A proposed alternative to third-party cookies may provide insights into the future of targeted ads.
Modern digital ad targeting relies on individual and personal information. An online retailer, for example, can use networks such as Google or Facebook to target potential customers. Some commerce companies — omnichannel retailers, ecommerce merchants, wholesalers — have become dependent on these sorts of ads.
But cookie-based targeting creates privacy problems. Imagine you have visited a web page that included a Facebook “like” button. That button probably placed a third-party cookie in your browser so that Facebook could track your movements.
Knowing exactly which sites you visited would be great for advertisers, but it might be a little disconcerting to know that Facebook now possessed all of your browsing history.
End of Third-party Cookies
Privacy concerns have led to new legislation such as the European Union’s General Data Protection Regulation, the California Consumer Privacy Act, Virginia’s Consumer Data Protection Act, and similar.
These laws and growing consumer privacy worries have led the makers of popular web browsers such as Apple Safari, Mozilla Firefox, Brave, and Google Chrome to disallow third-party cookies now or in the near future.
The end of third-party cookies could end personally targeted advertising.
What Is FLoC?
Google has proposed several new standards that would work together to provide effective ad targeting and address some privacy concerns. Included in these proposals is something called Federated Learning of Cohorts, or FLoC.
Federated learning is an artificial intelligence technique that accesses data across a network of decentralized devices without sharing that data beyond the device. Google has described FLoC in detail in articles and papers, such as:
Essentially, FLoC would run in a web browser. Google is already testing it in a few million instances of Chrome. (You can test your Chrome browser to learn if FLoC is present).
The FLoC algorithm would monitor a person’s browser behavior and sort that individual into large groups or cohorts of folks with similar interests. One person might be associated with several cohorts.
While an individual’s personal history would not leave the browser, Chrome would share cohort labels with websites and advertisers for targeting.
Targeted Ads Live On
FLoC and the discussion around it may offer some insights into the future of targeted ads. And that future could be important for ecommerce retailers and wholesalers.
The first insight could be that targeted advertising will likely exist after the end of third-party tracking cookies.
Google generated $146 billion in advertising revenue in 2020. Ad targeting almost certainly played a role. Google does not want to stop earning ad revenue, as evidenced by FLoC.
“It’s difficult to conceive of the internet we know today — with information on every topic, in every language, at the fingertips of billions of people — without advertising as its economic foundation,” wrote David Temkin, Google’s director of product management, ads privacy, and trust, in a March 2021 post.
But “people shouldn’t have to accept being tracked across the web to get the benefits of relevant advertising. And advertisers don’t need to track individual consumers across the web to get the performance benefits of digital advertising,” Temkin wrote.
With FLoC and other proposals, targeted and relevant ads will outlive tracking cookies.
FLoC and similar proposals, however, have not ended the debate. That’s the second insight.
In an article titled “Google’s FLoC Is a Terrible Idea,” Bennett Cyphers, a staff technologist at the Electronic Frontier Foundation, a non-profit privacy group, wrote:
“FLoC is meant to be a new way to make your browser do the profiling that third-party trackers used to do themselves: In this case, boiling down your recent browsing activity into a behavioral label, and then sharing it with websites and advertisers. The technology will avoid the privacy risks of third-party cookies, but it will create new ones in the process. It may also exacerbate many of the worst non-privacy problems with behavioral ads, including discrimination and predatory targeting.”
One potential problem with FLoC is that there are no cohorts to begin with. Rather the algorithm would create cohorts around behavior. Thus FLoC could create and share cohorts with disconcerting labels. Cyphers continued:
“Ideally (for advertisers), FLoC will create groups that have meaningful behaviors and interests in common. But online behavior is linked to all kinds of sensitive characteristics — demographics like gender, ethnicity, age, and income; ‘big 5’ personality traits; even mental health. It is highly likely that FLoC will group users along some of these axes as well. FLoC groupings may also directly reflect visits to websites related to substance abuse, financial hardship, or support for survivors of trauma.”
Clearly, some folks are concerned about FLoC. In fact, DuckDuckGo, the search engine, has announced that its Chrome extension will block FLoC.
Thus the discussions of FLoC indicate that the fight surrounding tracking cookies will continue.
Ad Targeting Alternatives
Ecommerce merchants rely on ads. Consumers want free services, free access to information, and relevant ads. Advertising will likely continue in some form.
The takeaway for advertisers might be to prepare for changes in ad efficacy and look for targeting alternatives.