’ll soon be framed around large audience segments instead. The recent Google initiative, Federated Learning of Cohorts (FLoC), uses intelligent algorithms to automatically develop anonymized groups based on common interests. However, it's been reported that following the deadline extension, "Google said it will hold off on testing FLoC and other Privacy Sandbox methods in its ads products."
This was welcomed news, due in part to FLoC’s impact on privacy being a matter of industry debate. Primarily, there was apprehension around its reliance on browsing history to determine specific interests. Concern also grew about the possibility that other players may combine cohorts with additional data signals to enable individual identification and reverse-engineer them to create unique profiles. Finally, the scale of FLoC would have been restricted to Google’s walled garden, limiting control and transparency.
What does this mean for Universal IDs?
Advertisers keen to establish the future scope for one-to-one targeting haven’t had an easy time figuring out Google’s position on Universal IDs. Both last year and in early 2021, the company stated it wouldn’t support alternate identifiers for user tracking and had no plans to include them in its offerings, allegedly due to privacy protection reasons. In May, however, this stance shifted radically; another blog post revealed Google was exploring giving publishers a means of sharing encrypted signals with their selected advertising partners.
In fact, the announcement confirmed tests were in motion for not only supporting first-party IDs but also third-party IDs — sometimes known as Universal IDs. Following this surprising turnaround, industry players clung to the idea of one-to-one advertising and cross-domain tracking in Google’s environments.
While tailored online content and engaging ads bring many instant benefits for users, it’s important to recognize the questionable ethics of cross-domain tracking. Side-stepping potential challenges ultimately delays progress, as the digital landscape will continue to evolve alongside privacy regulations. One prime example of a new issue for IDs based on emails and IP addresses is Apple’s latest privacy updates.
How can the ad industry sustain its capabilities?
The core value of identity is well-known. Achieving an in-depth understanding of audience interests, habits and preferences — as well as the channels and devices they use — has become a staple of delivering digital advertising that achieves cut-through and hits its mark. But when looking at alternate targeting methods, advertisers and agencies must bear in mind that longevity is now directly tied to protecting users’ best interests.
Even after the demise of third-party cookies, one solution that I believe will help safeguard privacy-secure relevance and interest-based targeting is contextual intelligence. With advancements in machine learning, the effectiveness of contextual intelligence now goes beyond what’s on the page. Machine learning can analyze dozens of other factors, such as time of day, preferred device and browser used, to better inform ad creative and relevance. The industry’s fixation on identity is drawing attention away from more sustainable methods of understanding and engaging users.
What will be the fallout of Google’s final decision?
Two core outcomes are relatively certain. Regardless of whether Google ultimately decides to support Universal IDs in its products, the tech giant will maintain its dominance in the ad industry. No matter the results of Google’s testing, we can also be sure the privacy-centric landscape will continue to present challenges for cross-domain user tracking. To take on a healthy amount of skepticism, the industry should anticipate Google to only do what’s necessary to evade an anti-trust action by European governments.
For publishers, advertisers and AdTech companies, it’ll be important not to wait for Google before testing and developing their own solutions. The positive outcome of recent developments is that deeper collaborations are emerging between smaller industry players. To address the gaps left by Google, these players will be the key drivers behind building a more privacy-conscious and sustainable ecosystem. The combined efforts to overcome current difficulties will lead to a varied mix of more moderate solutions.
In my opinion, Google’s potential acceptance of Universal IDs won’t be good news for the move to build a truly privacy-first ecosystem. However, we can be sure that the remarkable, collective push for innovation will continue, no matter the tech giant’s decisions. Finding the most effective alternatives to the third-party cookie will direct the progress of the whole ecosystem as it steps away from temporarily viable, band-aid solutions.