Google is policing itself on privacy because it knows it has to

The company's new ad policies reflect a changing industry -- and a potential move to sidestep government regulation.

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Most people have known for years that technology giants like Facebook and Google make a ton of money by knowing exactly what people do online and selling that knowledge to advertisers. The advertisers, in turn, get better and better at serving people ads targeted directly to them. But there’s been a reckoning in the past few years as people and governments around the world have learned just how much these companies know and what they can do with it.

Despite that, yesterday’s news that Google will not build identifiers to track individuals across the internet came as a surprise. The company also affirmed that it won’t use any new identifiers made by third parties. Google’s entire business model has relied on having extensive information on what people do with its services as well as details on the sites people visit with Chrome.

That said, Google has been moving in this direction for a few years now. The company announced in January 2020 that it planned to make third-party cookies obsolete over the course of two years, and now Google has confirmed it won’t just substitute in a new tracker or identifier that can follow people across the internet.

That doesn’t mean personalized ad tracking is going away, but it will be more anonymized. For example, Google’s new “privacy sandbox” technologies will allow companies to target ads without collecting data at the individual, personalized level. Instead, advertisers will be able to target groups of users with similar browsing behavior and interests. Google will start testing this technology in Q2 of this year. “Advances in aggregation, anonymization, on-device processing and other privacy-preserving technologies offer a clear path to replacing individual identifiers,” Google’s David Temkin wrote in a blog post announcing the changes yesterday.

As usual, there are a few caveats, the first being that “first-party” data, or information you collect on visitors to your own sites, is still fair game for targeting. And that’s something that gives Google an advantage in the advertising space, as the company has tons of data on people who visit its sites or use its products, especially if they’re signed in with a Google account. And, according to The Wall Street Journal, this change applies to websites only, not mobile apps. The market research firm eMarketer says that 68 percent of all digital ad spending in the US in 2020 was for mobile ads — but that figure doesn’t differentiate between spending in mobile apps versus ads on mobile web sites.

Google’s surprisingly strong stance in the online tracking debate aligns it more with Apple and Firefox — and pits it squarely against Facebook. As part of iOS 14, Apple announced it would include anti-tracking protection in the form of something called App Tracking Transparency. This will require app developers to ask users if they want to be tracked for ad targeting purposes when they open an app. Altruistically, Facebook says that turning off tracking in its app will be harmful to small businesses who want to serve ads to potential customers. Of course, it also has the potential to be a huge harm to Facebook’s ad business in a larger sense, thus hurting Facebook’s bottom line.

Google hasn’t come out directly against Apple’s solution, but it does take issue with how browsers like Firefox and Safari let users block third-party cookies entirely. “Some browsers have reacted to [privacy] concerns by blocking third-party cookies, but we believe this has unintended consequences that can negatively impact both users and the web ecosystem,” Google wrote in its Chromium blog when it announced its plans to phase out third-party cookies. “By undermining the business model of many ad-supported websites, blunt approaches to cookies encourage the use of opaque techniques such as fingerprinting (an invasive workaround to replace cookies), which can actually reduce user privacy and control.” It’s been over a year since that announcement, but it seems Google believes that its “privacy sandbox” approach works well enough for the company to make this week’s statement.

Google recognizes that, in the short term, this change may put its own advertising business at a disadvantage. “We realize this means other providers may offer a level of user identity for ad tracking across the web that we will not — like PII [personally identifiable information] graphs based on people’s email addresses,” wrote Temkin. “We don’t believe these solutions will meet rising consumer expectations for privacy, nor will they stand up to rapidly evolving regulatory restrictions, and therefore aren’t a sustainable long term investment.”

Based on this, it seems Google is setting itself up for a future where consumers and government regulators expect companies to be more transparent and careful with data they collect. It’s also an admission that the internet has grown to a point where the privacy trade-offs of third-party cookies and similar tracking technology aren’t worth the potential business gains, especially if Google can develop with its Privacy Sandbox that can keep user behavior more private while still offering advertisers options for targeting groups based on their behavior.

Going forward, a big question is whether Google’s move puts any additional pressure on Facebook to change its ways, such as dropping its attack on Apple’s new privacy features. Given the massive scope of Google’s advertising business, it would be hard for these changes not to reverberate throughout the industry. But Facebook is an advertising juggernaut in its own right — and if its stance on Apple’s threat to its business is any indication, it won’t be forced into a more privacy-friendly world without a fight.

There’s also the spectre of continued antitrust interest — UK regulators are already investigating whether Google’s sandbox tools will give it a competitive edge. Google is also facing antitrust lawsuits from the US Department of Justice as well as two separate, multi-state suits. While these suits don’t necessarily have to do with user privacy, Google could be trying to show itself as a good corporate citizen with a progressive view on protecting its customers’ data. But the UK investigation already shows that the company will have to tread carefully with this new initiative.

Ultimately, I’m most interested to see if Google can live up to its high-minded views on privacy that it now publicly states. If this decision hurts the bottom line in the short term, we could see a collision between business interests and Google’s recent privacy commitments.

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