What's next for digital advertising?

As part of Chrome's plan, Disable third-party cookies in Chrome browser by defaultOur Google Ads and DV360 teams have been testing the advertising solution developed by Google Chrome - Topics API - which enables the Addressing target groups in a world without third-party cookies. These include audiences with common interests, high propensity to buy, custom audiences as well as demographic segments from the Google Display Network built using a combination of privacy-friendly signals.

In the first quarter of 2023, we launched a test for Google's advertising platforms. The aim was to determine how strongly our interest-based audience (IBA) advertising solutions perform when based on a combination of privacy-friendly signals. These include contextual data, the Topics API within the Privacy Sandbox, and proprietary identifiers such as Publisher Provided Identifiers (PPIDs). The focus was less on the performance of the Topics API as an alternative to third-party cookies, but rather the application of various available signals (of which the Topics API is one) in a privacy-oriented environment.

For the test, two test groups were created, each with a certain proportion of Chrome accesses. The first test group continued to use third-party cookies. For the other, they used a combination of privacy-friendly signals instead, keeping third-party cookies for other use cases such as measurement and remarketing.

Our findings

Our tests have shown that the new privacy-friendly solutions developed by the Google Chrome team can achieve similarly good results compared to third-party cookies. In our tests, we found that the probability of a user clicking on an ad (CTR) is 90% of the current level. Conversions per dollar of marketing investment, an indicator of the client's return on investment, decreased by only 1-3 percent. Finally, marketing investment on the Google Display Network decreased by 2-7 percent compared to third-party cookies. Similar performance figures could also be observed for Display & Video 360.

In addition, our tests show that campaigns can be optimized using AI-powered solutions. For example, campaigns that achieved "optimized alignment" or the bidding strategy "Maximize Conversions" used even better results, indicating that AI-powered optimization solutions will play an important role.

These results seem promising - however, no clear conclusions should yet be drawn from them about the performance of interest-based advertising on Google after the elimination of third-party cookies. The present test only measures the effectiveness of interest-based advertising based on the Topics solution developed by Google Chrome. The results of future tests for other solutions under development, such as remarketing and measurement, may well vary.

The importance for the future

Our industry is at a crossroads - and the future of digital advertising and the open Internet as we know it is at stake. Some are calling for a ban on all personalization of advertising, while other players are developing alternative methods to identify users (e.g. fingerprinting) across websites. We believe that none of these approaches are the right way to better protect the privacy of users on the one hand, and to maintain an advertising-funded Internet accessible to all on the other.

In the following months, we will work on further development and conduct additional testing in consultation with the UK Competition and Markets Authority (CMA). We will continue to share regular feedback on Chrome and share our findings with the industry. This will enable us to keep improving Topics. We're also making progress in our conversion and remarketing measurement testing - we'll share more on this later in the year.

In the meantime, we encourage advertisers to continue to embrace innovative advertising solutions that not only deliver optimal results, but also better protect user privacy.

*Dan Taylor is vice president, Global Ads, Google Inc.