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May 21, 2021updated 30 Sep 2022 10:18am

UK publishers face losing hundreds of millions in display ad revenue when Google switches off third-party cookies

By Freddy Mayhew

Ending third-party cookies could cost UK publishers hundreds of millions in digital display advertising, prompting fears the industry is “hurtling towards the edge of a cliff”.

The UK Competition and Markets Authority’s estimated in its Online Platforms and Digital Advertising report, published in July last year, that UK digital display ad spend reached £5.5bn in the UK in 2019.

Of this, about half is spent with Facebook and another 10% with Google. According to separate data from AA/Warc, UK national and regional news brands made £500m from digital advertising overall in 2020 (the majority of which would be display).

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Using data from a Google experiment, the CMA estimated that “UK publishers earned around 70% less revenue overall when they were unable to use third-party cookies to sell personalised advertising but competed against others who could”.

The death of third-party cookies could therefore see UK publishers lose hundreds of millions in revenue assuming no alternative is put in place to make up the shortfall.

[Read more: UK competition watchdog calls for action as Facebook and Google take 80% of £14bn annual digital ad spend]

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Ad spend is broadly split between display and search, the latter dominated by Google. Total global digital ad spend reached $333bn (£235bn) in 2020, according to eMarketer.

As the UK digital ad market, worth £23.5bn in 2020, makes up roughly 10% of worldwide ad spend, it is feared that global publishers are facing a loss of digital display ad revenues running into billions with the death of third-party cookies.

Global digital ad spend is set to reach $455bn (£321bn) this year, with over half (55.2%) going to display ads and 40% to search, eMarketer reports.

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Third-party cookies are used by advertisers to serve relevant, targeted ads to web users through automated real-time auctions. Ad space on a website is typically owned by ad companies.

Safari and Firefox have already blocked third-party cookies, with Google set to phase them out entirely by 2022 on Chrome with its move to the Privacy Sandbox, which will shift the web from tracking by default to privacy by default. Google’s Chromium open-source browser code, which underpins Chrome, is also used by other browsers, including Microsoft Edge.

[Read more: Enter Sandbox: How Google is building an internet without cookies – and why publishers are concerned]

Among those raising concerns about Google’s move is Swan founder member James Rosewell. Swan bills itself as an open-source alternative to Google’s Privacy Sandbox. Rosewell said: “The publishing industry, as well as the web as an entire entity, is hurtling towards the edge of a cliff.

“The changes put in place, and being proposed, surrounding the use of third-party cookies, threatens to destroy the publishing industry as we know it by increasing Google, Apple and Facebook’s control over people’s access to ‘free’ information and services.

“Everyone has the fundamental right to protect their own personal privacy, but there doesn’t need to be a compromise in order for this to happen.”

First-party cookies, which are shared directly between a website and user (such as are used to show your digital shopping basket), will continue to function in the Privacy Sandbox. Google has said that it will honour these relationships and that personalised ads can be served to customers in a way that maintains privacy.

Google has also proposed Federated Learning of Cohorts (FLoC) to “provide an effective replacement signal for third-party cookies”, maintaining users’ anonymity by clustering them in a group with similar interests while never sharing data that could identify them as individuals. Other alternatives to third-party cookies are also being explored by the tech giant.

A Google spokesperson said: “The web ecosystem is at risk if it doesn’t keep up with changing privacy expectations.

“The work we’ve been doing with ecosystem partners in the Privacy Sandbox on new privacy-preserving proposals help move the industry away from tracking individuals across the web, while maintaining advertising effectiveness. And to help publishers sustain their revenue, we’ve been experimenting with new features as the web evolves to being privacy-first.”

Richard Reeves, managing director at the Association of Online Publishers, said of the feared multi-billion pound loss to UK digital display ad revenues that he “wouldn’t argue that figure”. But he said of Google: “It’s not in their interest to turn something off and then shoot themselves in the foot and not have any of that income-generating.”

He added: “The reality is that by the time Google turn off the third-party cookie I would like to believe that we will understand different ways of being able to connect to that data and that information in a compliant way that isn’t a reliant on hashed emails and other kinds of tracking technologies, but is purely based on information that has been imparted by the consumer who trusts that media source and that environment, and with the consent of that user…”

Picture: Reuters/Stephen Lam

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