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Can Google keep a step ahead of regulators?

Assif Shameen
Assif Shameen • 10 min read
Can Google keep a step ahead of regulators?
Google needs to chart a new course that does not rely on dominating AdTech, Search or by stifling competition
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Facebook’s owner Meta Platform is not the only major global Internet firm in the crosshairs of regulators and legislators around the world. Its main rival in the advertising space, Google’s parent Alphabet Inc, faces formidable privacy as well as antitrust scrutiny in Europe, UK and the US.

Earlier this year, the US Department of Justice (DoJ) filed a second antitrust suit against Google revolving around the company’s sprawling digital advertising business.

The suit claims that Google’s digital ad business is anticompetitive. It follows a 2020 lawsuit from the DoJ on the company’s practices in the Search space. Can Google remake itself before trustbusters and regulators force a change?

State attorney generals in the US and the DoJ’s renewed focus on Google’s practices in digital advertising comes in the wake of the UK’s Competition and Markets Authority’s investigation of Google’s “Privacy Sandbox” browser changes and the EU’s formal antitrust investigation to “examine whether Google is distorting competition by restricting access by third parties to user data for advertising purposes on websites and apps, while reserving such data for its own use.”

As regulators increase their scrutiny of Google, the way Alphabet’s main operating firm actually tracks users like you and me is changing.

In late January, several state attorney generals and the attorney general for the District of Columbia sued Google, alleging that it deliberately misled consumers about when they were being tracked. The lawsuit also alleges that Google has been misleading users on what data it still collects from them. Google has an account setting called “location history” that any user can toggle on or off. If you turn it off, you would be under the impression that Google was no longer collecting any more data from you that it could later use to sell advertising.

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The problem is that in reality the faucet of data was never actually turned off completely. Google continues to collect data about your search history long after you have turned it off and indeed uses that data to sell as many ads as it can using its huge dominance in AdTech.

In other words, Google has been lying to users like you, to its advertisers as well as to regulators who have been given the assurance that users now decide whether Google gets to collect any data or not.

Here is the thing: Google has a number of other settings on its browser, aside from just the location history. Unless all of those settings are turned off as well, Google will still be able to keep collecting data about you. Until now, at no point Google had told users or regulators that all the settings needed to be turned off for its data taps to run dry. For its part, Google says regulators wrongly cited data collection practices that it no longer pursues.

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Google recently abandoned its FloC. For those of you who have not followed some of my earlier columns on Internet giant and privacy, FloC is Federated Learning of Cohorts, which was supposed to be Google’s replacement for much derided third party in its Chrome browser. Other web browsers like Firefly and Apple’s Safari stopped using cookies years ago because of privacy concerns.

Beware the cookie monster

Although Google’s decision to abandon cookies is purely to curry favour with regulators who have antitrust suits against it, regulators in UK and Europe are now investigating whether Google’s plans to get rid of cookies will give its own ad business an unfair advantage and hurt other advertising based platforms.

What are cookies? Cookies are snippets of computer code, or random sequences of numbers and letters, that a website stores on your device when you visit it. When you visit a website, you are asked to accept a cookie, through which websites can track you whenever you return. They remember what is in your shopping cart.

When I went to Amazon.com’s website recently, it remembered that I had put in two boxes of cereal a few days earlier and never actually put in an order.

If you visit The New York Times website for the first time, a cookie is set in your browser to allow the newspaper to remember who you are, what you like to read, whether you are a subscriber or were a subscriber once or how much you paid for that subscription 10 years ago.

There is an on-off toggle for third party cookies as well. If you turn it on once, for a respected site like say your bank or the world’s most respected newspaper, the browser assumes you have agreed to receive cookies from every single website you ever visit. Most people tend to give a one-time permission, and unbeknownst to them, are forever followed and stalked by Google, Facebook and others to collect data that is used to target them with ads.

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It is scary what that cookie monster can do and how much it can help the website’s owner remember about you. Here is something more creepier: If you get a cookie from one website when you visit the next website it can figure out what other cookies you have on your browser which allows that website to sell you stuff based on your previous history across the website. Cookies allow sites to just follow you around the web.

Yet, unlike Facebook, Google has been much more proactive in trying to use other means to collect data without stalking us all from website to website and blasting you and me with their targeted ads. FLoC was Google’s own proposal to replace cookies. Google’s plan was to regulate itself before the regulators force it to do something it does not want to do. Yet after just two years of trials, Google last month abandoned FLoC.

