Google’s “Privacy Sandbox” project, meant as a more private alternative to cookies for personalized advertising, was in no small part designed to keep the company out of future legal hot water. Early signs are that it may not have the intended effect, with Reuters reporting that smaller adtech firms are facing high costs associated with implementation and continued rumblings of involvement by antitrust regulators.
Privacy Sandbox costs higher than expected
Google’s Privacy Sandbox has already attracted the attention of antitrust regulators in both the US and UK, with fears of it increasing the company’s dominance in adtech. The system, which places ad recipients into generalized interest groups rather than tracking them around the web individually, has been gradually worked into the Chrome browser and is being rolled out for Android. Though Google initially intends to only use it with its own products, it aims to have the system adopted as a general standard by other tech firms.
But adtech firms will need to build out Privacy Sandbox platforms at scale to continue to reach all of these Chrome and Android users that will no longer be tracked by cookies, and the smaller of these are finding the cost of this is prohibitive. These firms had initially estimated that keeping up with Privacy Sandbox would require an investment of about $5 million USD, but delays in the development timeline have now doubled this cost to about $10 million.
These smaller adtech firms often have annual revenue in the very low hundreds of millions of dollars, making a $10 million outlay difficult to absorb. Even more difficult is that this cost is not necessarily fixed, and may increase even more depending on the development of the Privacy Sandbox timeline. That timeline has already unfolded over five years since the announcement of the plan, with a number of major direction changes along the way.
All of this is shaping up to create an ecosystem where only the larger adtech firms can absorb the cost of doing business, at least according to some industry executives. In addition to financial resources, the smaller firms are competing for engineering staff that may be hard to come by in a very competitive job market that favors skilled tech workers. Some of these executives feel that this simply puts the smaller players out of the game entirely.
Major change to the adtech landscape?
Much of this hinges on antitrust action that is still pending. The US Department of Justice is taking the company to trial over its broader range of alleged anti-competitive adtech practices, from how it packages and connects its marketing tools to its ad bidding systems to its rules for news publishers that might compete with its own in-house products. Just weeks ago, a ruling in a separate DOJ suit has left Google with the possibility of seeing its search tools and other parts of its business parceled out as independent operations.
The DOJ claims that Google controls about 91% of the ad server market, 85% of ad networks and more than half of the ad exchange market, and these lines of business produce about 80% of the company’s total revenue. Google has pushed back by suggesting that these estimates are faulty as they fail to factor in social media platforms and streaming services. For years it has also defended its general adtech practices as an unprecedented and unparalleled tool for small businesses that would normally be priced out of more traditional advertising channels.
Google also faces regulatory trouble in the UK, where the lead national privacy watchdog has specifically taken issue with Privacy Sandbox. A draft report by the agency that was leaked to the media in April found that the system does not adequately protect user identities and that adtech companies will likely be able to continue to track individuals around the web through various workarounds. A recent research report also came up with a dozen tested attacks on Privacy Sandbox that could expose the identities of users. Google’s various iterations of the plan have met with similar concerns over the years, and the company is still struggling to reassure the public that it has security under control.
The scrutiny seems to have killed perhaps the single most important reason for Privacy Sandbox’s development; as of July of this year, Google announced that third-party cookies will not be eliminated from Chrome after all. Users will instead be allowed to enable or disable them, as is currently standard with nearly all major browsers, and implement Privacy Sandbox features in a more selective way. Google had previously announced that third-party cookies would be gone from Chrome by the second half of 2024. The case against the company in the UK seems to have been a particular catalyst for this, first prompting Google to push back cookie elimination to 2025 before dropping the plan entirely.
