Privacy Sandbox testing reveals challenges for publishers in a cookieless future

Privacy Sandbox testing by Index Exchange reveals challenges for publishers in a cookieless future, including reduced revenue, limited format support, and potential bias towards large cloud providers.

Privacy Sandbox testing reveals challenges for publishers in a cookieless future

Index Exchange, a major SSP, this month shared insights from its initial testing of Google's Privacy Sandbox, a proposed solution for targeted advertising in a cookieless future. While the results offer a glimpse into a cookieless environment, they also highlight significant challenges that need to be addressed before it can be widely adopted.

Privacy Sandbox is a set of APIs (application programming interfaces) designed to enable targeted advertising without relying on third-party cookies. These cookies have been under increasing scrutiny due to privacy concerns, and Google plans to phase them out entirely in Chrome by the end of 2024 (originally planned for mid-2023).

Index Exchange's testing involved over 100 publishers, thousands of domains, and 10 demand-side platforms (DSPs). This makes it one of the largest-scale independent initiatives examining Privacy Sandbox, providing valuable insights for the industry.

Key Findings and Challenges

  • Limited Testing Scope: While millions of Sandbox impressions were delivered, overall volume and spend remain limited. This means some conclusions may not be entirely representative of real-world scenarios.
  • Uncertain Value of Topics API: The Topics API assigns browsing interest categories to users, but it's unclear how useful this information is for advertisers. However, some initial feedback from testers has been encouraging.
  • Reduced CPMs for Publishers: A major concern is a 33% decline in cost-per-thousand-impressions (CPMs) for Sandbox impressions compared to those using cookies. While the APIs help somewhat, they don't fully bridge the gap at the current stage. This could significantly impact publisher revenue.

Publisher-Specific Concerns

  • Limited Format and Channel Support: Privacy Sandbox currently doesn't fully support video ads or mobile environments, which are crucial areas for programmatic advertising. Deal functionality, essential for many transactions, is also lacking.
  • Increased Latency: Auctions within Privacy Sandbox are slower compared to traditional methods. This is because Google acts as the top seller and processes all bids through Google Ad Manager (GAM) before finalizing the winner. This latency can negatively impact user experience.
  • Competition Concerns with TEEs: Privacy Sandbox utilizes Trusted Execution Environments (TEEs) to run auctions securely. However, Google's technical requirements potentially favor large cloud providers like AWS and Google Cloud Platform, raising concerns about competition and cost for smaller players.
  • Limited Publisher Control of Audiences: Currently, only advertisers can create interest groups within the Protected Audience (PA) API. This restricts publishers' ability to monetize their own audiences effectively.

Despite the challenges, Index Exchange emphasizes the importance of finding a solution for targeted advertising in a cookieless future. The extended timeline for cookie deprecation provides more time for testing and improvement.

Similar Revenue Concerns: Criteo, another advertising technology company, also reported concerns about publisher revenue during their Privacy Sandbox testing, highlighting the potential for Google to gain a larger market share.

CMA's Viewpoint: The UK Competition and Markets Authority (CMA) is closely monitoring Privacy Sandbox development. They emphasize the need for a solution that fosters competition and doesn't unfairly advantage Google.

Index Exchange concludes by encouraging continued testing and collaboration between Google, publishers, advertisers,and other stakeholders. This will be crucial for developing a viable and scalable Privacy Sandbox that addresses the concerns raised and ensures a healthy programmatic ecosystem in a cookieless future.

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