Data privacy changes will impact business

As user concerns around data privacy continue to evolve, advertising companies like Google are leaning into privacy-first solutions to keep up with the changing expectations.

Building upon its announcement to end support for third-party cookies in 2022, Google recently shared that it will not build or use alternative identifiers to track users for advertising purposes. Instead, its ads will be driven by one of itsprivacy sandbox initiatives called Federated Learning of Cohorts (FLoC).

As a refresher, Google uses third-party cookies and behavioral targeting to serve more relevant ads to users. The problem (and power) of cookies is that they help advertisers target so precisely that there’s a unique identifier for each individual user. Because of this, third-party cookies have been at the center of growing data privacy concerns and evolving data privacy regulations for some time.

Google’s shift to a privacy-first alternative to cookies will officially mark the end of behavioral targeting and the resurgence of contextual and interest-based targeting within its products.

What is Google FLoC?

FLoC is a privacy-focused solution from Google’s Privacy Sandbox designed to help advertisers perform behavioral targeting without third-party cookies. The FLoc API is based on the notion of cohorts or groups of users with similar interests and browsing history.

FLoC uses machine learning algorithms to develop a cohort based on the sites users visit. The algorithms might be based on the URLs, content or other factors. The browser ensures that cohorts are well distributed so that each represents thousands of people. This approach effectively hides individuals “in the crowd” and uses on-device processing to keep a person’s web history private on the browser.

Google expects to start testing FLoC-based cohorts with advertisers beginning in Q2 of this year. The targeting changes will go into effect when it officially stops recognizing third-party cookies in Chrome browser.

What is the difference between behavioral targeting and interest-based targeting?

Behavioral targeting (also known as online behavioral advertising) is a cookie-based method that allows advertisers and publishers to display relevant ads and marketing to users based on their web-browsing behavior and cross-domain tracking.

For example, it allows an advertiser to retarget users based on the websites they have visited and the actions they have taken across the web. When Chrome stops supporting third-party cookies next year, behavioral targeting will no longer be an option for advertisers using Google products.

Interest-based targeting allows advertisers to display relevant ads and marketing to users based on their interests as determined by the sites and content they interact with online.

For example, with FLoC, advertisers will be able to reach people with relevant content and ads by clustering large groups of people with similar interests based on their browsing behavior.

What does this mean for marketers?

Although Google won’t allow ad targeting based on what it calls “alternative identifiers” in inventory it sells, there is the notion that they might continue to enable those identifiers in its Chrome browser environment.

With only limited testing being done so far, it’s too early to know what the true impact will be on tech firms, agencies, brands and publishers. It’s unclear what Google will or will not allow regarding identifiers.

However, with the shift toward targeting groups (as opposed to targeting individuals within groups) there is the potential for ad effectiveness to be downgraded. It will reduce the pool of addressable audiences as well as our understanding of the consumers within those pools.

How will marketers adapt?

Advertisers will be able to target their databases of consumers through first-party data on Google properties, such as Google’s search results pages and YouTube. Because of this, it will be essential for brands to continue collecting and organizing first-party data. It will enable marketers to upload customer lists to platforms that can help market directly to those customers or create lookalike audiences.

Companies that are taking their first-party data strategy seriously are investing in Customer Data Platforms, robust server-side and client-side data management, and machine learning capabilities. These are the ones leading their industries into this new era of privacy and personalization.

Why embrace the future of privacy on the web?

Google’s decision to not support alternate identifiers for cross-site tracking is just another step in a gradual move away from tracking technologies based on questionable user consent.

Privacy Sandbox technologies represent the future of how ads and measurement products will work on the web. Advertisers who lean into this new privacy-first approach — be it through first-party data or interest-based targeting — will create better experiences for consumers while supporting more durable solutions for the ads industry.