What Google’s latest cookie news means for top ad tech stocks

Analysts are getting off Google’s latest guidance promised not to use technologies that track individuals across the internet. Some analysts say their views have not changed. But others at BMO have taken down one ad tech stock, noting it’s “too hot in the kitchen.”

Google said in a blog post Wednesday that it only uses “privacy-preserving technologies” that rely on methods such as anonymity or data collection after it stopped supporting cookies. Cookies are small pieces of code that a website delivers to a visitor’s browser and stays with them as that person visits other sites. They have been used to track users across multiple sites to target ads and see how they are performing. Google announced plans in January 2020 to end support for third-party cookies, which fuel much of the digital advertising ecosystem. , in his Chrome browser within two years.

The blog post raised questions in the industry about the future of campaigns from ad tech players, who have been working on ways to balance user privacy while maintaining personalization in post-ad advertising. cannot use cookies.

Following the announcement, here’s what analysts say about the shake-up for public ad tech companies, including Google:

Bank of America analysts said Thursday that Google’s comments “suggest that app developers and publishers need to move away from each individually identifiable option, which could make Google’s ‘privacy sandbox’ capabilities even more valuable in the industry. ”

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

KeyBanc analysts said their real question was whether Google intended to restrict other identifiers from Google results. They said such a move would “clearly favor Google over the open internet, and set an interesting legacy for regulators – how user privacy should be balanced against the power of the internet”. market? ”

Google said Wednesday that its blog post was about how its own advertising products work, and that it will not prevent what might happen to Chrome with third parties. The company said it would not use Unified ID 2.0 or LiveRamp ATS, two tools that claim to help advertise in a more privacy-sensitive way, but would not talk specifically about a single campaign. Uncertainty remains over whether Google will block that 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 just make the largest companies stronger,” KeyBanc analysts said. “Until trade between privacy and competition is considered, we suspect that regulation impedes competition. ”

Macquarie analysts said they believe this move “more clearly defines Google ‘s responsibilities for online advertising vs. the roles that internet ad companies such as The Trade Desk, LiveRamp and Criteo playing. ”

“It seems to be placing Google in a different part of the ad-targeting industry – which it is able to do because of its scale, and which it may have to do because of privacy concerns and scrutiny. government is increasingly concerned about its methods, “Macquarie analysts said.” But it still builds the walls around its yard longer, as any advertiser working with Google ‘s advertising service technology has to accept to Google ‘s new API – based protocols – which target users in a very different way. ”

Google stock rose nearly 1% after the market opened on Thursday.

KeyBanc analysts said the Trading Desk will compete with changes to Google’s Chrome browser if it blocks the use of other identifiers.

The Trading Desk led the creation of Unified ID 2.0, a framework that relies on stripped and circulated email addresses from users who grant their consent. The Desktop Trade Desk has been identified as a better alternative to cookies that better explain to consumers how relevant advertising funds the content and experiences they read. or using the internet. The Trading Desk in February took control of an integrated non-profit ID 2.0 called Prebid.

“In short, Unified ID 2.0 puts privacy back in the hands of the user, which appears appropriate with the goals of open Internet privacy and value exchange,” KeyBanc analysts said. “If Google is able to restrict other IDs, then Google has become even more powerful in the advertising industry.”

Macquarie analysts said Wednesday that the message appears to be limiting the Trade Desk’s ability to purchase ads using IDs on Google’s exchange platform or supply side.

“… But that only encourages TTD to work with publishers directly and across a broad spectrum of others [supply-side platforms] through private market transactions, “they wrote. We anticipate that Unified ID 2.0 will continue to evolve as a device- and browser-agnostic industry standard with [opt-in] and licensing between publishers and users, and TTD will continue to gain its position as the largest independent DSP to date to help advertisers reach users across the outside open web Google. ”

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

“Unified ID 2.0 puts the user in the driver’s seat, makes them unrecognizable, and gives them control over how their data is used,” he said.

Trading Desk stock was down 5% on Thursday morning.

BMO explained LiveRamp Thursday in a note titled “Too Hot in the Kitchen.”

Analysts say they believe Google’s confirmation that it does not include “other identities” could delay LiveRamp’s sales cycle as ecosystem players re-evaluate the best way forward. -year.

At the end of October, LiveRamp announced that the Unified ID 2.0 will be available to publishers through its platform, which it says will help advertisers target real people instead of profiles or cookie-based devices. LiveRamp is called “Authenticated Traffic Solution,” which it says allows users to choose to take control of their data. Alternatively, brands and publishers can tap into that data. The company’s solution is to deal with third-party cookie reduction.

“We believe that greater revenue transparency and acceleration is possible in 2022 (when GOOG completes its cookie roadmap, among other things), but today’s visibility is limited , “BMO analysts wrote. They said the industry is still waiting for Google to provide more clarity on how it handles alternatives.

BMO analysts said they believe the near-term revenue impact on LiveRamp is limited but warned of a lower likelihood of upside revisions.

Macquarie analysts said the kind of notification that came from Google on Wednesday usually causes stock volatility to be the main perceived risk. “But we believe that while this is yet another twist in a growing ad tech landscape, the outlook for TTD, RAMP and CRTO is virtually unchanged.”

In a blog post responding to the news, LiveRamp said that Google ‘s announcement is based on what it has been claiming. LiveRamp argued that its ATS solution incorporates ideas about first-party customer relationships, transparency and customer control.

“In the short term – marketers will be able to keep a people-based record on DV360 using LiveRamp,” the post says. DV360 is a product of Google ad tech.

LiveRamp stock fell 7.7% on Thursday morning.

The tech ad company Criteo said in a statement that Wednesday’s Google post “does not alter or affect Criteo’s plan and roadmap.”

“As we have said before, we continue to invest in our first-party media network, as well as cohort-based and contextual advertising, which allows marketers to communicate effectively with the public. Their customers are protected in a way that is safe with privacy and permission, “a company said.

At the end of October, Criteo announced that it was engaged in collaboration with Unified ID 2.0. The company said it will provide the signage solution and help develop a “publicity portal,” which will give consumers more control over their advertising experience.

Macquarie analysts said the company’s view on Criteo had not changed following Google’s announcement, and noted that Criteo has been heavily involved in Google’s privacy campaigns.

BMO analysts raised their target price from $ 25 to $ 45 and said they are building more confidence in Criteo ‘s conversion efforts as it repositions its retargeting-heavy business.

“For CRTO, we expect the fundamental use case to refocus will continue to attract investor questions,” the BMO analysts said. “But we still believe that CRTO has been developing alternative ways to effectively reach consumers who have previously expressed an interest in advertiser products. ”

The BMO analysts said, moving forward, the changes may require a shift from a one-to-one target to messages of a group of consumers who have expressed similar interests in an advertiser’s product.

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

Criteo stock fell 5.4% on Thursday morning.

CNBC’s Michael Bloom add a statement.