Google (GOOG, GOOGL) will end its use of third-party cookies, a technology that can track users across websites and serve personalized ads, through its Chrome browser later this year. The transition will be painful.
While Google’s efforts are intended to protect user privacy, they could endanger many of the sites users trust and value. The move represents a fundamental restructuring of the advertising industry and user experience on the Internet.
“The open web is going to take a hit,” said Anthony Catulle, CEO of the IAB Tech Lab, a digital advertising industry trade group. “The long tail of the web — the mid-size and small publishers — is going to be significantly affected.”
Many people are hyper-aware that the internet they experience is based on what different providers think they want to see. For marketers and businesses, the ability to guess what users want creates value. As targeting becomes more precise, ads become more relevant to viewers.
But without third-party cookies, companies would have less insight into who their customers are, which would reduce their ability to make money through advertising and make their content available for free without tricking users into giving up their email addresses or phone numbers.
Chrome, which controls 60% of the world’s internet traffic, is the last major browser that allows third-party cookies. Apple’s (AAPL) Safari and Mozilla’s Firefox have blocked third-party cookies by default for years, but their market share is small compared to Google’s. Additional ad dollars flowed to Chrome after Safari and Mozilla beefed up privacy protections, but if Chrome says goodbye to cookies, the advertising market will have no other browser to rely on.
The push to phase out third-party cookies comes against the backdrop of changing sentiment around the need for stronger consumer privacy. (Anadolu via Getty Images)
As a result, websites that rely on advertising on the open internet may struggle to survive, and users may end up seeing even more ads they are not interested in as sites try to compensate for the decline in value by increasing the amount of ads they serve.
Carsten Weide, chief analyst at W Media Research, said some publishers could see revenue losses of 20 to 40 percent as the removal of third-party cookies reduces the effectiveness of their ads. “Generally speaking, you’re going to see all kinds of websites shut down or have less to offer,” he said. “The irony is that this is something that was designed to protect users, but in the end it’s going to be bad for them.”
Experts argue that the end of third-party cookies could also lead to the deterioration of consumer privacy by making granular data collection even more normalized. As more companies offer incentives to log in to replace the data collection that cookies enable, user profiles will become more detailed and centralized, essentially replacing one surveillance paradigm with another.
The story continues
Part of the changes, which Google expects to implement in the second half of 2024, will be to introduce new privacy-preserving techniques and provide alternative ways for websites to serve more relevant ads. Google told Yahoo Finance it believes the new tools will allow developers to recover a significant portion of the losses they would otherwise incur in the absence of third-party cookies. One new targeting method will group people into larger cohorts based on their web browsing activity. The technique does not identify users individually, but instead places them in clusters with others who may have similar interests.
In response to criticism that these tools don’t work as well as third-party cookies, Google said the Privacy Initiative isn’t intended to replace all the functionality the market has built on top of third-party cookies. Google also touted the Privacy Initiative as a collaboration with other ad industry stakeholders, regulators and consumer advocacy groups. “No other browser has attempted to offer such a broad range of solutions to the industry, and no other browser has publicly consulted with stakeholders before making changes,” the company said.
But change will happen.
Many of the web’s biggest companies are well-positioned to navigate this revolution. Tech giants like Meta (META), Apple, and Amazon (AMZN) have built their own walled gardens and have a deep understanding of user wants and behavior. And some of the biggest media companies and publishers with sizable followings can rely on subscription and app ecosystems. They build direct relationships with users through email and logins, allowing them to monetize their audiences directly without cookies and monitor richer data streams.
For many other sites, striking a different balance on user privacy could be the trigger for their extinction. This is especially true for websites already strained by declining traffic, economic uncertainty, and the looming threat of AI-driven transformation. As the cookie’s demise leaves a vacuum and the battle over what comes next intensifies, it’s likely to intensify the realization that ad dollars are better spent with trillion-dollar tech companies.
“Uncertainty tends to make advertisers hesitant,” said Evelyn Mitchell Wolf, a senior analyst at eMarketer. “Ad dollars aren’t going to go down. The question is where they’re going to be spent.”
Hamza Shaaban is a reporter covering markets and economics for Yahoo Finance. Follow Hamza on Twitter. translation:.
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