Why Google Can Afford To Kill the Tracking Cookie

A growing emphasis on first party data gives Google, the dominant force in that sort of information, a significant competitive advantage. 

It does not need cookies if Google search provides unique browsing histories. This means that the privacy optics may be more publicly palatable, while the quality of the data provided may be just  as useful but less advantageous to smaller tech companies and more beneficial to Google. JL

Will Oremus reports in OneZero:

Google (is) retreating to a more defensible form of tracking that creates competitive advantages for Google. Google will still track users’ behavior on its own services. Making it harder for websites to track users will place emphasis on “first-party data,” the data companies collect on their own sites or apps. Between Android, Google Search, Gmail, YouTube, Google Home, it’s hard to think of a company with more first-party data than Google. Google Search follow users’ browsing activity. (And) alternative tracking frameworks put users into groups based on browsing rather than tying website histories to identity. 

For two decades, the cookie has been an emblem of the online advertising model that powers much of the open web — and the privacy invasions that come with it. Now, the cookie as we know it is dying.

Online advertising will live on, of course, and so will privacy invasions. But the changes taking shape today will nonetheless alter how we navigate the web in the future — and define which companies dominate it.

The Pattern

The internet’s giants are building its post-cookie future.

Google has been planning for a while now to phase out third-party tracking cookies in its Chrome browser, deprecating those bits of code that track and tattle on your browsing history for the sake of targeted advertising. It promised in January 2020 that they’d be gone by 2022. And we’ve known since 2019 that it was working on less-intrusive ways to target ads.

This week, Google committed not to build or use any systems that track individual people across the web. That means Google won’t support some of the nascent efforts by other ad-tech players to replace cookies with technologies that track an individual’s online identity in other ways, such as by matching email addresses across databases. “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,” Google’s David Temkin wrote in a blog post.

That’s a substantial privacy commitment for a company whose business is built on targeted advertising, and Google deserves credit for it. But, as some analysts were quick to point out, Google isn’t just doing this out of the not-evilness of its heart.

It’s responding in part to pressure from several sides: regulators, privacy advocates, consumers, and especially rivals. Apple and Mozilla, whose revenue models aren’t driven by ad targeting, already block third-party cookies by default in their respective browsers, Safari and Firefox. While Google Chrome remains the world’s most popular browser by a wide margin, the iPhone’s popularity has helped to make Safari an influential competitor, forcing the entire mobile ad industry to either adapt to or work around Apple’s increasingly stringent privacy protocols. The latest of those is Apple’s move to require opt-ins for any app that wants to track users, which has sparked a fight with Facebook.

Rather than die on the cookie hill, Google appears to be retreating to what it sees as a more defensible form of tracking — one that creates some competitive advantages for Google in particular.

For one thing, Google will still track users’ behavior on its own services — and, as you might have noticed, it happens to have rather a lot of services. In general, making it harder for websites to track users across the web will place more emphasis on “first-party data,” which is the data that companies collect while users are on their own sites or apps. Between Android, Google Search, Gmail, YouTube, Google Home, etc., it’s hard to think of a company with more first-party data than Google. And as the Platform Law Blog’s Dimitrios Katsifis points out: “By operating Google Search, Google is effectively able to follow users’ browsing activity beyond its properties; it knows what the user is looking for, and has full visibility into the search result the user clicks on.

And then there are the alternative tracking frameworks that Google is developing. My OneZero colleague Owen Williams has a very good, plain-language explainer on those approaches, which revolve around the idea of putting users into groups based on their browsing rather than tying their individual website histories to their identity. Some versions seek to preserve the infamous (yet relatively effective) practice of “retargeting,” in which users are targeted repeatedly with ads for an item they once viewed on a shopping site; other versions would dispense with it.

The possible approach that Google specifically mentioned in its blog post is called Federated Learning of Cohorts, or FLoC, which the company claims can be 95% as effective as cookies. (Google has a white paper explaining it in detail if you’re into that kind of thing.) FLoC has some supporters but also some vehement detractors: The Electronic Frontier Foundation’s Bennett Cyphers called it a terrible idea, arguing that it will replace old privacy flaws with new ones and “exacerbate many of the worst non-privacy problems with behavioral ads, including discrimination and predatory targeting.”

Merits aside, it’s clear that Google is positioning itself for a more privacy-conscious future in ways that seek to preserve its dominance — likely at the expense of a slew of smaller rivals. There is a whole value chain built around third-party cookies and individual user tracking, and a lot of that value is likely to go poof. Ad-tech companies such as The Trade Desk, LiveRamp, and Criteo saw their shares nosedive after Google’s announcement while Google parent Alphabet held steady.

The big picture here is that a handful of giants — in this case, Apple and Google — are powerful enough to essentially dictate the terms of the modern internet to everyone else. That they’re now moving toward models that are (arguably) better for consumer privacy is welcome. The problem is that they’re also quite obviously remolding the playing field in their own interests.

So what’s the answer to this dilemma? To Jules Polonetsky, CEO of the nonprofit Future of Privacy Forum, it’s actually pretty straightforward. “I don’t think we should expect that companies are somehow going to have the societal-level answer” to problems of privacy and competition, Polonetsky told me in a phone interview Friday. “That’s where the law has got to come in and create a playing field that is fair from both a privacy perspective and a competition perspective. Neither privacy nor competition law is sufficient; we need both.”