What Google’s latest cookie news means for the best advertising technology stocks

Sundar Pichai, CEO of Google, speaks during the signing ceremony to help Google expand the training of information technology at El Centro College in Dallas, Texas, on October 3, 2019.

Brandon Wade | Reuters

Analysts are clinging to Google’s latest guidelines on their promise not to use technologies that people follow on the Internet individually. Some analysts believe that their opinion has not changed. But others at BMO downgraded one ad-tech stock, noting that ‘it’s too hot in the kitchen’.

Google said in a blog post on Wednesday that it will only use “privacy retention technologies” that rely on methods such as anonymizing or collecting data after it stops supporting cookies. Cookies are small pieces of code that deliver websites to the visitor’s browser and stay up to date. if the person visits other sites. They were used to track users on multiple sites to target ads and see how they were performing. In January 2020, Google announced plans to end support for third-party cookies, which fuel a large portion of the digital advertising ecosystem, within two years in its Chrome browser.

The blog post has raised questions in the industry about the future of initiatives by ad tech players, who have worked on ways to balance consumer privacy while retaining personalization in ads after they can not use cookies .

Following the announcement, analysts are saying about the upheaval for public advertising technology companies, including Google:

Google

Bank of America analysts said Thursday that Google’s comments ‘suggest that app developers and publishers will have to move away from all alternatives to individual identifiers, which could make Google’s privacy sandbox’ capabilities even more valuable in the industry. ”

Analysts cite figures from Jounce Media and estimate that 40% of the money that flows from advertisers to publishers on the open Internet goes through Google’s advertising advertising tools.

KeyBanc analysts said their real question is whether Google intends to restrict alternative identifiers of Google products. They said such a “clear preference for Google over the open internet would be an interesting dilemma for regulators – how should consumer privacy be balanced against market power?”

Google said on Wednesday that its blog post is about how its own advertising products will work, and that it will not limit what can happen to third parties on Chrome. The company has said it will not use Unified ID 2.0 or LiveRamp ATS, two tools that say they will be able to target ads in a more privacy-conscious way, but will not specifically talk about one initiative. Uncertainty still exists as to whether Google will limit activity on Chrome in the future.

“In our view, the inherent problem with the current efforts to regulate Internet companies is that efforts to provide more privacy are only making the largest companies stronger,” KeyBanc analysts said. “Until compromises between privacy and competition are considered, we suspect that regulation could stifle competition.”

Macquarie analysts say they believe the move “more clearly defines the roles that Google will play in online advertising than the roles that open Internet advertising companies such as The Trade Desk, LiveRamp and Criteo play.”

“It looks like Google is placing another part of the ad targeting business – which it can afford to do given its size, and it should probably increase given privacy issues and the government’s investigation into its methods,” Macquarie analysts said. . “But it’s still raising the bar around its garden, because any advertiser working with Google’s advertising presentation technology will have to use Google’s new API-based protocols – which will have to target consumers in a very different way.”

Google’s share rose nearly 1% after the market opened on Thursday.

The commercial bank

KeyBanc analysts say the Trade Desk will dispute changes to Google’s Chrome browser if it restricts the use of alternative identifiers.

The Trade Desk has led to the creation of Unified ID 2.0, a framework that will rely on email addresses that are hashed and encrypted by the consumers who give their consent. The Trade Desk has painted the identifier as a better alternative to cookies, better explaining to consumers how relevant ads fund the content and experiences they read or use on the Internet. In February, the Trade Desk transferred control of Unified ID 2.0 to a non-profit organization called Prebid.

“In short, Unified ID 2.0 puts privacy back into the consumer, which is consistent with privacy objectives and the value exchange of the open Internet,” KeyBanc analysts said. “If Google can restrict alternative IDs, Google will only become even more powerful in the advertising industry.”

Analysts at Macquarie said on Wednesday that the announcement appears to limit The Trade Desk’s ability to purchase ads with IDs on Google’s exchange or offer platform.

