How Google's Privacy Sandbox redefines contextual advertising for digital publishers

In light of escalating privacy concerns among internet users, Google, the digital kingpin, has run into its fair share of legal issues. In August 2023, reports revealed a high-severity warning issued by India's Computer Emergency Response Team (CERT-In), operating under the Ministry of Electronics and Information Technology, regarding Google Chrome. 

As per the CERT-In advisory, users of Chrome may face various security challenges that have the potential to jeopardise their sensitive information. Similar privacy concerns escalated in the European Union in June, when the company was scheduled to launch its generative AI chatbot Bard and more recently, in September, in the US, where it was alleged that Google's location-privacy practices violated California consumer protection laws.

To address the mounting privacy concerns, Google has accelerated its bid to curtail third-party cookies. On September 7, the company announced the general availability of Privacy Sandbox. The company had announced that privacy concerns will be addressed with its Sandbox commitments back when it began working on it in 2019.

In this transition towards a cookieless era, Google seeks to reshape ad targeting, measurement, and fraud prevention by adhering to the Privacy Sandbox framework, which introduces five distinct Application Programming Interfaces (APIs).

Advertisers will utilise these APIs to access aggregated data related to key metrics such as conversion rates (indicating ad performance) and attribution (identifying the entity credited for a purchase).

“Google's journey towards privacy-centric features started with FLoC, which later evolved into the Topics API. This feature aims to understand user behaviour and categorise it efficiently, making the browser smarter. With this, Chrome, as a browser, will put user behaviour into various buckets on the basis of the type of content or certain topics of common interest,” Dr. Kushal Sanghvi, head- India and SEA, CitrusAd opines. 

The Topics API serves as a Privacy Sandbox tool engineered to safeguard user privacy while facilitating the sharing of user interest information with third parties. Its primary function is to enable interest-based advertising (IBA) without the need for tracking a user's website visits.

Sharing his thoughts on the API, Rajiv Dingra, founder and CEO, ReBid, says, “Google's Topics feature differs significantly from cookies. It doesn't provide individual-level data depth across customers. Given that Google controls a substantial portion of the advertising spending, this represents a major shift for Indian advertisers. Adapting to this new system will take time, and its precise impact on current ad spends, both in terms of performance and brand advertising, remains uncertain.”

What is certain is that now third parties will have only a limited access to an individual’s searches on Google Chrome. This will curb cross-tracking, especially through third-party cookies, which has been a standard practice in online advertising till now.

In the absence of this, marketers will be left with little choice than to implement and discover ways for contextual advertising, that is, placing ads on web pages based on the content of those pages. 

“The shift away from third-party cookies may impact ROI, as advertisers may need to optimise for the middle of the funnel, where the Topics API plays a role. The Topics API offers around 450 topics, but some find it not granular enough for effective personalisation. Lack of depth can affect the personalisation and context of ads. With limited options for personalisation, contextual advertising becomes essential to ensure ads match the content and context of user consumption,” Preetham Venkky, CDO, DDB Mudra Group, says. 

As marketers reconsider online advertising strategies, the question arises: Who can benefit most from Google's Privacy Sandbox transformation?  It would make sense to think of online platforms with extensive libraries of various types of content to benefit from these changes. 

With Sandbox, Google is creating various buckets of audiences on the basis of the type of content or certain topics of common interest. The largest volume of content lies with digital media/ news publishers. Thus, digital publishers, who often have concerns of ad revenues, are likely to gain from this, Sajal Gupta, CEO, Kiaos Marketing, opines.

“Nobody generates quality content at the pace at which digital publishers do. So, when contextual advertising is applied to specific topics, these top-quality content producers, that is, the digital publishers, are likely to receive the maximum number of ad placements.”

Even though the introduction of this new future provides an opportunity to publishers, marketers opine that they need to be tactful in their approach to leverage this.

“They need to understand the mechanics of how user data is collected and leverage this knowledge to enhance their offerings. They may start selling data based on user interests and keywords. The entire advertising industry is likely to shift towards this model, with the potential for better value in terms of CPM (Cost Per Mille),” Sanghvi says.

Since the Topics API lacks the capabilities to provide detailed personalisation of ads, advertisers will need to collaborate with publishers, to access topic-related data. This collaboration allows for better personalisation of ad content served to a user, Venkky points out. 

Decoding a probable future for the publisher ecosystem, he says, “Publishers who are able to use the Topics API effectively and provide more information to advertisers about the content that users are consuming will be able to get better outcomes and therefore better revenue from advertisers. Those who choose not to use it may not experience substantial benefits but won't suffer significant losses either. They might see a modest boost in their revenue, considering that contextual advertising often leans towards reach-based strategies. This approach tends to result in higher revenue per interaction, albeit with a lower overall net revenue.”

While the Privacy Sandbox has begun rolling out, currently, only 1 percent of users have access to this feature. The complete rollout is expected to take place in the coming quarters, and the full impact of this initiative is likely to become apparent by the second half of 2024, the marketers opine.

However, publishers may not be the sole beneficiaries. E-commerce platforms, like Amazon or Flipkart, have access to data of searches made by users on their platforms and their needs.

While Google now only has access to a person’s visit to an e-commerce platform, these digital players can offer advertisers more details.

"This new structure benefits a wide range of businesses, particularly e-commerce brands. It allows for more refined targeting, and contextual advertising becomes feasible, where content and ads align more effectively,” comments Kiran Capoor, head of technology- tech, Schbang. 

The impact of the Privacy Sandbox is anticipated to vary between performance and brand advertising. While brand advertising may remain relatively unaffected, performance advertising could undergo significant changes as the bottom-funnel impact previously measured using cookies transitions into obsolescence.

Capoor shared insights into the impact, stating, "The larger impact is going to be on performance. Brand spends on advertising will not be impacted that heavily."