Google’s Latest Chess Move is Great News for the Open Internet
Yesterday Google made yet another announcement regarding its approach to the future of identity. And in the 24 hours since then, I've fielded dozens of calls about what this means for the open internet and for The Trade Desk.
The short answer? Not much has changed. But what has changed, will ultimately prove positive.
To be clear, Google’s announcement went a step further than they had previously. Specifically, Google stated that “today, we’re making explicit that once third-party cookies are phased out, we will not build alternate identifiers to track individuals as they browse across the web, nor will we use them in our products.”
On the surface, that may not seem like news. Cookies are going away after all. Nothing new there. You already knew that. And, of course, cookies only impact the browsing internet. That’s about 20% of data-driven ads today. 20% is meaningful, but the open Internet has already created an alternative to third-party cookies -- Unified ID 2.0. Additionally, cookies don’t matter much to the fastest growing areas of the digital advertising ecosystem, such as CTV. With CTV, consumers log in with an email or phone number and that login helps create everything from customized viewing recommendations to a better ad experience that features fewer, more relevant ads. And this is critical for content owners, who rely on advertising to pay for that expensive content. In this new golden era of TV content quality, ad revenue is crucial to almost every content creator except for Netflix.
Rather, the new revelation is that Google will not rely on any identifiers that they don’t own.
Why is that important? In any chess match, eventually you have to let pieces go. You trade a less valuable piece for those that matter most. Google is making a trade. With this announcement, Google is doubling down on its own properties, such as search and YouTube and adding bricks to the walls around those properties. The trade-off is that Google no longer values serving ads on the rest of the internet as much -- certainly not as much as they once did. DoubleClick, the ad server and the ad exchange, will be operating at a small disadvantage going forward. DV360 will likely be in a similar position. On the open internet, they will not use alternative identifiers to cookies, but everyone else will.
Those alternatives, especially Unified ID 2.0, eliminate the cookie syncing problem that once hurt the open internet’s ability to scale. But perhaps most important, Unified ID 2.0 has been designed with the consumer in the driver's seat. The consumer's information is not identifiable. The consumer controls how their data is shared. And the consumer gets a simple, clear explanation of the value exchange of relevant advertising in return for free content. With this approach, Unified ID 2.0 has the best opportunity to become a new common currency of the open internet. It’s already beginning. It is a common currency that pays off the value exchange of the internet in a way that benefits publishers, advertisers and consumers. It is also one that cannot be controlled by any one company, including Apple or Google.
That's great for the open internet. So what's in this for Google? Two things, most likely.
First, Google is in the crosshairs on the privacy issue more than any other company in the world, past or present. Google knows more about you than any other company on the internet because of their dominant share in search. Any product you're researching, and medical condition you worry about -- pretty much all of your life's travails are followed by a (logged in) search query. With big tech under growing privacy scrutiny, this kind of announcement is a strategic move.
And second but no less important, compared to the properties they own and operate, Google makes comparatively little revenue from the open internet. So, perhaps this is a smart strategic move.
But let's be clear. Google is not abandoning targeted advertising. In fact, it could be argued that they want to be the only one to provide targeted advertising and they’ll base it on their 2 billion-ish email-based logins (something they don’t want others to do). If you think about this news in the context of Google's decision to also remove third-party cookies from Chrome and replace them with FLoC cohorts, it’s almost as if Google wants fewer cars on the road: The world will be safer; we'll keep our Ferrari; and with proposals such as FLoC, everyone else can have a bicycle. While bikes have their uses, competing with Ferraris is not one of them.
In addition, like most great chess players, Google appears to be hedging their move in case this goes another way. They seem to be expanding the scope of “first party data,” giving themselves room to use their email-based SSO data around the rest of the internet.
FLoC is an innovative idea and useful, but it won’t be able to pay off the value exchange of the internet in the same way that cookies did or that Unified ID 2.0 will. As one of the most vocal advocates of the open internet, I’m delighted that Google is investing in FLoC and privacy sandbox, but I think it is a mistake to assume those efforts will fill the hole that Google creates when eliminating third-party cookies.
In this environment, it's no surprise that the ad ecosystem has been hard at work building a better alternative to cookies -- one that centers on consumer privacy and control. The Partnership for Responsible Addressable Media (PRAM), comprising the world's leading brands, agencies, publishers and AdTech companies, has focused on building a framework, along with the IAB Tech Lab (a member of PRAM). Unified ID 2.0 builds on that work and has been embraced by all corners of the advertising business. It is these kinds of efforts that will fill the gap.
The good news is that the open internet has come together in a way that it should have done when GDPR was rolled out. Unified ID 2.0 threads the needle between privacy and relevance and it answers the question of how the internet is going to pay for itself without everyone having to resort to unsustainable subscription models. This represents our best opportunity to keep funding this golden age of television and to support critical industries, such as journalism, which have sometimes struggled to adapt since the world’s shift to digital.
As one leader of a major agency holding company told us after reading Google’s news, during one of those dozens of conversations, this will be remembered as a great day for the future of the open internet.