What happened?

Last week, Google announced a significant shift in its plans for the Privacy Sandbox for Google Chrome and the deprecation of third-party cookies, referred to as a "new path." While details are still emerging, Google made two key points clear:

  1. Google will not disable third-party cookies by default. Instead, they will introduce a new user experience (UI) that allows users to make an informed choice to disable third-party cookies across their web browsing.
  2. Google will continue to invest in the Privacy Sandbox to offer privacy-preserving alternatives to third-party cookies.

What does that all mean?

First a little context

Background

This announcement comes amidst pressure from multiple directions:

  1. Platform Competition: Browsers and mobile operating systems are engaged in a "privacy competition," largely initiated by Apple in 2018. Apple's latest advertising emphasizes this again - see Privacy on iPhone
  2. Regulatory Scrutiny: Google faces intense scrutiny over its market practices, especially concerning anti-competitive behavior. The Privacy Sandbox, initially aimed at disabling third-party cookies by default, is being developed and tested under the UK Competition and Markets Authority (CMA). Additionally, Google is involved in multiple lawsuits in the US and faces tighter regulations under the European Union's Digital Markets Act.
  3. Business Model: Google aims to future-proof its business model, which is primarily driven by advertising-related services.

Why now?

Google announced the Privacy Sandbox in 2020 and agreed in 2021 to develop, test, and roll it out under the oversight of the UK CMA. Google committed not to disable cookies until the Privacy Sandbox APIs—designed for audience targeting, campaign measurement, and attribution—were ready and approved by the CMA. These APIs had to be effective replacements for third-party cookies, ensuring they didn't advantage Google over competitors and didn't lead to significant revenue losses for media owners.

Over the years, this proved to be a more challenging task than Google anticipated, resulting in multiple delays. The latest delay, announced two months ago, set the timeline for disabling third-party cookies to Q1 2025. Some market participants speculated that these delays were strategic, keeping competitors preoccupied.

Recent Changes

In July, Google pivoted its plans likely due to unsatisfactory results from recent tests of the new Sandbox API, conducted under the CMA's guidance. These tests, which included real-life campaigns, showed that the APIs were not ready. Key issues included:

  • Revenue losses between 30%-60% in different experiments, showing little improvement over campaigns without third-party cookies or the Sandbox.
  • Significant latency increases for ad auctions (28%-100%).
  • Concerns that moving advertising processes directly into the browser would cement Google's dominance as the leading ad server, controlling all auctions.
  • Unanswered questions about the governance of Sandbox development.
  • Privacy concerns raised by the UK Information Commissioner's Office (ICO).

If you're interested in details take a look at the reports from Index Exchange, Criteo and IAB TechLabs Fit/Gap Analysis. Googles own results were a bit more favorable but still far from what one would call ready to fullfill the goals agreed to with the CMA. 

Anticipating negative feedback from the CMA, Google preemptively adjusted its plans to avoid an unfavorable report.

Whats next?

Google will now negotiate with the relevant authorities to restructure the agreement. Since the agreement was based on Google's plan to disable third-party cookies by default, it remains to be seen what commitments Google will retain.

From Google's perspective, this move is strategic:

  • It will reduce anti-trust scrutiny by placing the decision to disable cookies in the hands of users, making it unlikely that authorities would entirely prohibit this choice.
  • It still allows Google to market Chrome as privacy-friendly, offering users an enhanced choice mechanism to disable third-party cookies.
  • Google will continue developing the Privacy Sandbox to promote privacy-friendly solutions over third-party cookies setting them apart from parties promoting their continued use

Take aways 

3p cookies are still going away

The upcoming debate will focus on how and when users will be offered the choice to disable third-party cookies in Chrome. While we obviously don't know how this will look there are known precedents with Apple ATT or consent banners with a simple accept and reject choice - one can expect at least 50% of users disabeling cookies and likely more into the direction of 60-80%. A glimps of a wording and a potential UX can already be found in this blogpost from Google, while this was not designed for this scenario.

Continue to build and scale 

This change reaffirms the need to invest in digital advertising solutions that do not depend on third-party cookies and choices of big plattforms. A diversified portfolio of tools will be essential, including:

  • Expanding and scaling first-party data—enhancing login reach, optimizing consent rates and deploying identity graphs
  • Deploying and operationalizing clean-room technology.
  • Utilizing alternative identifiers like netID and Utiq.
  • Execute strategies for internal (via BeData) and external data collaboration

Still Sandbox and other plattform provided solutions can and will be a part of this mix, given their sheer reach and if they are further developed into effective solutions. Continued scrutiny of Google's UX choices and Sandbox development is essential unrelated to the above.