Why? FLoC is not as privacy “safe” as originally intended. For another, big Internet firms like Amazon last year suddenly began blocking the FLoC tracking system from gathering data on its websites. Apparently, Google had forgotten to inform Amazon that FLoC was skimming data from its website. More importantly, FLoC was not allowing the search giant to gather enough data which helped sell a lot of ads.

So, Google is now replacing FLoC with a new interest-based targeting proposal called “Topics” which will label every user with an interest based on his or her browsing history. Google’s Topics tracks you through 300 interests like cooking, travel, fashion and cars for example.

Targeted users

Though it will not have your entire browsing history, Google will still have a general understanding of what you are interested in. If you surfed the web for a new microwave oven in the past, Google would have inundated you with ads of ovens. Now, because a microwave or an oven is lumped in as a home appliance, you might be bombarded with ads of refrigerators or coffee makers. Why would you want to see ads for a refrigerator when you just want to buy an oven?

Clearly, it is not perfect and does not allow Google to precisely target every user the way Facebook was able to do before Apple clamped down with its App Tracking Transparency policy, but it is still better than having no data and nothing to target users with.

Advertisers who have long gotten used to micro targeting consumers are now forced to cast a much wider net with far less effective ads. Newspapers, magazines and TV lost most of their advertising to Google and Facebook because the tech giants could tell the advertisers that they could reach consumers who were interested in buying their microwave ovens.

While they may still be far better than TV or newspapers, platforms like Google are increasingly less effective at targeted advertising. Google is also imitating Apple’s App Tracking Transparency with its own plan that allows users to opt out of being tracked by apps on its Android smartphones. Why would Google — the world’s biggest collector of data, advertising platform and number one AdTech firm — cut back on tracking across apps on all Androids phones? Because it wants to stay one step ahead of regulators. You want Google to have App Tracking transparency too? Well, it can soon claim that it has that already.

Until now, every time you opened an app on your phone you were identified by a string of unique numbers and letters and allowed tracking technology to learn about you and then track you so that the company collecting your data could target you with ads. Unlike Apple’s App Tracking Transparency that became effective eight months ago, Google says that it will completely overhaul the digital ads industry with new proposals in two years. So, essentially Google ad tracking restrictions will not kick in until 2024 at the earliest.

Moreover, unlike Apple’s App Tracking Transparency where you can either opt in or opt out when the app asks you whether you want it to track you all the time (which is only some of the time or never), Google has said it will make its own rules and build a consensus with key stakeholders — regulators, advertisers and advocates — and then inform Android smartphone users what the rules are. Even though Google’s ad tracking is likely to be a much milder version of Apple’s version, the big losers will be the likes of Facebook which relies heavily on precisely micro targeted advertising.

Dealing with the monopoly

One of the most serious threats to Google is the antitrust case that challenges its dominance in AdTech. Regulators in Europe and the US allege that Google abuses its monopoly power in online advertising. Google’s dominance of AdTech began with its purchase of DoubleClick in 2008. It not only controls the largest ad auction in the world it also controls each and every segment of the digital ad market. It controls publishers on one side, advertisers on the other as well as the ad exchange in the middle. That allows it to charge monopoly prices — a whopping 19% to 22% on every transaction. That would be like the New York Stock Exchange charging US$22,000 ($29,851) on every US$100,000 worth stocks traded on the exchange.

Who gains if Google’s ad business is severely restricted in the aftermath of antitrust actions in the US and Europe? Any disruption to Google dominance in AdTech would be a benefit to open Internet players such as programmatic ad firm The Trade Desk (which competes against Google’s AdTech firm DoubleClick as well as Facebook Ads), online ad software firm Pubmatic, online AdTech firm Magnite Inc (formed last year following the merger of Rubicon Project and Telaria) and ad software firm DoubleVerify Holdings.

Google has to walk a fine line. On the one hand, it does not want to antagonise its main customer — advertisers — by aggressively restricting access to data that brings 80% of its revenues through ads. On the other hand, it also wants to tell regulators, legislators and privacy advocates that it is doing something itself and it should not be regulated. Although Facebook was brought to its knees by Chinese short video social media app TikTok, Google is likely to be undone because of its clear monopoly-like dominance in AdTech.

Google has fared better than beleaguered Facebook in part because it has a better PR strategy and also because it has deftly managed to stay one step ahead of regulators.

Yet, as monopolists from Standard Oil a hundred years ago to giant telco AT&T from half a century ago found out, regulators may be a step or two behind much of the time — they eventually catch up. Google needs to chart a new course that does not rely on dominating AdTech, Search or by stifling competition — it needs to be the strongest player in a competitive landscape.

Assif Shameen is a technology and business writer based in North America

Photo: Bloomberg

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