‘… But it only encourages TTD to collaborate directly and across a wide range of others with publishers [supply-side platforms] through private market transactions, “they wrote.” We expect Unified ID 2.0 to continue to evolve as a device and browser agnostic industry standard with [opt-in] and consent between publishers and consumers, and TTD will continue to leverage its position as by far the largest independent DSP to help advertisers reach consumers on the open web outside of Google. ‘

A Trade Desk spokesman said in a statement that there was a significant focus on the industry to build a new identity solution that retained the value of relevant advertising while protecting consumer privacy.

“Unified ID 2.0 places the consumer on the driver’s seat, ensures that it is not recognizable, and gives them control over how their data is used,” he said.

The Trade Desk share fell 5% on Thursday morning.

LiveRamp

BMO downgraded LiveRamp on Thursday in a note titled “Too hot in the kitchen.”

Analysts say they believe Google’s confirmation that it will not integrate ‘alternative identifiers’ could delay LiveRamp’s sales cycle by reevaluating ecosystem players this year to move the best forward.

In late October, LiveRamp said that Unified ID 2.0 would be available to publishers via its platform, which they said helps advertisers target real people instead of cookie-based profiles or devices. LiveRamp has, what he calls, its “verified traffic solution”, which he says allows consumers to log in to gain control over their data. On the other hand, brands and publishers can leverage that data. This is the solution of the company to deal with the abolition of third-party cookies.

“We believe that further clarity and acceleration of revenue is possible in 2022 (when GOOG finalizes its cookie roadmap, among other things), but visibility today is limited,” BMO analysts wrote. They said the industry is still waiting on Google to provide more clarity on how it will handle alternative options.

BMO analysts said they believe the revenue impact on LiveRamp is likely to be limited in the short term, but warned that the likelihood of upside is being reviewed.

Macquarie analysts said the type of announcement coming from Google on Wednesday usually caused volatility in stocks on the alleged headline risk. “But we believe that while it is still a turnaround in the evolving ad tech landscape, the outlook for TTD, RAMP and CRTO is more or less unchanged.”

In a blog post responding to the news, LiveRamp said that Google’s announcement was in line with what he had advocated. LiveRamp argued that its ATS solution incorporates the ideas of first-party consumer relationships, transparency and consumer control.

“In short, marketers will still be able to buy people-based stock on DV360 with LiveRamp,” the report said. DV360 is an advertising technology product from Google.

The LiveRamp share fell 7.7% on Thursday morning.

Criteo

Advertising technology company Criteo said in a statement that Google’s message on Wednesday “does not affect Criteo’s plan and roadmap.”

“As we said before, we continue to invest in our first-party media network, as well as in cohort-based and contextual advertising, enabling marketers to engage effectively with their customers in a privacy-safe and informed manner,” said a company. spokesman said. “User consent and consent are at the heart of our solution.”

In late October, Criteo announced its involvement in the collaboration with Unified ID 2.0. The company said it would provide the sign-up solution and help develop a “transparency portal” that gives consumers more control over their advertising experience.

Analysts at Macquarie said the outlook for Criteo remained unchanged after Google’s announcement, noting that Criteo was an active contributor to Google’s privacy initiatives.

BMO analysts have raised their target price from $ 25 to $ 45, saying they are building more confidence in Criteo’s turnaround efforts as it repositions its retarget-heavy business.

“For CRTO, we expect the basic use case for reallocation to continue attracting investor questions,” the BMO analysts said. “But we continue to believe that CRTO has developed alternative techniques to effectively reach consumers who have previously shown interest in an advertiser’s products.”

The BMO analysts said the changes could move forward from a one-to-one target to the message to a group of users who have shown similar interests in an advertiser’s product.

“Combined with strong machine learning, we believe that CRTO can continue to show improvement in its core business to help advertisers market interested customers,” they wrote.

The Criteo share fell 5.4% on Thursday morning.

CNBC’s Michael Bloom contribution made.

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