For years, the business model of Internet giants that provided “free” services was based on collecting user data and monetizing the information in the form of advertisements. The global spotlight on data privacy issues, however, has forced companies to change the way they work. At the same time, big tech companies – Facebook, Apple, googleAmazon – have come under increasing antitrust scrutiny for attempts to monopolize their business.
Recent decisions by Apple and Google to give users greater control over the use of the data they generate online can be seen as both a strengthening of user privacy and a step towards consolidating the position of these companies.
What did Apple and Google do?
Last year, Apple added the App Tracking Transparency (ATT) feature to iPhones and iPads, which requires apps to ask users for permission to track their activity on other apps and websites. This impacted businesses that relied on advertising as a revenue model, as the ATT feature cut off their access to iPhone user data, which they harvested and used for targeted advertising. Meta, Facebook’s parent company, said the financial hit from Apple’s decision could be “in the order of $10 billion” for 2022.
Earlier this month, Google announced it would bring the Privacy Sandbox — the privacy solution it’s building for the web — to Android devices. The new solution would “limit” the sharing of user data with third parties and work without cross-app identifiers, including advertising identifiers. Advertising ID is a unique, user-resettable identifier for advertising provided by Google Play Services.
The Privacy Sandbox on Android could go live in two years.
But what is the Privacy Sandbox?
In the context of the web, Google said the Privacy Sandbox will phase out third-party cookies and limit covert tracking. A “cookie” is a small piece of data stored in the browser when a user visits a website.
Third-party cookies are stored by a service that operates across multiple sites. For example, an advertising platform may store a cookie when you visit a news site. First party cookies are stored by the website itself.
So if the news site stores a cookie, it will use it to provide curated news that the user is more likely to read. But if an advertising platform like Facebook stores a cookie when you visit a news site, it is likely to use this information and classify the user into certain compartments according to their preferences, and will offer advertisers the ability to target the user with specific advertisements. It can also be used for political advertisements.
How do cookies work, in clear terms?
Imagine you are traveling with a friend and you each have checked baggage. Imagine that before putting the bags in the belly of the plane, the airline staff examines their contents. They find a bottle of Chanel perfume and Tommy Hilfiger clothes in your bag, and put a red sticker on it. In your friend’s bag, he finds a camera tripod and books on photography, and puts on a blue sticker. (These stickers are cookies.)
At your destination, your taxi driver writes down the stickers and gives you separate advertising leaflets: yours for the Hermès bags and your friend for the Canon DSLRs. Local brands and businesses have paid the taxi company to hand out brochures to passengers, and your ride is now free.
How was Meta hurt?
According to a New York Times report, having been given the choice to opt out of app tracking, many iPhone users have done so for apps such as Facebook, blocking the main channel of online advertising activity from the iPhone. ‘business.
With the reduction in the volume of data collected from users’ online activity, such as e-commerce and search engine queries, and other social media activity, it has become more difficult for Facebook to target specific advertisements, which may reduce the incentive for advertisers to run promotions on the platform. Online ads aimed at iPhone users typically have higher conversion rates than Android, so disabling app tracking by these users is particularly damaging.
Although Privacy Sandbox on Android may have a greater impact on Meta given the larger global market share of Android devices, even implementing the solution on the web could harm Meta. Unlike Google and Amazon, Facebook relies heavily on third-party user activity tracking to generate data. In the case of Google or Amazon, on the other hand, users help generate first-hand data through their queries.
How could these developments lead to a greater concentration of data?
Solutions like Privacy Sandbox mean phasing out cookies, currently the go-to technology for online advertisers.
Google had proposed that cookies be replaced by FLoC (Federated Learning of Cohorts) – which meant that instead of interest-based advertising enabled by cookies, users would be grouped into groups with comparable interests. But privacy advocates argued that rather than stop tracking users’ online activity, the FLoC put tracking directly into Google’s hands. Antitrust investigations have been opened in the United Kingdom and the European Union.
Google abandoned the FLoC project and announced “Topics” last month, through which the company’s Chrome browser would organize a user’s top interests in a week based on browsing history. A key difference between FLoC and Topics is that the latter will exclude categorization based on sensitive categories such as race, religion, sexual orientation, etc. A developer trial will be launched soon, Google said.
While Topics would give users greater choice to limit the collection and use of their data by third-party apps, it would continue to track those users through its bouquet of apps such as Search, Gmail, Google Maps, GPay, YouTube , etc
Additionally, Apple’s decision to limit app tracking has tipped the balance in Google’s favor when it comes to online advertising. Notably, online advertising is Google’s core business, unlike Apple.
A Wall Street Journal report pointed out that after Apple introduced its privacy feature last year, the cost of acquiring customers for small businesses advertising on Meta, Facebook and Instagram platforms, has increased – and some of these smaller companies have shifted their “total advertising budget”. ” to search for ads on Google.
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