Google Stock, Apple Stock: Outlook for Digital Advertising As Cookie Crumbles

For years advertisers have feasted on cookies, those small data files that track your every click on the web. But in the name of improved consumer privacy, Google and Apple are forging ahead with plans to thwart online ad trackers. Now the stage is set for these internet giants, media publishers and digital advertisers to battle in the new cookie-free world.


Alphabet‘s (GOOGL) Google plans to phase out third-party cookies in Chrome next year. Chrome is the most widely used web browser.

Apple (AAPL) eliminated tracking cookies on its Safari mobile browser three years ago. Now it plans to require consumers to opt in for ad tracking on all mobile apps. Facebook (FB), for one, has challenged Apple, saying the new privacy options will hamper small businesses and in-app advertising.

But targeted ads aren’t going away. The issue is whether a handful of big tech platforms track consumer behavior and control personalized advertising or other websites and marketers will as well. And over time, the latter is likely.

The digital advertising industry is developing new ways to identify web users that are ostensibly more consumer-friendly. Trade Desk‘s (TTD) email-based framework to create encrypted identifiers is leading the way.

Apple stock and Google stock may gain from the consumer privacy initiatives. Some observers fear Google’s clout in digital advertising will grow as cookie replacements emerge. While Google is not opposing other companies’ methods, the company has its own proposals for providing personalized ads without cookies.

TTD stock also stands to benefit as Trade Desk’s replacement for third-party cookies gains momentum in the digital advertising industry. Speculation on the change helped drive TTD stock up 209% in 2020.

The loss of third-party tracking cookies in Chrome and mobile app IDs in the Apple realm will be a formidable one-two punch to the digital advertising industry.

Apple’s plans affect its IDFA mobile app identifier, an ID technology that has become critical to online advertisers. The change will leave the IDFA turned off by default.

Apple will provide iPhone and iPad users the option to either opt in or out to allow their data to be collected. They may lose access to content, however, if they opt out.

Facebook, Snap (SNAP) and game publishers stand to lose revenue because of Apple’s changes, according to a Morgan Stanley report.

Despite Apple Delay, Big Changes Loom In Digital Advertising

Apple delayed carrying out the changes to give advertisers more time to adapt. But Apple says it plans to move ahead in early 2021.

Consumers stand to gain in some respects. Irrelevant pop-up ads, for example, may fade away, say some proponents of alternative tracking technologies.

Digital media publishers are scrambling to develop new tracking methods that let digital advertisers track consumer activity across multiple websites.

Ad tech firm Trade Desk’s universal identifier has gained traction. Its tool for web publishers aims to fight companies that operate “walled gardens.”

These closed online environments such as Google, Facebook, and social media platforms Pinterest (PINS) and Snap (SNAP) don’t need third-party cookies or device identifiers because they can track actions by their logged-in users. The walled-garden firms share only limited data with advertisers and agencies but make liberal use of it themselves.

“The argument is that the independent, non-walled-garden ecosystem must work together and collaborate and consider identity a commodity,” said Nicole Perrin, analyst at eMarketer.

Web publishers using Trade Desk’s technology share email addresses and data with others in a database instead of keeping it to themselves.

“Basically the idea is that without coming together and doing this collaboratively, there’s no way what they call the open internet can compete with Google, Facebook and Amazon (AMZN),” Perrin said.

Toward this end, the Interactive Advertising Bureau in February 2020 created “Project Rearc” to re-architect digital marketing.

Digital Advertising: Walled Gardens At Google, Apple

Ad trade associations, ad agencies and web publishers — in concert with big brand advertisers such as Ford (F), General Motors (GM), Procter & Gamble (PG) and Unilever (UL) — took another step in August. They formed the Partnership for Responsible Addressable Media. The group aims to find replacement technologies for third-party cookies and create new industry standards for targeted advertising.

Instead of using the new trackers, big brand advertisers could simply cut back their online ad spending, divert it to internet TV, or shift more spending into walled gardens. Even if they dislike the data policies of Google or Facebook, their massive user bases make them hard to ignore. As for internet TV, subscriptions provide a way to identify users, and the services’ fast user growth is a draw for advertisers.

The IAB, when announcing Project Rearc last February, warned that some advertising dollars could shift as third-party cookies go away. But the shift is expected to be limited. Citing research by a Harvard Business School professor, the IAB said “the elimination of digital marketing personalization would mean a loss of $32 billion to $39 billion in ad revenue on the Open Web by 2025, with more than 90% of those revenues shifting to walled gardens.”

TTD Stock: Cookie Replacement Harnesses Encrypted Emails

Support for Trade Desk’s user-identity framework, called Unified ID 2.0, reflects advertisers’ hopes for an alternative.

While the proposed replacement for third-party cookies is not a revenue generator, it has raised Trade Desk’s stature within the digital advertising industry.

Even so, analysts expect more than one universal ID to emerge. Ad tech companies including LiveRamp (RAMP), Criteo (CRTO), Neustar, MediaMath, Adobe Systems (ADBE), startup Kochava and others aim to play a role in third-party cookie replacements and finding new ways to identify mobile device users.

LiveRamp’s Authenticated Traffic Solutions (ATS) system is widely used by web publishers. Also, Trade Desk and LiveRamp recently agreed to make their advertising technologies interoperable.

At BMO Capital Markets, analyst Daniel Salmon in a report praised the Trade Desk-LiveRamp pact.

“A stronger Unified ID 2.0 and more broad adoption should help the Open Web better push back against share gains of the walled gardens,” Salmon said.

Trade Desk’s Unified ID 2.0 recently gained the support of digital advertising industry players such as measurement firm Nielsen (NLSN), Magnite (MGNI), Index Exchange, PubMatic and others. Magnite was renamed following the merger of Rubicon Project and internet TV specialist Telaria.

