Internet advertising will witness a paradigm shift by the end of 2022. Google, the market leader in search advertising, has announced that it will phase out support for third-party cookies. Chrome, Google’s internet browser, is the predominant application for web access in the world.
Advertising accounts for the majority of Google’s revenue, which amounted to a total of 181.69 billion U.S. dollars in 2020. The majority of Google’s advertising revenue comes from search advertising. These revenue figures come as no surprise, as Google accounts for the majority of the online and mobile search market worldwide.
Advertising Revenue of Google Over the Years
Image Courtesy: Statista
As of October 2020, Google was responsible for almost 90 percent of global desktop search traffic. The company holds a market share of around 90 percent in a wide range of digital markets, having little to no domestic competition in many of them. China, Russia, and to a certain extent, Japan, are some of the few notable exceptions, where local products are more preferred.
Image Makeover
The new approach will track clusters of users with similar interest. Individual targeting has faced opposition from privacy advocates and have made Google a party to numerous anti-trust litigations across the world. Google will not build new tech to support the proposed system, as it is not a sustainable long-term investment.
The new approach has been named FLOC – Federated Learning of Cohorts. As per the Collins Dictionary, a cohort of people is a group who have something in common. Cohort is used especially when a group is being looked at as a whole for statistical purposes.
“Users are demanding greater privacy—including transparency, choice and control over how their data is used—and it’s clear the web ecosystem needs to evolve to meet these increasing demands,” Chrome engineering director Justin Schuh said in a blog post.
Google’s move has been seen as a reactive measure to address privacy concerns and build a positive image among anti-trust agencies and lawmakers. Advertisers are sceptical about the effectiveness and pricing for future campaigns once individual targeting is halted.
A rapidly evolving regulatory environment is making companies evolve methods for future operations. Self-regulation can facilitate a softer landing as compared to imposition of similar or more severe laws by governments.
Certainly Uncertain
Testing for clustered advertisement targeting will begin in the second quarter of this year. To make the switchover look and feel organic, every change will be graded and gradual. First era of internet advertising witnessed direct sales between publishers and advertisers. Subsequently, in the second era, algorithm driven bidding was employed. Evolution of the third era will have non-cookies-based advertising.
The proposed change seems to give Google even more power and looks opaque from the point-of-view of advertisers. Advertisements are important to keep content free on the internet. In the next two years, web-based information and entertainment content will have to explore the subscription model or else prepare for an uncertain future.