Cookie Crumbles Again: A Sandbox for Innovation or a Walled Garden? - Part 1

Google has once again postponed the removal of third-party cookies in Chrome, this time until 2025. This marks the third delay and follows concerns raised by the UK’s Competition and Markets Authority (CMA) regarding Google's Privacy Sandbox, a privacy-centric substitute for third-party cookies.

Some of the concerns (related to privacy and competition) raised by the CMA are:

• Unfair benefit: The CMA worries that Privacy Sandbox could unfairly benefit Google, giving them an advantage over other ad platforms and publishers. This, CMA contends, could stifle competition in the online advertising market.
• Multi-touch attribution: Advertisers track conversions across different touchpoints (website visits, ad clicks, etc.) to understand campaign effectiveness. The CMA is concerned that Google's approach to attribution in the Privacy Sandbox might favour "single touch" attribution, which would primarily benefit Google Ads and disadvantage competitors.
• Privacy concerns: While the initiative is called "Privacy Sandbox," the CMA (along with the UK's Information Commissioner's Office) isn't convinced it offers enough user privacy. There are concerns that user data might still be collected and used in ways that haven't been fully transparent.

The CMA has reported an increasing number of concerns over time. In their most recent report (April 2024), the watchdog listed 111 potential issues, up from 72 just a few months prior.

An interesting aspect of the CMA's intervention is its potential to set a global standard for the development of the Privacy Sandbox. If the CMA requires Google to do away with the proposals, it's likely that regulatory bodies in other countries may follow suit.

Does Google aim to use this additional time to fine-tune its Privacy Sandbox initiative? What potential challenges can be expected from the delay in phasing out third-party cookies for both advertisers and publishers, and how might this affect the trajectory of online advertising strategies in the interim period? In this two-part series, Adgully attempts to answer these queries and much more.

Under scrutiny

The effectiveness of Privacy Sandbox has been under scrutiny for some time. In September 2021, an UK group called Marketers for an Open Web (MOW) filed a complaint with the EU Commission about Google’s ‘anti-competitive Privacy Sandbox’ web browser changes.

The MOW, an alliance of businesses, campaigns to “keep the web open, promote user choices and a diversity of voices and opinions”.

MOW Co-founder James Rosewell argues that the Privacy Sandbox could stifle competition. “Google talks about a privacy sandbox, and they say it’s open. It’s like it’s a proprietary API. But because no one else is implementing it, it’s open in name only. And it’s so bad that in an open market, no one would use it. The only reason people are paying any attention is because it’s got Google’s name attached to it,” he says.

Google said in a statement that it has been closely engaging with the UK Information Commissioner's Office (ICO), and “other privacy and competition regulators globally, and will continue to do that to reach an outcome that works for users and the entire ecosystem”.

More time for fine-tuning?

The postponement of cookie deprecation exacerbates the existing uncertainty in the online advertising world. Without clear guidance, stakeholders such as advertisers, publishers, and ad-tech players are left to navigate the situation on their own.

Experts say that the stakeholders now get more time to try alternative solutions.

The extension granted for deprecating third-party cookies offers marketers more time to leverage privacy-compliant and scalable solutions such as contextual targeting and attention metrics and privacy-focused identity solutions like first-party data, retail data, and alternative identifiers, states Laura Quigley, SVP APAC at Integral Ad Science (IAS).

The advertising industry and the UK’s CMA have made it clear that Google’s Privacy Sandbox is an inferior framework, states Mathieu Roche, CEO and Co-Founder, ID5. However, Roche adds, this should not be a reason to delay the phasing out of cookies.

“At the end of the day, Privacy Sandbox is just one of many alternatives on the market. Yes, this delay does give Google time to tweak this initiative, but many industry members are tired of the constant changes and confusion. Instead, the advertising ecosystem is turning to independent solution providers, like ID5, that offer more stability and proven results, unlike Privacy Sandbox,” says Roche.

Apurv Modi, Managing Director & Co-Founder, ATechnos Group, points out that Google’s decision to postpone the deprecation of third-party cookies buys them valuable time. Modi feels that this window allows them to develop their Privacy Sandbox initiative further, incorporating the insights from regulators, advertisers, and, of course, users themselves. He reckons that it's a balancing act: protecting user privacy while facilitating a healthy online advertising ecosystem.

However, Modi agrees, this delay creates uncertainty. “Advertisers might need a clear timeline for the cookie's demise to solidify long-term plans. Similarly, publishers could face disruptions in their revenue streams as they grapple with the changing landscape. This interim period becomes crucial. Stakeholders across the board – advertisers, publishers, and tech companies alike – will need to invest in new data management strategies and tools. This will help them navigate the eventual shift away from third-party cookies and prepare for a future that prioritizes user privacy without sacrificing the effectiveness of online advertising,” he says.

Russhabh R Thakkar, Founder and CEO, Frodoh World, also agrees that Google's extended timeline likely offers them more time to refine their Privacy Sandbox, the alternative approach to tracking users online. Thakkar adds that this delay creates uncertainty for advertisers and publishers who rely on current targeting methods. However, he adds, it also gives users continued privacy protections as the industry adjusts to a future without third-party cookies. This could lead to innovation in online advertising strategies as new methods are developed.

“Well, it is cited that the delay is to allow for a detailed evaluation of the tech proposed, but my individual submission is that there are various elements at play like pressure from advertisers, federal pressures, not to forget human rights debates which could require a lot of time to finesse a framework that benefits everyone. Let's also not forget that bug testing can be a tedious and prolonged process, not to mention a complete rethink on retargeting ads,” points out Suchana Sarkar, CBO, Makani Creatives.

Unfair edge?

Many experts, like the UK’s CMA, are concerned that Google’s Privacy Sandbox could give them an unfair advantage in the advertising industry.

Out of the 15 features bundled in the Privacy Sandbox, 12 are restrictive by nature and have the potential to stifle ad tech innovation and disrupt many advertising use cases, says Mathieu Roche. “The CMA investigation may have influenced Google to abandon one of these restrictive use cases that would limit the amount of signals that publishers could have access to. This would have severely impacted publishers and the companies they work with ability to identify users. Essentially, publishers would have lost control over their own users while Google has access to signals and full control,” explains Roche.

Each platform owning and monopolising data is what’s happening today, points out Suchana Sarkar. She further adds, Google’s response is largely due to the Federal intervention and demand for regulation such as EU’s GDPR and the California Consumer Privacy Act.

“While Meta’s response has been more towards adapting to these external pressures rather than leading the charge on developing new privacy-centric advertising technologies like Google’s Privacy Sandbox, I don't suppose competitors will be exempt from making similar changes either. Giants like Apple’s Intelligent Tracking Prevention (ITP), App Tracking Transparency (APP) and Microsoft’s Tracking Prevention are all actions in response to the mounting pressure and sensitivity towards data privacy,” says Sarkar.

Russhabh R Thakkar feels that Google’s control over Chrome data within the Privacy Sandbox is a concern worth watching. “Chrome’s dominance in the web browser market gives Google significant access to data within the Sandbox. This could potentially give them an unfair edge compared to competitors who rely on different methods. However, the Sandbox itself is designed to minimize data collection and keep it on-device, which could create a more level playing field overall. It’s an ongoing debate, and only time will tell how this dynamic plays out,” he points out.

(Tomorrow, Part 2 of this report will address if the Privacy Sandbox provides sufficient transparency and control for users regarding their data used in targeted ads. Also, it will explore if the move from third-party cookies to the Privacy Sandbox might harm online publishers’ revenue streams.)