Sundar Pichai, CEO of Google, speaks during the signing ceremony committing Google to help expand information technology education on October 3, 2019 at El Centro College in Dallas, Texas.
Brandon Wade | Reuters
Analysts commented on Google’s latest guidance on its promise not to use technology that could individually track people on the Internet.
Some analysts said their views hadn’t changed. However, others at BMO downgraded an ad tech stock, finding it was “too hot in the kitchen”.
Google said in a blog post on Wednesday that it only uses “data protection technologies” that rely on methods such as anonymization or aggregation of data after cookies are no longer supported. Cookies are small pieces of code that websites send to a visitor’s browser and stick with.They have been used to track users across multiple websites, target ads and check their performance. Google announced plans in January 2020 to end support for third-party cookies, which fuel much of the digital advertising ecosystem, in its Chrome browser within two years.
This is what analysts have said about the shakeout and what it means for Google and public ad tech companies:
Bank of America analysts said Thursday that Google’s comments “suggest that app developers and publishers need to move away from any single identifier alternative, which could make Google’s” privacy sandbox “capabilities even more valuable in the industry . ”
They cited numbers from Jounce Media and estimated that 40% of the money that goes from advertisers to publishers on the open internet goes through Google’s ad buying tools.
KeyBanc analysts said their real question was whether Google intends to restrict alternative identifiers for Google products. They said such a move would “clearly favor Google over the open internet and present an interesting dilemma for regulators – how should consumer privacy be balanced against market power?”
Google said on Wednesday that its blog post is about how its own ad products work and that it doesn’t limit what third parties can do on Chrome. The company said it won’t use Unified ID 2.0 or LiveRamp ATS, two tools that say they would help make ads more privacy-conscious but would not specifically talk about an initiative. There is still uncertainty as to whether Google will restrict these activities in Chrome in the future.
“We believe the inherent problem with current efforts to regulate Internet companies is that privacy efforts just make the largest companies stronger,” said KeyBanc analysts. “Until compromises between data protection and competition are considered, we suspect that regulation could stifle competition.”
Macquarie analysts said this move “more clearly defines the roles Google will play in online advertising compared to the roles played by open internet ad tech companies like The Trade Desk, LiveRamp and Criteo.”
“It appears to put Google in a different part of the ad targeting business – which it can afford, given its size, and probably has to do because of privacy concerns and increased government scrutiny of its methods,” Macquarie analysts said. “The walls around the garden will be raised even further, however, as any advertiser using Google’s ad serving technology will have to use Google’s new API-based protocols that appeal to consumers in a completely different way.”
Google’s parenting alphabet stocks fell 2.7% on Thursday.
The trade desk
According to KeyBanc analysts, The Trade Desk will contest changes to Google’s Chrome browser if the use of alternate identifiers is restricted.
The Trade Desk led the creation of Unified ID 2.0, a framework based on email addresses that are hashed and encrypted by consumers who give their consent. The Trade Desk has painted the identifier as a superior alternative to cookies. The Trade Desk passed control of Unified ID 2.0 to a nonprofit called Prebid last month.
“In short, Unified ID 2.0 puts data protection back in the hands of the consumer, which is in line with the data protection goals and exchange of values of the open Internet,” said KeyBanc analysts. “If Google can restrict alternative IDs, Google will be even more powerful in the advertising industry.”
According to analysts at Macquarie, Wednesday’s announcement appears to limit The Trade Desk’s ability to purchase ads using IDs on Google’s Exchange or supply-side platform.
“But that only encourages TTD to work with publishers directly and through a wide range of others [supply-side platforms] We assume that Unified ID 2.0 will continue to develop as a device and browser-independent industry standard [opt-in] and consensus between publishers and consumers, and TTD will continue to leverage its position as by far the largest independent DSP to help advertisers reach consumers beyond Google and beyond the open web. ”
A trade desk spokesman said in a statement that “there is a significant industry focus on building a new identity solution that preserves the value of relevant advertising while protecting consumer privacy.”
“Unified ID 2.0 puts the consumer in the driver’s seat, making sure they are not identifiable and giving them control over how their data is used,” he added.
The Trade Desk share was down more than 5%.
BMO downgraded LiveRamp on Thursday in a note titled “Too Hot in the Kitchen”.
Analysts at the bank said Google’s confirmation that “alternative identifiers” will not be integrated could slow LiveRamp’s sales cycle as players in the ecosystem reevaluate how best to move forward this year.
LiveRamp announced in October that the Unified ID 2.0 will be available to publishers through its platform, which will help advertisers target real people instead of cookie-based profiles or devices. LiveRamp has what is known as the “Authenticated Traffic Solution” that consumers can use to log in to gain control of their data. On the other hand, brands and publishers can access this data. It is the company’s solution to deal with the rejection of third-party cookies.
“We believe that further clarity and an acceleration in sales are possible in 2022 (when toget, among other things, finalizes its cookie roadmap), but visibility is limited today,” wrote the BMO analysts. They said the industry is still waiting for Google to provide more clarity on how alternative options are treated.
BMO analysts said the short-term impact on LiveRamp’s revenue is likely to be limited, but warned of a lower likelihood of upward changes in estimates.
According to analysts at Macquarie, announcements like Google’s usually cause volatility in stocks due to perceived headline risk. “However, we believe that while this is another turn in the evolving ad tech landscape, the outlook for TTD, RAMP and CRTO remains more or less unchanged.”
In a blog post that responded to the news, LiveRamp said that Google’s announcement was in line with what it advocates. LiveRamp argued that its ATS solution encompasses the ideas of first party consumer relationships, transparency and consumer control.
“In short, marketers will still be able to use LiveRamp to purchase personal inventory on DV360,” the post said. DV360 is a Google Ad Tech product.
LiveRamp Shared slipped more than 4%.
Ad tech company Criteo said in a statement that Google’s contribution “in no way changes or affects Criteo’s plan and roadmap.”
“As we said earlier, we are continuing to invest in our first-party media network, as well as in cohort-based and contextual advertising that enables marketers to interact effectively and securely with their customers,” a company spokesperson said. “User permission and consent form the core of our solution.”
Criteo announced its participation in the collaboration with Unified ID 2.0 in October. The company said it will provide the sign-up solution and help develop a “transparency portal” that gives consumers more control over their advertising experience.
Macquarie analysts said the company’s outlook for Criteo has remained unchanged after Google’s announcement, and Criteo has actively contributed to Google’s privacy initiatives.
BMO analysts raised their target price on the stock from $ 25 per share to $ 45 per share. They added that they have more confidence in Criteo’s turnaround efforts as it repositions its retargeting-heavy business.
“For CRTO, we expect the basic use case for re-targeting to continue to raise investor questions,” said the BMO analysts. “However, we continue to believe that CRTO has developed alternative techniques to effectively reach consumers who have previously shown an interest in an advertiser’s products.”
The BMO analysts said the changes may require a shift from one-on-one targeting to messaging for a group of users who have shown similar interests in an advertiser’s product.
“Combined with strong machine learning, we believe that CRTO can further improve its core business of helping advertisers remarket to interested customers,” they write.
Criteo shares were trading at $ 31.90, down 5.8%.
CNBC’s Michael Bloom contributed to the coverage.