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Later this year, Google (GOOG, GOOGL) will end its use of third-party cookies, a technology that can track users across websites and serve personalized ads, through the Chrome browser. This transition is painful.
Although Google’s efforts are intended to protect user privacy, many of the sites users trust and value could be at risk as a result. This move represents a significant reshaping of the world of advertising and the user experience on the internet.
“The open web is going to suffer,” said Anthony Catur, CEO of ad tech trade group IAB Tech Lab. “The long tail of the web, small and medium-sized publishers, will be hit hard.”
Many people are acutely 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 your targeting becomes more precise, your ads become more relevant to your audience.
However, without third-party cookies, businesses have less visibility into who their audience is. This reduces our ability to monetize advertising and can make it difficult to publish content for free without forcing users to provide their email or phone number.
Chrome, which accounts for 60% of the world’s internet traffic, is the last major browser to allow third-party cookies. Apple’s (AAPL) Safari and Mozilla’s Firefox have blocked third-party cookies by default for years. However, their market share seems small compared to Google’s. Additionally, additional ad dollars flowed into Chrome after Safari and Mozilla enabled stronger privacy protections, but once Chrome says goodbye to cookies, there won’t be another browser for the ad market to turn to.
As a result, websites that rely on advertising on the open Internet may be less likely to exist. And as sites try to make up for the loss in value by churning out more ads, users may end up seeing more ads that aren’t of much interest to them.
Carsten Weide, principal analyst at W Media Research, said some publishers could see a 20% to 40% revenue loss due to the elimination of third-party cookies as advertising becomes less effective. Ta. “Generally speaking, all kinds of websites will be shut down or have less content to offer,” he said. “Ironically, while this is designed to protect users, it ends up being worse for them.”
Experts argue that the end of third-party cookies could, in some ways, worsen consumer privacy by making fine-grained data collection more normalized. As more companies encourage people to log in instead of collecting data through cookies, user profiles will become more detailed and centralized, essentially replacing one paradigm of surveillance with another.
As part of this change, which Google expects to occur in late 2024, new privacy-preserving technologies will be introduced and websites will have alternative ways to serve relevant ads. Google told Yahoo Finance it’s confident in its new tools This allows developers to recover a significant portion of the losses that would otherwise occur without third-party cookies. One new targeting method groups people into larger cohorts based on their web browsing activity. Rather than identifying users individually, this technology places users in a crowd of other users who may have similar interests.
In response to criticism that the tool doesn’t work the same way as third-party cookies, Google said its privacy efforts are not intended to replace all the functionality the market has built on top of third-party cookies. Ta. Google also emphasized that this privacy initiative is a collaboration with other advertising industry stakeholders, regulators, and consumer advocacy groups. “No other browser has attempted to provide the industry with such a variety of solutions, much less provided public consultation with stakeholders before making changes,” the company said.
But change will come.
Many of the web’s biggest companies will be better equipped to handle the overhaul. Tech giants like Meta (META), Apple, and Amazon (AMZN) are building their own walled gardens, providing deep insights into user desires and behavior. Additionally, some large media companies and publishers with large followings can rely on the subscription and app ecosystem. We built direct relationships with users through email and login, monetized directly from our viewers, and enabled us to monitor rich data streams without cookies.
For many other companies, striking a different balance when it comes to user privacy could trigger an extinction event. This is especially true for websites already strained by declining traffic, economic instability, and the impending threat of AI-driven transformation. As the death of the cookie creates a vacuum and a scramble for what comes next, the view is likely to grow that advertising dollars are better spent at multitrillion-dollar tech companies.
“Advertisers tend to shrink when there’s uncertainty,” said Evelyn Mitchell Wolf, senior analyst at eMarketer. “Advertising spending isn’t going down. The question is where it goes.”
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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