What the latest news about Google cookies means for top advertising technology stocks

Analysts are probing Google’s latest guidance on its promise not to use technologies that track people individually over the Internet. Some analysts say their views have not changed. But others at BMO downgraded an advertising technology lawsuit, noting that “it is too hot in the kitchen”.

Google said in a blog post on Wednesday that it will only use “privacy preservation technologies” that rely on methods like anonymization or data aggregation after it stops supporting cookies. Cookies are small pieces of code that websites deliver to the visitor’s browser and remain with them as that person visits other websites. They have been used to track users on various sites to target ads and see how they are doing. Google announced plans in January 2020 to end support for third-party cookies, which feed much of the digital advertising ecosystem, on its Chrome browser within two years.

The blog post raised questions in the industry about the future of initiatives by advertising technology players, who have been working on ways to balance consumer privacy while maintaining personalization in advertising after they cannot use cookies.

Following the announcement, here’s what analysts are saying about the shake-up at public advertising technology companies, including Google:

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

Analysts cite figures from Jounce Media, estimating that 40% of the money that flows from advertisers to publishers on the open Internet goes to Google’s ad-buying tools.

KeyBanc analysts said their real question is whether Google plans to restrict alternative identifiers for its products. They said that such a move “clearly favors Google over the open Internet and poses an interesting dilemma for regulators – how should consumer privacy be balanced with market power?”

Google said on Wednesday that its blog post is about how its own advertising products will work and that it will not restrict what can happen on Chrome by third parties. The company said it will not use Unified ID 2.0 or LiveRamp ATS, two tools that it says would help target ads in a more privacy-conscious way, but would not specifically speak about any initiative. Uncertainty still looms over whether Google will restrict this activity in Chrome in the future.

“In our opinion, the problem with current efforts to regulate Internet companies is that efforts to provide more privacy simply make larger companies stronger,” said KeyBanc analysts. “Until the trade-offs between privacy and competition are addressed, we suspect that the regulation risks stifling competition.

Macquarie analysts said they believed that this move “more clearly defines the roles that Google will play in online advertising versus the roles that Internet advertising technology companies like The Trade Desk, LiveRamp and Criteo play”.

“It seems to put Google in a different part of the ad targeting business – which it can do due to its scale and probably needs to do due to privacy concerns and the growing government scrutiny of its methods,” said Macquarie analysts. “But it still raises the barriers around your garden even more, as any advertiser working with Google’s ad serving technology will have to adopt Google’s new API-based protocols – which target consumers in a way very different.”

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

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

The Trade Desk led the formation of Unified ID 2.0, a structure that will feature hashed email addresses and consumer encryption that give their consent. The Trade Desk painted the identifier as a superior alternative to cookies that better explains to consumers how relevant advertising finances the content and experiences they read or use on the Internet. In February, the Trade Desk passed control of Unified ID 2.0 to a non-profit organization called Prebid.

“In short, Unified ID 2.0 brings privacy back to the consumer, which seems congruent with the privacy goals and value exchange of the open Internet,” said analysts at KeyBanc. “If Google is able to restrict alternative IDs, it has become even more powerful in the advertising industry.”

Macquarie analysts said on Wednesday that the ad appears to restrict The Trade Desk’s ability to buy ads using IDs on Google’s trading or supply platform.

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

A Trade Desk spokesman said in a statement that there is “a significant industry focus on building a new identity solution that preserves the value of relevant advertising while protecting consumer privacy”.

“Unified ID 2.0 puts the consumer in the driver’s seat, ensures that he is not identifiable and gives him control over how his data is used,” he said.

Trade Desk shares fell 5% on Thursday morning.

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

Analysts said they believe Google’s confirmation that it will not integrate “alternative identifiers” could slow LiveRamp’s sales cycle, as ecosystem participants reevaluate how best to move forward this year.

In late October, LiveRamp said that Unified ID 2.0 will be available to publishers through its platform, which helps advertisers reach real people instead of profiles or devices based on cookies. LiveRamp has what it calls an “Authenticated Traffic Solution”, which, she said, allows consumers to choose to gain control of their data. On the other hand, brands and publishers can access this data. It is the company’s solution to deal with the depreciation of third party cookies.

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

BMO analysts said they believed the impact of short-term revenue on LiveRamp is likely to be limited, but warned of a lower likelihood of upward revisions to the estimates.

Macquarie analysts said the type of announcement made by Google on Wednesday generally caused stock volatility in the perceived risk in the headlines. “But we believe that, while this is yet another turnaround in the evolving advertising technology landscape, the prospects for TTD, RAMP and CRTO are more or less unchanged.”

In a blog post responding to the news, LiveRamp said the Google ad is in line with what it has been advocating. LiveRamp argued that its ATS solution embraces the ideas of primary consumer relationships, transparency and consumer control.

“In short – traders will continue to be able to buy people-based stock on the DV360 using LiveRamp,” says the post. DV360 is a product of Google’s ad technology.

LiveRamp shares fell 7.7% on Thursday morning.

Advertising technology company Criteo said in a statement that Google’s post on Wednesday “does not change or impact Criteo’s plan and roadmap in any way.”

“As we said before, we continue to invest in our primary media network, as well as contextual and cohort-based advertising, which allows marketers to effectively engage with their customers in a manner that is consented and protected by privacy,” one company said. the spokesperson. “User permission 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 will provide the subscription solution and help develop a “transparency portal” that will give consumers more control over their advertising experience.

Macquarie analysts said the company’s prospects for Criteo remained unchanged after Google’s announcement, and noted that Criteo has been actively contributing to Google’s privacy initiatives.

BMO analysts raised the target price from $ 25 to $ 45 and said they were gaining more confidence in Criteo’s recovery efforts as it repositioned its retargeting business.

“For CRTO, we expect the basic use case for redirection to continue to raise questions from investors,” said BMO analysts. “But we continue to believe that CRTO has been developing alternative techniques to effectively reach consumers who have already shown interest in an advertiser’s products.”

BMO analysts said that in the future, the changes may require a change in segmentation one by one to send messages to a group of users who have shown similar interests in an advertiser’s product.

“When combined with strong machine learning, we believe CRTO can continue to show improvements in its core business of helping advertisers remarket to interested customers,” they wrote.

Criteo’s shares fell 5.4% on Thursday morning.

CNBC’s Michael Bloom contributed reports.