Is Google Benefiting From Banning Third-party Cookies

Google has announced the depreciation of third-party cookies will be delayed – again. This update has been supposedly pending for several years, and now, it looks like it won’t happen until 2024 at the earliest. While Google still works to find a savvy alternative, many publishers have already begun questioning how they will continue earning ad revenue once this happens. But is it really all that bad for Google if third-party cookies disappear? 

When programmatic advertisers don't have access to third-party data, their bids tend to be lower, decreasing the payouts to publishers. This, in turn, impacts ad tech vendors who price on a rev-share model: if advertisers are paying less, these middlemen also make less. Such a move by Google ostensibly threatens their own revenue, including the $23 billion these vendors made in 2020 through Google’s programmatic networks including AdX and AdSense.

But as the update looms closer, a deeper look highlights that it might not be so bad for them after all. In fact, deprecating third-party cookies could be a way to increase, not decrease, their market share - all under the guise of “privacy.”

Until this update happens, we can only guess how Google will change its famously opaque advertising practices. But if they do block third-party cookies from everyone, the question is, “Will Google go into the auctions on an even playing field with other buyers, or will they use cross-site first-party data that only they have access to?” 

Take Chrome, Google’s web browser, which commands a 65% global market share. If someone is signed into Chrome, is all of their browsing activity considered Google’s first-party data, which could then be used to personalize ads? This is valuable data that publishers won’t have access to when third-party cookies go away. If Google is able to retain cross-site behavior data while blocking it from everyone else, they’ll enjoy a massively unfair advantage, since they could use this information to outbid competitors for high-quality impressions.

One data point that corroborates that they may do this is in Google’s Activity Controls, specifically, the “Web and App Activity” section, where users tell Google what it can track about them. By default for individual accounts, Google checks a box that reads, “include Chrome history and activity from sites, apps, and devices that use Google services.”

At face value, this wording indicates that checking this box gives Google permission to personalize ads using not just any Chrome activity, but activity on any site that uses Google Analytics, Google Ad Manager, Google Optimize, and so on. Due to the reach of these services, this is a nearly endless amount of first-party data that could be used to outbid competitors and win more auctions

Is Google actually using Chrome and Google Analytics data for ad personalization? We have no way of knowing, but if they do, they can always point to this consent box to indicate the company’s transparency around the practice.

On the other hand, by deprecating third-party cookies, Google will be blocking its competitors from easily accessing valuable user data, allowing Google to gain more control over the Internet. 

Amazon, for example, is one of Google’s largest competitors for digital ad spending. Amazon’s ad platform, a multi-billion dollar revenue stream for the company, will likely be negatively affected by this update, as they will no longer have access to the cookie data that allows them to retarget –a major value-add for its ad platform.

Retargeting allows advertisers to target users across the web based on what they had previously viewed on Amazon. Without third-party cookies, retargeting is stymied if not over. Google’s decision, therefore, handicaps the growth trajectory of a major competitor, all under the guise of a user-first, privacy-focused update.

Of course, it’s possible that third-party cookies never go away. And it’s possible that by the time they do, publishers and advertisers will develop other methods of targeting beyond third-party data, such as by intent and context. The growth of walled ad gardens and in-house retail media platforms (e.g. those used by Walmart and Instacart) also offer alternatives to standard banner ads. Rather than helping Google, this change may accelerate the migration of ad budgets away from OpenRTB.

The likeliest outcome is that many of these independent ad solutions will see expected CPMs drop when buyers and DSPs have less data to work with. In a perfect world, this would impact everyone evenly, so market shares would stay the same, even if eCPMs decreased. Trouble arises if Google retains access to this cross-site information while blocking it from others. If they can monitor your Chrome history, for example, they know your preferences, your purchase history, and so on. 

With such knowledge, they know when they should bid slightly more to reach a valuable target, leading to more won auctions than before the change. This will have cascading effects on ad tech vendors. Not only will they make less revenue from lower eCPMs and fewer won auctions, but it makes Google a more appealing partner for both advertisers and publishers.

If banning third-party cookies is part of a broader strategy to grow market share, should we be surprised? Google has a long history of bending the rules to its advantage and making shrewd deals. Google’s Jedi Blue program, for instance, was an agreement between Google and Facebook, where Facebook agreed to stop building a competing product in exchange for getting better ad placements and proprietary user data.

The bottom line is that the banning of cookies will result in drastic changes to the advertising industry as a whole. With the update now delayed until 2023, there’s plenty of time for the industry to evolve, but not that much time. It’s important that publishers and ad tech vendors alike find ways now to maintain their ad revenue and stay competitive.