TTD Stock: Not Commercializing Cross-Site Tracker

Dave Pickles, Trade Desk’s co-founder and chief technology offer, told IBD that Unified ID 2.0 has its roots in the IAB’s Project Rearc.

“The Unified ID 2.0 project will eventually be run by someone other than us,” Pickles said. “We intend to have it operated by a trade body or a neutral body somewhere. This is not something we’re trying to commercialize. We’re planning to open source it. It’s going to be interoperable with every other technology out there.”

With Unified ID 2.0, consumers will be asked to provide an email address. This can occur when they first visit websites or after accessing a limited amount of content. Consumers can opt in or out. In exchange for the email address, those who opt in will get access to free or customized content as well as more relevant ads.

According to Trade Desk, consumers would be able to manage their data and privacy settings and opt out at any time, though probably not with the same content access. The process encrypts the email, then turns it into an anonymous ID. With the use of a single sign-on technology, consumers would be able to visit other participating websites without logging in again.

Many consumers already provide emails as part of subscriptions or to online retailers for product information. Websites with logged-in users would help create “connective tissue” that operates in the background.

Digital Advertising: A Boost For Omnichannel Marketing?

One plus for the digital advertising industry is that Unified ID 2.0 is a “cross-channel identifier,” says Macquarie Research analyst Tim Nollen. He says Unified ID 2.0 works across multiple devices — PCs, internet-connected TVs and mobile phones. Third-party cookies only work on PCs.

“To have an identifier that understands what a consumer is doing on different devices is much more valuable,” Nollen said. “The concept of omnichannel marketing may finally come about because there’s a better understanding of users.”

Nollen says consumers stand to gain. Most obviously, they’ll see fewer ads that pop up again and again.

Pickles notes that web publishers like news sites have the clout to ask for email addresses. He also points out that other websites have been successful in asking consumers to turn off ad-blocking technologies if they want access to content.

Consumers Favor Advertising-Funded Products Over Subscription?

“Publishers will be withholding content to consumers that don’t provide some kind of payment,” Pickles said. “If you look at the range of subscription versus advertising-funded products in any space, you can see that advertising-funded are far more popular when both are an option. How many people would sign up for Netflix (NFLX) with ads if it was available?”

Pickles added: “It’s a basic quid pro quo of the internet and media. Content has to get paid for. If cookies go away, publishers will either have to put up a (registration) wall of some kind to collect retail data or they will go out of business, or they’ll massively restrict content.”

IBD 50 Growth Stocks To Watch Right Now

Whether TTD stock will continue its run remains unclear. But Trade Desk plans to launch Unified ID 2.0 in the first half of 2021. Pickles expects the year to be a tryout period before Google restricts usage of third-party cookies in 2022.

Meanwhile, Google has its own ideas on how to replace third-party cookies and cross-site tracking. Its “Privacy Sandbox” initiative uses aggregated, anonymized data to create personalized ads.

Google Stock: Unlike Apple, Core Business Is Advertising

“Google isn’t going to go about this cookie-deprecating process in any way that hurts its ad revenue business,” said Nollen. He added: “The non-walled-garden side could do better with better information to run on” depending on what industry standards emerge.

Google is walking a fine line amid increased regulatory pressure. Among web publishers, there’s concern about giving Google too much control over the cookie-replacing process. Google and Facebook take in over 60% of total digital advertising revenue.

The Department of Justice in October filed antitrust charges against Alphabet, focused on its internet search engine and search-related advertising. The antitrust case could broaden to Google’s whole digital advertising business.

Cookie Replacements In Digital Advertising: First-Party Data

Amid the big changes coming to the $160 billion online ad industry, Nollen says industry trade groups will need to step up with consumer education initiatives.

At eMarketer, Perrin said: “As far as the brands — what I am mostly hearing within the industry is that brands are maybe hanging back a little bit and waiting for their agencies and tech providers to figure out a solution. The ad tech people have been calling for brands and publishers as well to be more involved to make sure new solutions meet their needs.”

IBD Live: A New Tool For Daily Stock Market Analysis

Consumer product maker P&G didn’t respond to an interview request by IBD.

Some web publishers may be big enough to go it alone. The New York Times (NYT) in early 2020 shifted away from collecting third-party cookies. Instead, the news website relied on its own, proprietary data from logged-in subscribers. In the advertising industry, that’s called “first-party” data. Consumers often provide data as part of loyalty programs that offer perks.

Trade Desk’s Pickles says relying on first-party data isn’t a solution for most web publishers with less site traffic than a New York Times. He says they’re better off taking part in a network sharing encrypted email lists.

Other Alternatives Spurred By Apple, Google Moves

Nollen expects many solutions to emerge. One is Criteo’s “revocable ID.” It serves Criteo’s largely retail client base.

Then, there’s improved “contextual marketing.” Using machine learning, a type of artificial intelligence, advertisers build probability models based on what kind of websites — travel, sports or fashion — a consumer visits.

“There are a number of small private companies with ID solutions as well as large public companies offering identity services as part of their marketing cloud software,” Nollen said.

He added: “And ad agency groups like IPG (Acxiom) and Publicis (Epsilon), through recent acquisitions in first-party data marketing, are creating ways to resolve identity for personalized marketing campaigns.”

Follow Reinhardt Krause on Twitter @reinhardtk_tech   for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.


IBD Live: A New Tool For Daily Stock Market Analysis

Find Compelling Growth Stocks With IBD’s Stock Of The Day

View Breakout Stocks & Technical Analysis

Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists

Get A Free Trial Of IBD Leaderboard



Source link

The post Google Stock, Apple Stock: Outlook for Digital Advertising As Cookie Crumbles appeared first on TechFans.