Google Sandbox rollout could cost publishers 60% of online advertising revenue

Privacy Sandbox, Google’s upcoming replacement for third-party cookies, will reduce publishers’ revenue from programmatically-sold online ads by 60%, according to new research from advertising platform Criteo.

Meanwhile, trade group the IAB Tech Lab has warned Sandbox would “throttle” smaller news publishers and restrict the media industry’s growth.

A spokesperson for Google said it was too early to judge the system.

Taken together, the Criteo and IAB Tech Lab assessments paint a dismal picture for publishers who still get significant ad revenue from cookie-based advertising. They underline a warning issued in Press Gazette at the start of this year that online publishers will face significant year-on-year revenue decline in the first quarter of next year if they do not take urgent action.

Third-party cookies on Chrome currently underpin the majority of online advertising for news publishers by allowing marketers to anonymously identify and track readers.

Criteo’s Sandbox test was conducted via a sample of 18,000 advertisers, 1,200 publishers, and 100 million weekly ad impressions.

Google has allowed testing of its new Sandbox technology on Chrome since the start of this year by banning Cookies on 1% of traffic.

Criteo looked at examples where third-party cookies were used but there was no usage of Sandbox, the condition for most programmatic advertising today and compared this to where Sandbox was used in addition to publisher first-party data.

Criteo found that when Sandbox was used instead of cookies:

Publisher revenue decreased on average by 60%
Google Ad Manager’s market share went up from 23% to 83%
Less than 55% of publishers have so far adopted Sandbox in this testing phase of the new technology.

Google Ad Manager is the search giant’s own technology for serving programmatic ads which currently competes with various other ad management platforms.

“I’ve never shipped a product that, for example, is working at a 60% deficit to an alternative,” Criteo Chief Product Officer, Todd Parsons told AdExchanger, the industry news site. “I probably wouldn’t have my job here if I did.” Criteo is a development partner in the Sandbox project.

The IAB Tech Lab, which has criticised Sandbox before, said: “Privacy Sandbox may limit the industry’s ability to deliver relevant, effective advertising, placing smaller media companies and brands at a significant competitive disadvantage. The stringent requirements could throttle their ability to compete, ultimately impacting the industry’s growth.”

The group also questioned whether Sandbox would behave as an honest broker of advertising. Spending cannot be independently audited in Sandbox, and Sandbox isn’t accredited by the Media Rating Council (MRC), a standard requirement for many ad clients, IAB Tech Lab said.

“The absence of such audits leaves users in the dark about the advertising transaction’s robustness against threats and its adherence to best practices,” IAB Tech Lab said.

Because Sandbox performs ad auctions via the Chrome browser, as opposed to an online advertising platform, it’s not clear who bears legal liability if something goes wrong, IAB Tech Lab said. “How does Chrome address the need to maintain contractual relationships with media buyers, publishers, and technology partners?”

A Google spokesperson told Press Gazette that “not much has changed” between the IAB Tech Lab’s initial assessment — which Google said had “many misunderstandings and inaccuracies” — and the new “final” assessment.

“This is not surprising,” Google said. IAB Tech Lab’s “bar for the report was for everything to work exactly as it does today [with third-party cookies], which was never the intention of Privacy Sandbox. Looking forward, we’re encouraged that the [IAB] Tech Lab is turning its Privacy Sandbox focus toward discussing new capabilities and sharing integration guidance with the industry, with input from Chrome,” the spokesperson said.

“In addition, we expect performance numbers to evolve, and they currently don’t reflect how the overall ecosystem will perform in a true marketplace – which won’t exist until adoption expands alongside third-party cookieless traffic”.

Google also told AdExchanger that Criteo’s test was faulty because “it’s not possible to predict publisher performance based on effectiveness of a single buying platform, as publishers typically work with dozens of demand sources.”

Publishers have been lukewarm about Sandbox so far.

“We’ve been testing the Privacy Sandbox APIs, along with Criteo, and both of our results show that the Privacy Sandbox is not yet a viable alternative to cookies,” said Paul Bannister, the chief strategy officer at Raptive, a large US independent publishing platform.

The two analyses will likely be read closely by the UK Competition & Markets Authority, which must approve the final version of Sandbox before Google is allowed to get rid of cookies altogether. The claim that Sandbox concentrates Google’s market share of online advertising will likely receive particular scrutiny. The CMA declined comment but said in its last assessment of Google’s progress that it was worried the search engine would downrank sites that declined to use Sandbox.

Publishers are also concerned that Google might act as a monopoly over Sandbox, controlling which sites can be grouped together for advertising purposes and which cannot.

“When the IAB Tech Lab originally came out with its report Google tried to dismiss it, claiming that it contained ‘many misunderstandings and inaccuracies’, James Rosewell, co-founder of Movement for an Open Web, told Press Gazette.

“The original report was right to identify that Sandbox is not fit for purpose and that it doesn’t support a huge range of use cases on which the modern digital marketing industry is based. Google’s original response was clearly bluster and lies in an attempt to obfuscate this truth.”