Google CEO Sundar Pichai speaks during a signing ceremony pledging Google to help expand information technology education at El Centro College in Dallas, Texas on October 3, 2019.
Brandon Wade | Reuters
Analysts are talking about Google’s latest guidance on its promise not to use technologies that track people individually across the Internet. Some analysts say their views have not changed. But others at BMO have downgraded an ad tech stock, noting that “it’s too hot in the kitchen.”
Google said in a blog post Wednesday that it will only use “privacy preservation technologies” that rely on methods such as anonymization or data aggregation after it stops supporting cookies. Cookies are small pieces of code that websites send to a visitor’s browser and remain with as that person visits other sites. They have been used to track users across various sites to target ads and see their performance. Google announced plans in January 2020 to end support for third-party cookies, which power much of the digital advertising ecosystem, in its Chrome browser within two years.
Following the announcement, here’s what analysts are saying about the reorganization of public ad tech companies, including Google:
Bank of America analysts said Thursday that Google’s comments “suggest that app developers and publishers will have to move away from all individual identifier alternatives, which could make ‘privacy sandbox’ capabilities of Google are even more valuable in the industry. ”
Analysts cite figures from Jounce Media, which estimate that 40% of the money that flows from advertisers to publishers on the open Internet goes through Google’s ad buying tools.
KeyBanc analysts said their real question was whether Google plans to restrict alternative identifiers for Google products. They said such a move “would clearly favor Google over the open Internet and pose an interesting dilemma for regulators: How should consumer privacy be balanced with market power?”
Google said Wednesday that its blog post was about how its own ad products will work and that it will not restrict what can happen in Chrome by third parties. The company said it will not use Unified ID 2.0 or LiveRamp ATS, two tools that it says would help target ads in a more privacy-conscious way, but would not specifically address any initiative. Uncertainty still hangs over whether Google will restrict that activity on Chrome in the future.
“In our view, the inherent problem with current efforts to regulate Internet businesses is that efforts to provide more privacy simply empower larger companies,” KeyBanc analysts said. “Until the tradeoffs between privacy and competition are considered, we suspect that regulation runs the risk of stifling competition.”
Macquarie analysts said they believe this measure “more clearly defines the roles that Google will play in online advertising versus the roles played by open Internet ad technology companies such as The Trade Desk, LiveRamp and Criteo.”
“It appears to place Google in a different part of the targeted advertising business, which it can afford given its scale, and probably should given privacy concerns and increasing government scrutiny of its methods,” Macquarie analysts said. “But it still builds the walls around its garden even higher, as any advertiser working with Google’s ad serving technology will have to adopt Google’s new API-based protocols, which target consumers on a website. very different way. ”
Shares of Google rose nearly 1% after the market opened on Thursday.
The trading table
KeyBanc analysts said The Trade Desk will challenge the changes to Google’s Chrome browser if it restricts the use of alternative identifiers.
Trade Desk led the formation of Unified ID 2.0, a framework that will be based on encrypted and encrypted email addresses of consenting consumers. Trade Desk has described the identifier as a superior alternative to cookies that better explains to consumers how relevant advertising funds the content and experiences they read or use on the Internet. Trade Desk in February passed control of Unified ID 2.0 to a nonprofit called Prebid.
“In short, Unified ID 2.0 puts privacy back in the hands of the consumer, which seems congruent with the privacy goals and the exchange of value of the open Internet,” said KeyBanc analysts. “If Google can restrict alternative IDs, then Google becomes even more powerful in the advertising industry.”
Macquarie analysts said Wednesday that the ad appears to restrict The Trade Desk’s ability to buy ads using IDs on Google’s trading or bidding platform.
“… But that only encourages TTD to work with publishers directly and on a wide spectrum of other [supply-side platforms] through private market transactions, “they wrote.” We expect Unified ID 2.0 to continue to develop as a device and browser independent industry standard with [opt-in] and consent between publishers and consumers, and TTD will continue to leverage its position as the largest independent DSP by far to help advertisers reach consumers through the open web beyond Google. ”
A Trade Desk spokesperson said in a statement that there is “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, ensures that they are not identifiable, and gives them control over how their data is used,” he said.
Trade Desk shares fell 5% on Thursday morning.
BMO downgraded LiveRamp on Thursday in a note titled “Too hot in the kitchen.”
Analysts said they believe Google’s confirmation that it will not integrate “alternate identifiers” could slow LiveRamp’s sales cycle as ecosystem players reassess the best way forward this year.
In late October, LiveRamp said that Unified ID 2.0 will be available to publishers through its platform, which it says helps advertisers target real people instead of cookie-based profiles or devices. LiveRamp has what it calls its “Authenticated Traffic Solution,” which it says allows consumers to choose to gain control of their data. On the other hand, brands and publishers can leverage that data. It is the company’s solution to deal with the disapproval of third-party cookies.
“We believe greater clarity and revenue acceleration is possible in 2022 (when GOOG finalizes its cookie roadmap, among other things), but current visibility is limited,” BMO analysts wrote. They said the industry is still waiting for Google to provide more clarity on how it will treat alternative options.
Analysts at BMO said they believe LiveRamp’s short-term revenue impact is likely to be limited, but warned of a lower likelihood of upward revisions to estimates.
Macquarie analysts said the type of announcement that came from Google on Wednesday generally causes stock volatility in overall perceived risk. “But we believe that while this is another twist in the evolving ad technology landscape, the outlook for TTD, RAMP and CRTO is about the same.”
In a blog post responding to the news, LiveRamp said that Google’s announcement is in line with what it has been advocating for. LiveRamp argued that its ATS solution encompasses the ideas of first-person relationships with consumers, transparency, and consumer control.
“In summary, marketers will continue to be able to purchase people-based inventory on DV360 using LiveRamp,” the publication says. DV360 is an ad technology product of Google.
LiveRamp shares fell 7.7% on Thursday morning.
Ad technology company Criteo said in a statement that Google’s post on Wednesday “does not change or in any way affect Criteo’s plan and roadmap.”
“As we said before, we continue to invest in our source media network, as well as contextual and cohort-based advertising, which enables marketers to effectively interact with their customers in a secure and privacy-consent manner.” , a company said the spokesperson. “User permission and consent are the foundation of our solution.”
At the end of October, Criteo announced its participation in the collaboration with Unified ID 2.0. The company said it will provide the login solution and help develop a “transparency portal,” which gives consumers more control over their advertising experience.
Macquarie analysts said the company’s perspective on Criteo remained unchanged following Google’s announcement, noting that Criteo has actively contributed to Google’s privacy initiatives.
Analysts at BMO raised their price target from $ 25 to $ 45 and said they are building more confidence in Criteo’s recovery efforts as it repositiones its retargeting business.
“For CRTO, we expect the basic use case for retargeting to continue to raise questions from investors,” analysts at BMO said. “But we continue to believe that CRTO has been developing alternative techniques to effectively reach consumers who have previously shown interest in an advertiser’s products.”
Analysts at BMO said that in the future, the changes may require a change from one-to-one orientation to sending messages to a group of users who have shown similar interests in an advertiser’s product.
“When combined with robust machine learning, we believe CRTO can continue to show improvement in its core business of helping advertisers market to interested customers,” they wrote.
Criteo shares fell 5.4% on Thursday morning.
CNBC Michael Bloom contributed to reporting.