Juha Saarinen: The internet advertising cookie crumbles this year

OPINION

In theory, Internet advertising could be amazingly efficient for everyone: customers get relevant, up-to-date ads, with merchants reaching their intended target audiences easily, and in large numbers unconstrained by geographies.

However, in reality Internet
advertising has turned into a war zone.

For users, the personalised ads have become “surveillance capitalism”. Your browsing activity and history is tracked across the Internet because the more that’s known about you and your habits, the more valuable you are to brokers.

There are huge incentives for criminals to fake all that knowledge, and present fraudulent data and numbers to advertisers. Nobody really knows for sure how much is being swindled through ad fraud, but UK’s Juniper Research estimates that last year the figure was US$100 billion ($162b), and growing.

That’s worldwide, and data intelligence platform Statista put the worldwide Internet ad spend at US$626b.

Meanwhile, users who quite rightly feel uncomfortable at being tracked and targeted by faceless advertising companies on the Internet have resorted to blocking ads in browsers.

Browser vendors have listened to this, and acted on privacy worries. For instance, Apple’s Safari and Mozilla Firefox have blocked third-party cookies for several years now.

Cookies are little text files that web servers on the Internet can set in browsers, and read data from. It’s a useful feature that’s been abused to profile users with unique identifiers, and one easy and powerful privacy protection is to disallow third-party websites from setting them to stop you being followed on the web.

No third-party cookies mean advertisers know much less about site visitors. You become far less valuable to them.

It’s a matter of trust, or lack thereof rather, and the Internet advertising industry has not covered itself with glory in that area.

Google, which last year hauled in some US$225b in advertising revenue, has had a think about how to counter the threat of users saying no to privacy-invasive targeting. This is the year when we’ll see how the cookie crumbles quite literally.

It’s been an uphill battle for Google to talk turkey on privacy while maintaining its crucial advertising revenue flows. In 2021, the company mooted replacing third-party cookies with something called “federated learning of cohorts” or FloC that was trialled in New Zealand and other countries on a small scale.

Small is of course relative when you’re Google: Chrome currently is used by two-thirds of people on the Internet, and that’s somewhere in the three billion range. Don’t forget that Chrome is shipped with Google’s Android mobile operating system as well.

Since Google would control FloC, the idea was shot down in flames by just about everyone else as giving Big G way too much control. FloC was replaced by Topics which as the name suggests is a list of advertising categories in Chrome. Hundreds of them in fact, and they’ve been published so everyone can see what they are.

Instead of third-party cookies set by this and that server, the browser now tracks your interests. Topics are part of the Privacy Sandbox feature in Chrome but so was FloC. You can opt out of the Privacy Sandbox features in Chrome’s settings, under Ads Privacy.

Alternatively, you can switch to a browser that doesn’t use the Privacy Sandbox, and keep third-party cookies disallowed.

Most people probably won’t give this a second thought though but this is the year when the initial trial of Privacy Sandbox and Topics rolled out to 1 per cent of Chrome users, around 30 million of them.

By the second half of this year, third-party cookies will be fully phased out in Chrome, replaced by five application programming interfaces (APIs) provided by Privacy Sandbox.

Speaking to the venerable ad-land publication Campaign, Google’s director for privacy partnerships (whatever they might be) in Asia-Pacific, Kunal Guha, promised that all businesses and ad tech platforms will have access to the Privacy Sandbox data and capabilities.

No need for regulators to get involved, Google hopes.

Guha also said the Privacy Sandbox uses a range of technologies to make it harder to track users, hides their identities and minimises data collection.

Digital and online rights organisations such as the Electronic Frontier Foundation remain sceptical and say it’s still user-tracking, except it’s just Google doing it now.

Either way, it’s all happening this year. Initial reports from ad tech companies note that users on the Privacy Sandbox and Topics trial are “worth” at least a third less than others who accept third-party cookies.

This cookieless future for Chrome looks set to be a big change for Internet publishers, but we’ll have to wait until stats appear at the end of 2024 to find out its impact.