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March 21, 2022

How Will Google’s Privacy Sandbox Affect The Mobile Advertising Industry?

We sat down with Clement Cao, Mobvista’s co-founder & CEO, to ask for his thoughts on Google’s new privacy framework and what it means for the advertising industry. 

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It’s only a few months into 2022, and we’ve already had a major announcement from Google that’s set to further change the online advertising landscape, continuing the focus on customer privacy and data protection. Its Privacy Sandbox initiative promises to reduce cross-site and cross-app tracking while helping to keep online content and services free for all. But what exactly is it, and how will it affect advertisers, brands and marketers?

The Privacy Sandbox was originally announced back in 2019,  but thanks to Google’s announcement on the 25th of February we now know it’ll come into effect later this year. Driven by consumer demands for better privacy, the new ad system promises to bring an end to cookies whilst also preserving the ability to deliver targeted digital advertising – unlike Apple’s depreciation of IDFA, which severely affected established methods for ad tracking and targeting. 

This isn’t the first move by Google to strengthen the privacy of Android and Chrome users; last year it launched its Ads Data Hub, which has become the only way advertisers can gain insights into user-level information about programmatic campaigns. 

As with any major announcement from one of the big platform holders, the ad industry is scrambling to work out exactly what the Privacy Sandbox is and how it’ll affect business in the immediate as well as long term. However, Privacy Sandbox is currently a framework under development, not a stable API, so it’s difficult right now to pinpoint exactly the impact it may have.

To try and understand the situation better, we sat down with Clement Cao, Mobvista’s co-founder & CEO, to ask for his thoughts on Google’s new privacy framework and what it means for the advertising industry. 

How significant is the Privacy Sandbox for Google’s advertising strategy?

The move towards a higher standard of user privacy is certainly a positive step for consumers, and is likely to have a similar effect to Apple’s landmark update App Tracking Transparency (ATT) update which made ad tracking opt-in only. 

Google is assuring the industry that it will be providing tools to ensure that advertisers can continue to target their advertising and track its effectiveness, so all we can do is wait to see if it can deliver on this promise.

We’ve already seen the effect of major changes to ad targeting thanks to the changes introduced by Apple. In the mobile gaming world, the result has been that in-app purchases revenue even dropped 35% globally, showing the impact on advertisers reliant on highly targeted ads. 

Google is positioning this initiative as a “less blunt” and “more effective” alternative to Apple’s ATT approach, and industry commentators seem to agree, at least in the sense that the changes will not be as monumental as Apple’s update. 

The bottom line is that 3rd party targeting data will continue to be under scrutiny, meaning the companies that can cope best with this change will be the ones who have invested in quality 1st-party data and insight.

What will the impact be on advertisers?

The objective of the Privacy Sandbox is to bring Google into alignment with Apple when it comes to the protection of user data. This means the imminent removal of cross-app identifiers which are used to track a user’s journey and build a picture of their likes and dislikes.

Google is promising a new targeting solution, called Topics. This will work by giving advertisers a broad set of topics that a user has shown interest in (hence the name). This should give enough data to show that user ads will resonate with them, without the privacy issues that more active tracking might bring.

Of course, less accurate tracking and targeting means that conversation rates are likely to drop markedly. But there is a silver lining, as larger advertisers will be in a position to thrive because they hold a lot of their own information and data on their audiences.

It’s worth remembering that the concepts underpinning Google’s Privacy Sandbox are still just that – concepts. With a beta planned later this year, the finished product could be a very different story. 

What will the impact be on publishers?

As with Apple’s move, this announcement by Google puts a premium on sources of quality 1st party data. So it might be that we see more acquisitions in the advertising space as companies look to secure reliable data that will allow them to continue to offer targeted ads.

Larger publishers with sizable audiences will be at a considerable advantage. Just as we have seen some of the mobile ad networks launch or acquire their own games studios, I believe we will see more ad networks and media companies either collaborating or combining forces.

Another way to mitigate the impact to publishers is to use predictive modelling as a basis for improved targeting. This uses algorithms to estimate and predict the most effective traffic sources – so in effect, replacing the insights lost through the lack of tracking data. This is something which Mintegral has been offering to our customers following the changes to IDFA tracking on iOS, and it’s helped us to become one of the three leading ad networks in China for ad monetization.

European media publishers like TL Group and ProSiebenSat.1 Media SE have already banded together to form login alliances that would let people use a single account to register with multiple sites, pooling data across the companies. Advertisers like American Express are investigating possible replacements for third-party cookies by building out their own tech stacks to give direct access to the first-party data that comes from identifiers like login information.

Adobe’s 2022 digital trends report found that 35% of UK marketing practitioners are not prepared for a no-tracking future. So one thing’s for sure, companies need to take a proactive approach now, and start planning and implementing their first-party-data strategies. 

What will the impact be on the mobile industry as a whole?

As I’ve already said, companies that are able to leverage large scale diverse data across sources are likely to maintain an advantage, as they will be able to provide advertisers with the insights they need to maintain healthy businesses, while also meeting the most stringent privacy standards. 

I believe that the impact of the Privacy Sandbox will be noticeable but not too serious, as companies have had some time to adapt to Apple’s changes, and this is more of the same. 

Companies that have been able to embrace the requirement for greater privacy will thrive, with more emphasis placed on really great creative and innovations around ad formats to drive engagement offsetting the loss of accurate targeting.

What are the main concerns about the Privacy Sandbox?

If we take it at face value, Google’s new stance on privacy should only be a positive thing. But the announcement has been met with mixed reactions from many in the industry, as they worry about the detail behind the broad intentions of Google’s announcement. Just as with Apple’s privacy changes, the initial announcement will now be followed by many months of speculation before there is clarity on the details – meaning that many companies will be in limbo until that time.

At the end of the day, it’s about consumer data, and who has access to it, and how. Industry players want to ensure equitable access to data in the Privacy Sandbox, and I believe the whole industry is in agreement of the importance of better and stronger privacy protections. The companies that will continue to be successful will be the ones that have the technology or the consumer relationships that will allow them to continue to help brands and advertisers achieve their goals.

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