A paradigm shift

Change in digital advertising might further restrict competition

The digital advertising market is set to see tectonic shifts over the next year. Google says it intends to stop serving ads based on tracking surfer history and behaviour across websites by 2022. This is a pre-emptive measure designed to address growing privacy concerns, which have been highlighted by surfers and legislators across the EU, the US, and the UK. As the global digital advertising market is effectively a duopoly, with Google and Facebook holding an overwhelming combined market share, this will also put pressure on Facebook to follow suit. In addition to this move, and the implications it holds for technological change space, both have agreed in principle to share revenues with news organisations in Australia and France after protracted negotiations. They are now also very likely to start sharing ad revenues across other EU nations, and they are faced with demands to do so in other major markets. The Indian Newspaper Society, for example, has demanded a whopping 85 per cent revenue share for local content.

The specifics of Google’s change in ad personalisation are not so clear yet. However, the digital giant says it intends to block all “third-party” cookies in its popular Chrome browser on desktop systems (not on mobile). Third-party cookies are the commonest means of tracking surfers as they move from website to website and these allow the accumulation of data about surfers’ tastes and interests, which can be used to serve personalised ads. Facebook also uses third-party cookies and is now shifting to different means. Many popular browsers such as Mozilla’s Firefox and Opera already block third-party cookies by default, and Apple’s Intelligent Tracking Prevention Feature also blocks these. So apart from forestalling potential legislative concerns on privacy, Google may also be attempting to stem a possible shift away from Chrome.

There are other means of tracking surfers across websites, including a controversial “fingerprinting” technique, which uniquely identifies every surfer by detailed analysis of the browser and operating system, etc. Facebook has started shifting to Facebook Pixel, a “First-party” cookie which sends back data if a surfer clicks on an ad while on Facebook. Similar “first-party” means could be used by Google on its search engine and YouTube platforms, although it says it will respect individual privacy in future. Google is said to be now testing ways for businesses to target ads to clusters of consumers with similar interests. Its FLOC system, or Federated Learning of Cohorts, aims to track clusters of users instead of individuals, claiming this would protect privacy by hiding individual users within a crowd. Sophisticated algorithms can also extrapolate from known individual preferences (gleaned from search terms, or membership of specific Facebook groups) to be accurate predictors of other areas of interest.

This shift would change the paradigms of digital advertising. But it may actually cement the duopoly even more effectively on top because other smaller advertisers simply lack access to the vast trove of first-party information that Google and Facebook possess through the plethora of popular digital platforms they both control. Digital advertising depends on being contextual in a way print and conventional television cannot. The impact in terms of viewership is also easier to measure in concrete terms. It will be interesting to watch how Google manages this shift in technologies and improves the privacy quotient while maintaining its ability to deliver ads contextually and measurably.