Why Google delayed third-party cookie phase-out

Timing isn't right for cookie phase-out due to the slowdown in ad spending globally given the microeconomic conditions. Also, Meta has reported declining revenues for the first time, say experts

e4m by Javed Farooqui
Published: Jul 29, 2022 8:30 AM  | 7 min read
google

Tech giant Google’s decision to extend the deadline for phasing out third-party cookies in Chrome for the second time has raised a lot of questions about the real motive behind the move.

While announcing the decision to push the third-party cookie phase out to the second half of 2024, Privacy Sandbox VP Anthony Chavez noted that the most consistent feedback received by Google is the need for more time to evaluate and test the new Privacy Sandbox technologies before deprecating third-party cookies in Chrome.

However, experts in the digital advertising industry believe that there is more to Google’s decision than what meets the eye.

Aqilliz Chief Business Officer Rajeev Dhal believes that the real reason behind the delay is what he calls Google's 4P conundrum. The 4Ps are Privacy, Personalisation, Performance, and Profit. “Alphabet is running a business where the regulator demands 'Privacy', user demands 'Personalisation', advertiser demands 'Performance', and shareholder demands 'Profit',” he said.

He further stated that the cookie deprecation deadline has been extended not because Google is looking at an alternative to FLoC (Federated Learning of Cohorts) since Sandbox permits errors and evolution. Earlier this year, Google killed FLoC and proposed Topics API as a replacement for cookies.

“If Google gives too much weightage to privacy to make the regulator happy then the advertiser is unhappy and so is the shareholder. On the revenue front, they are trying to strike a balance. The market condition is not conducive anyway as tech stocks are down, Meta has depleted by 50%, Microsoft is waking up, and Amazon is sitting on first-party data. In such a scenario, it's better to delay (third-party cookies phase out) than do it,” Dhal averred.

HT Media Group Head - Sales Excellence and Agency Partnership Mitesh Desai feels Google delayed the cookie deprecation due to the tough economic climate globally and lack of preparedness as far as alternative solutions to third-party cookies are concerned.

"There are two primary reasons, in my opinion, firstly, a large part of the decision could have been based on the prevailing global macroeconomic conditions and the impact it would have had on ad-supported business models. In an uncertain global economic environment, a move to phase out the cookies could have made the costs of acquisition for advertisers go up even further and eventually impact their business. So the prevailing stress in the macroeconomic environment could have been an important factor behind this decision," Desai said.

He elaborated further, "The other related factor to have played a role is that of preparedness, clearly, there is a lot more that needs to be done. It is about walking the tight rope and balancing revenue maximisation while minimising privacy implications. It is a complex challenge to solve and delays are expected as Google's Privacy Sandbox Topics API is in trials or limited tests. All eyes are now on the European regulators and how they enforce GDPR more strongly, perhaps in the second half of this year. Decisions made by the regulators may eventually decide the date on when the cookie sunset may happen. For now, delay or not, advertisers need to wake up to the time that they can’t ignore the gaps in the cookie-powered market as it rewards poor behaviour and buying practice."

Mirum India Joint CEO Hareesh Tibrewala stated that the industry will heave a sigh of collective relief over the delay in cookie deprecation. He feels that one of the reasons for the decision is the headwinds in the advertising industry due to global inflation.

“There has been a general concern that the depreciation of the 3rd party cookie will result in a drop in revenue for publishers and consequently agencies and also increase the cost of acquisition for the brand, at least for some time, till the industry comes to grip with a new ecosystem. Added to that, the industry is foreseeing some headwinds in the second half of this year due to inflation and possible recession. Facebook for the first time reported a decline in revenue today!!” he contended.

Publicis Media India SVP, Lead - Precision (Programmatic) Anil Pandit noted that the biggest reason why Google decided to delay the cookie phase-out was to give more time to the digital advertising ecosystem to prepare for the cookieless world.

“There are many factors that would have prompted Google to delay Cookie deprecation, but one which seems to hold a lot of water is that everybody including developers, publishers, and marketers needed more time to evaluate and test the new Privacy Sandbox technologies. They needed time to test APIs and expand trials to build confidence and also to make sure that Google allays all privacy concerns of the regulators around this (in-browser algorithm) in the best possible manner,” he stated.

AdLift CEO & Co-Founder Prashant Puri noted that the prevailing market conditions must have prompted Google to scrap the 2023 deadline for cookie deprecation. “Timing isn't right for cookie phase out due to the slowdown in ad spending globally given the microeconomic conditions. Also, Meta reported declining revenues for the first time partly due to Apple’s iOS privacy changes,” Puri added.

ProfitWheel Head of Product Marketing Abhinay Bhasin said that a strong reason for this delay is the need to get back to the drawing boards with test results that are large enough and ensure the needs of all the stakeholders of the ecosystem are met while keeping consumer privacy at the forefront.

“Privacy Sandbox’s proposition of FLoC was a way to ensure audience anonymity and create a “privacy-preserving” ID for ad targeting. To gain a better grasp of the impact of these changes on the ecosystem as these approaches are tested out exhaustively is one of the major reasons that prompted Google to delay the rollout of these changes,” he added.

Yahoo Chief Business Officer Iván Markman said that the delay will give the industry the much-needed time to come up with innovative solutions for a cookieless world. “The future of identity lies in the ability to leverage direct, consumer-consented sources and to be smarter about signals that are not attached to a consumer’s identity. While any delay gives the industry more time to test and learn, adapting solutions today brings greater reach across all inventory - with or without IDs."

Publicis Media’s Pandit said that the delay in phasing 3rd party cookies should be taken as a blessing in disguise since both advertisers and publishers would need a good amount of time to put their own houses in order.

“Advertisers should start focusing on short-term and long-term cookie-less tactics around Contextual Targeting, build a Zero Party Data and 1PD Framework, envisage an annual Value Exchange Content Calendar, start evaluating the right tech required, and audit their existing data from a Consent point of view,” he said.

Advertisers, he added, should also start testing a few Identity solutions, focus on 2nd Party Data partnerships and look for more unique Data Partnerships. “They should also start looking at newer measurement technologies like Data clean rooms for both attributions, Analytics as well as targeting (courtesy some independent Data Clean Rooms),” Pandit stated.

According to Pandit, publishers should look at this as an opportunity to further chisel their newer monetisation opportunities, start viewing their visitors as their own customers by giving them some value, build their own 1PD, participate in various ID solutions like UID 2.0, extend their subscription base with more data points enough to start understanding the needs, preferences, and habits of theirs and start forming rich deterministic cohorts to be sold to advertisers at a premium.

“They should focus on the product (content) and not ad slots; focus on creating outstanding user experience to build credibility and trust; build innovative formats to step up audience engagement opportunities; switch from quantity metrics to quality ones and ultimately develop a more finely targeted narrative towards buyers, presenting quality media as a complementary alternative to Walled Gardens,” he noted.

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