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Google’s FLoC has flown: what now for APAC?

What Google's FLoC means for APAC

A year after they de-facto declared the death of the cookie, Google unveiled FLoC as their post-cookie solution. Ian Chapman-Banks, CEO and Co-founder, Sqreem Technologies spells it out for the digital ad industry in Asia-Pacific.

After announcing last year that they were officially phasing out cookies, we now know that Google is not building alternative tracking identifiers.

Unveiling their post-cookie solution, Google introduced the Federated Learning of Cohorts (FLoC), an API that intends to deliver relevant ads to consumers by clustering users into large groups, or cohorts, based on their internet activity. Accounts are anonymised and grouped on-device, protecting user information from being spread across the web.

This ends speculation among publishers and advertisers on Google’s next steps once the cookie signs off in 2022. And although FLoC is showing promise in its early stages -- Google says FLoC has delivered 95% of conversions per dollar spent compared to cookie-based advertising in its initial tests -- advertisers, ad tech providers, and publishers are understandably left with questions and concerns in the face of this massive transition.

The cookie crumbles: What this means for the digital ad industry in Asia-Pacific

The fall of the cookie has been the writing on the wall for years now, as growing concerns on user privacy around the world continue to loom large. Companies have been scrambling to come up with federated ID systems and other alternative solutions that cushion the blow for various parts of the digital ecosystem while respecting shifting trends in privacy preferences. Generally, the Asia-Pacific region will have some catching up to do compared to their counterparts in Europe and the US when it comes to the cookieless race. APAC trails behind the rest of the world in acquiring first-party data, which might also mean that the region will likely face greater challenges in coming up with an alternative to cookies. Additionally, Google’s dominance in the region, particularly for Chrome and Android, could also imply a larger impact once cookies are out of the picture.

Yet coming up with a satisfying solution that will effectively replace the cookie is reasonably a tall order, with much on the line for advertiser, publisher, and consumer alike. The cookie forged the connection between a viewer and a publisher, on an advertiser’s behalf. With cookies out of the picture, the viewer loses their link to the publisher and the advertiser, dramatically diminishing an advertiser’s value to display targeted ads. Similarly, the ability for a publisher to make their inventory valuable to an advertiser has equally declined on the other end of the transaction.

This also means that consumers will receive lots of random ads. The inability for both publisher and advertiser to reach consumers also means that users are less likely to see relevant promotions from websites, publications, or vendors they normally interact with that depend primarily on third-party cookies. This impact on user experience can also pose an added blow to publishers.

It’s not that consumers don’t want to interact with ads -- in fact, consumers want brands to add value to their lives through personalised experiences, if not at the expense of their privacy.

Google’s FLoC announcement is the newest development in the shift to a post-cookie world, which could potentially make or break current methodologies being developed in the ad tech space. The tech giant has already confirmed that it will not be supporting unified ID systems -- which might scupper current platforms in motion such as Trade Desk’s Unified ID 2.0 -- and it’s exciting to see how this will affect subsequent developments for alternative solutions.

Even in Asia, we will continue to see emerging technologies and alternatives on what will replace the cookie. In the immediate short term, acquiring first-party data will be a priority in Asia, and we expect to see the value of first-party data increase as the region begins to further understand its importance. Generally, we also expect to see a more refined symbiotic relationship between those in advertising and the CRM industry to fill in the gaps that the cookie will leave behind.

This is a space those in ad tech should watch out for, including APAC. Digital advertising in the region is booming exponentially, and with the pandemic speeding up digital transition in the region, it will only continue to grow. Current market dynamics show that the total digital advertising spend in Asia and the world will continue to rise, as brands and publishers continue to look for ways to target audiences effectively.

What comes next: Potential emerging AI technologies

Ultimately, brands that hold rich, reliable, and current first-party data are already ahead of the race in filling in fragments of the ecosystem -- yet that’s just a piece of a bigger puzzle. Many of the alternatives that have emerged in recent years focus on a unified ID network, practically creating its own walled garden. Does this mean the ad industry will turn into a world of scattered walled gardens, each with its own trove of first-party data and its own privacy standards? That’s one possibility.

Even amidst surrounding concerns, Google’s FLoC is a good first attempt at a post-cookie solution that aims to deliver efficient results for advertisers and publishers. Just how extensive FLoC will be in its ability to interact with other platforms remains to be seen, with the initiative still in its sandbox stage. We don’t know the extent to which it can target a cohort that is partially on a Safari browser, for example. It will also be interesting to witness the emerging methodologies that can work side-by-side with FLoC and complement its capabilities instead of silo-ing themselves in their own networks.

At the moment, perhaps the largest concern advertisers in the region have, especially with Google’s ubiquitous presence in the region -- Chrome holds almost 72% of the browser market share in Asia -- is that once Google stops support for Cookies entirely, and eschews alternatives like Unified IDs, we will have no choice but to pay to play in a walled garden. A very large garden to be sure, but still a walled one.

Google’s FLoC concept is not a new one though, and at SQREEM we have been developing and refining a similar cookieless AI-driven behavioural targeting capabilities for almost a decade now and implemented a working model 5 years ago. We first began exploring the technology out of necessity because we could not afford to purchase cookies when we were first starting out. Our research notes that when we examined the use of cookieless AI targeting across over 200 different media campaigns in 68 countries, the technology is able to consistently outperform cookie targeting by over 50%.

Advertisers who wish to continue to use DSPs and independent publishers will need access to a private marketplace that functions with cookieless targeting. The Trade Desk, for example, has been pioneering a Unified ID driven alternative, but with Google saying no to unified IDs, the concept may no longer work. The approach also necessitates that the industry comes to an agreement on how we take identifiable IDs such as email address and then anonymise them.

We believe the market needs a PMP marketplace with FLoC-like targeting that is DSP agnostic. To that end, we are already beta-testing making our own AI-driven behavioural targeting.

While the death of cookies may present certain challenges for brands and the media industry, we believe that a solution is already in sight. Consumers are the ultimate benefactor of this shift - gaining enhanced privacy protection without sacrificing relevant and targeted ads. Brands and media agencies on the other hand have to be open to developing and testing new solutions quickly.

Ian Chapman-Banks is CEO and Co-founder, Sqreem Technologies.