Google Ad Revenue Unchanged by Privacy Sandbox Proposals

Amidst ongoing competitive concerns, Google has released an update regarding its Privacy Sandbox initiative, asserting that initial trials of its experimental ad-targeting methods – designed to eventually replace third-party cookies in its Chrome browser – are achieving results comparable to current cookie-based advertising practices.

Google has been developing a system known as Federated Learning of Cohorts (FLoC), which aims to target advertisements by grouping users with shared interests. The company maintains that this approach offers improved privacy protections compared to the existing practice of individual tracking by third parties.

The intention behind FLoCs is to allow for continued interest-based advertising even after support for third-party trackers is discontinued.

However, this proposal has raised concerns among advertisers who believe it could foster anti-competitive practices. Earlier this month, the U.K.’s Competition and Markets Authority (CMA) initiated an investigation into the Privacy Sandbox following complaints from a coalition of digital marketing firms, news organizations, and technology companies, alleging that Google is leveraging its dominant market position by phasing out third-party tracker support.

Regarding privacy considerations, Google’s Privacy Sandbox has not been universally praised.

The Electronic Frontier Foundation, for instance, has characterized FLoCs as “fundamentally opposed to privacy-preserving technology,” cautioning in 2019 that the system resembles a “behavioral credit score.” The organization expressed concerns that the proposals could perpetuate discrimination against vulnerable populations by matching their online behavior with others without their consent, and potentially expose sensitive information to third parties without providing users a means to opt out of interest-based ad targeting. 

Faced with objections from both advertisers and privacy advocates, and now subject to regulatory scrutiny regarding competition, Google faces the challenge of gaining acceptance for its proposed alternative to tracking cookies from all involved parties, with advertisers and competition regulators currently appearing to be of primary focus.

In a recent update on the Privacy Sandbox proposals, Google seeks to address advertisers’ anxieties about the potential impact of eliminating tracking cookies on their ability to effectively target internet users. The company reports that testing of the FLoC technology indicates advertisers can expect to see “at least 95% of the conversions per dollar spent” compared to cookie-based advertising.

The amount of test data used to generate this “95% minimum” figure remains unclear, as Google did not provide an immediate response when asked. Consequently, the claim lacks substantial supporting evidence.

A company spokesperson did mention that public testing will commence in March, with advertisers invited to participate in evaluating FLoC. Further details are anticipated on this front.

“Chrome plans to make FLoC-based cohorts available for public testing through origin trials with its next release in March, and we anticipate beginning testing FLoC-based cohorts with advertisers in Google Ads in Q2,” stated Chetna Bindra, group product manager for user trust and privacy, in a blog post. She added, “If you’d like to get started, you can conduct your own simulations (as we did) based on the principles outlined in this FLoC whitepaper.”

It is not surprising that Google continues to highlight the transparency of its Privacy Sandbox development process, as this may aid in defending against antitrust allegations. However, it is also important to note that the adtech industry, which has been attempting to delay the deprecation of third-party cookies, is concurrently developing its own competing solutions, often with less openness than Google.

Nevertheless, Google appears more comfortable quantifying FLoC’s potential effect on ad revenue (minimal, according to its latest claim) than articulating the privacy benefits internet users might experience from transitioning from individual tracking to being categorized into labeled groups for behavioral advertising.

Google’s blog post includes vague references to “viable privacy-first alternatives” and “hiding individuals ‘in the crowd’,” but offers no specific metrics or data demonstrating the extent of privacy gains users could expect from its proposed post-cookie future.

Test results released in October also concentrated on demonstrating to advertisers that FLoCs could deliver on key ad performance indicators. Notably, internet users’ privacy – and the implications of varying degrees of privacy loss – proves more difficult for Google’s computer scientists to measure.

“The goal is to prevent anyone from reconstructing your cross-site browsing history,” a company spokesperson explained when questioned about how the proposal would enhance user privacy.

“We are striving to address opaque forms of tracking across websites with privacy-safe mechanisms for consumers, and to prevent such tracking from occurring. We aim to achieve this while still enabling opportunities and fair compensation for publishers and advertisers. Therefore, it’s not about approximating privacy; it’s about addressing a fundamental user concern,” the spokesperson added.

FLoCs represent only one component of Google’s broader Privacy Sandbox proposals. The company is simultaneously working on a range of related initiatives to replace other essential elements of the adtech ecosystem. The blog post provides an overview of these efforts, including proposals for post-cookie conversion measurement, ad-fraud prevention, and anti-fingerprinting.

The post briefly discusses retargeting/remarketing, referencing a new Chrome proposal (called Fledge) that Google is considering for a “trusted server” model “specifically designed to store information about a campaign’s bids and budgets.” This will also be available for advertiser testing later this year, Google adds.

“Over the past year, numerous members of the ad tech community have provided input on how this might function, including proposals from Criteo, NextRoll, Magnite and RTB House. Chrome has published a new proposal called FLEDGE that builds upon a previous Chrome proposal (called TURTLEDOVE) and incorporates industry feedback, including the concept of utilizing a “trusted server” – defined by adherence to specific principles and policies – specifically designed to store information about a campaign’s bids and budgets. Chrome intends to make FLEDGE available for testing through origin trials later this year, allowing ad tech companies to experiment with the API under a “bring your own server” model,” it writes.

“Technological advancements such as FLoC, along with similar promising efforts in areas like measurement, fraud protection and anti-fingerprinting, represent the future of web advertising – and the Privacy Sandbox will power our web products in a post-third-party cookie world,” it adds.

Commenting on Fledge’s potential, Dr Lukasz Olejnik, an independent researcher and consultant, noted that its impact on user privacy remains uncertain. “The Fledge experiment appears potentially interesting, but it combines various proposals in this test. Such a combination would require a specific privacy assessment, as the offered privacy qualities might differ from those originally claimed. Furthermore, the current tests will initially have many privacy precautions intended for the future turned off. It will be challenging to gradually activate them,” he told TechCrunch.