It's been about three years since Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) subsidiary Google said it would disable third-party tracking cookies in the popular Chrome browser. In its place, Google proposed a new online activity-tracking technology known as Federated Learning of Cohorts (FLoC). One year later, Google invited other online advertising companies to propose improvements for the FLoC solution.
But the industry never embraced this platform the way Google had anticipated. FLoC also ran into user complaints and lawsuits along the way. And this week, Google simply pulled the plug on the whole FLoC idea.
FLoC is effectively dead, but Google has other ideas. The new new solution for privacy-respecting ad tracking is called Topics. This system could become the industry-standard replacement for third-party cookies, and user groups seem more open to Topics than they ever were to FLoC. Let's see what's new.
Out with the old
Online advertisers love to base their marketing campaigns on cold, hard data. Web browsers, mobile apps, media-streaming apps on your favorite media device, and other ad-peppered platforms collect detailed data on what you're doing online. Most of that data isn't directly available to ad-campaign managers because the underlying browser systems have evolved over the years to anonymize the information in various ways. Users want some degree of privacy, and the level of expected data protection generally increases over time.
The now-defunct FLoC solution put the detailed browsing data at arm's length from the info that advertisers could reach. Individual users were grouped together into cohorts of a few thousand people per bundle, all sharing similar browsing habits and apparent interests.
FLoC looks safe enough at first glance, but a deeper analysis makes it clear that the cohort grouping may reveal or imply unwanted information about each user. Even if this wasn't an explicit goal of the FLoC platform, groupings are likely to indicate personal characteristics such as race, gender, and other sensitive details. Moreover, Google wanted FLoC to be enabled by default in every browser, triggering protests from user groups that don't want exposure to any advertising technology without explicit consent.
In with the new
The finer details of the Topics system are up for debate, as Google hasn't even built a trial version into the current version of Chrome. The bird's-eye view shows a more user-controlled platform. Here, the browser collects user data as before, but individuals are able to change and remove unwanted topics.
Let's say the browser notices that you read a lot of articles about rock music, but you aren't comfortable with that classification. In FLoC, your only choice was to turn off the whole tracking system. In Topics, you can just block "rock music" from the reports that are available to advertisers and ad-campaign managers.
The Topics solution still bundles people together into larger groups with similar data patterns, but these categories are much broader and the groups are far larger. Therefore, Google argues that it will be more difficult to pinpoint individual web users or guess sensitive details based on the broader context.
Will this idea stick?
Third-party cookies are still going away from Google Chrome. The move has been delayed several times and is currently slated for the third calendar quarter of 2023. Digital-advertising companies -- including Google -- will have to figure out how to live without their cookie-based tracking data before then.
Mind you, Topics isn't the only alternative solution on the table. A group of advertising-technology companies led by The Trade Desk(NASDAQ: TTD) has cooked up a solution named Unified ID 2.0. PubMatic(NASDAQ: PUBM) is working on the Secure Web Addressability Network (SWAN), which combines concepts from the blockchain world with privacy-respecting data tracking. And then we have Viant Technology(NASDAQ: DSP) and its Household ID solution, which bundles online data users into family groups.
It remains to be seen whether Google gets to impose its own solution on the digital ad-buying marketplace. The Topics platform may simply become one of many available tracking tools rather than the preferred solution for every situation. The best advertising-management specialists will probably tap into every available tool in order to produce profitable ad campaigns for their clients.
Either way, the much-maligned FLoC idea is off the table. Google may be the biggest heavyweight in the online technology space, paired with the leading web-browser software, but even this massive gorilla doesn't always get what it wants. And the search for an appropriate long-term balance between actionable data and user privacy continues.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund owns Alphabet (A shares), and The Trade Desk. The Motley Fool owns and recommends Alphabet (A shares), PubMatic, Inc., and The Trade Desk. The Motley Fool recommends Alphabet (C shares). The Motley Fool has a disclosure policy.