Balance of
Power in Ad Industry at Stake as Google, Microsoft Seek to Control Web Tracking
The Wall
Street Journal
By
ELIZABETH DWOSKIN
Updated
Oct. 28, 2013 6:50 p.m. ET
The end
could be near for cookies, the tiny pieces of code that marketers deploy on Web
browsers to track people's online movements, serve targeted advertising and
amass valuable user profiles.
In the past
month, Microsoft Corp. , Google Inc. and Facebook Inc. have said they are
developing systems to plug into and control this river of data in ways that
bypass the more than a thousand software companies that place cookies on
websites.
The moves
could radically shift the balance of power in the $120 billion global digital
advertising industry—and have ad technology companies scrambling to figure out
their next play.
"There
is a Battle Royal brewing," says Scott Meyer, chief executive of Evidon
Inc., a company that helps businesses keep track of the cookies on their
websites. "Whoever controls access to all that data can charge rent for
it—and has a tremendous advantage going forward."
The Silicon Valley trio, which produce browsers, email
services and operating systems used by billions across many devices, are
positioned to potentially learn far more about people's activities than cookies
ever could. Today, a diverse ecosystem of companies places cookies on websites
to track people through browsers; now the giants see an opportunity to get into
tracking themselves.
The swift
adoption of mobile gadgets is driving the changing landscape. Cookies let
advertisers reach digital audiences, but the trail stops at smartphones and
tablets, because cookie technology doesn't work well on them. Advertisers are
hungry for consumer behavior on mobile devices, such as which workers are more
likely to browse eBay during their lunch breaks, or the precise moment during a
game of Angry Birds when a person would be most susceptible to an ad.
On
Wednesday, Microsoft quietly announced in a blog post that the company will
give marketers the ability to track and advertise to people who use apps on its
Windows 8 and 8.1 operating system on tablets and PCs. The company will do this
by assigning each user a number—a unique identifier—that monitors them across
all of their apps. (The system doesn't block cookies in Microsoft's Internet
Explorer Web browser.) Industry players think Microsoft-powered smartphones and
Xbox game consoles will be a natural extension of the system, but Microsoft
kept mum on the question.
Microsoft
could then use its access to consumers to broker advertising to people or sell
data about users as part of demographic categories, such as avid game players
under 40 who also check sports apps. Earlier this year, Apple Inc. also began
offering advertisers the ability to trail and target users through a unique ID
on smartphones and tablets.
Google's
plans, which the company disclosed in only the broadest of terms last month,
would also make use of a unique ID. But the tracking could be far-reaching, say
industry experts. Google's system could tie together data about users across
all the company's products—Gmail, the Chrome browser and Android phones. In a
statement about its efforts, the company said "technological
enhancements" like an identifier could improve security "while
ensuring the Web remains economically viable."
Microsoft
and Google declined further comment.
Facebook's
new ad service, launched earlier this month, gets around the traditional
third-party advertising cookies by doing the tracking on its own. When a person
visits a website selling shoes on a work PC, a piece of Facebook code placed on
that site—Facebook's own cookie—recognizes that the person has logged into
Facebook using that browser before. The shoe seller can then send the person an
ad for the shoe on Facebook's mobile app—even if that person never registered
with the shoe seller.
"Wherever
your audiences are, if they are offline in the real world, on your website, or
on your mobile app, you can reach them on Facebook," says Scott Shapiro, a
product marketing manager at the social network.
For Madison
Avenue, a move away from the cookie represents an enticing chance to dump a
technology with serious limitations. Designed in the 1990s, it was supposed to
be a mechanism to help e-commerce sites to keep track of what was in shopping
carts between visits.
Cookies
evolved to store much richer data about consumer behavior in the Web browser.
These bits of code can track the types of ads clicked on, the kinds of articles
read, online purchases and phrases highlighted in text.
But
advertisers have no way of knowing whether they are tracking the same people
using different browsers on the same computer, or whether it is the same person
on one browser, because cookies can't "talk" to one another—causing
widespread inaccuracies that are known in the industry as "cookie
loss."
As a
result, at least 20% of the data is inaccurate, says Michael Schoen, executive
vice president for product at the advertising firm Mediabrands. The amount of
bad data is growing because more consumers are deleting cookies or enabling
"do not track" features on their browsers. "Cookies," Mr.
Schoen says, "are dying a long and drawn-out death."
Not only
could unique IDs help the Web giants follow users across devices, they could
extract more accurate data. If the users have logged in with the companies'
services, their identities are known and they can be tracked throughout the
day.
Some
privacy advocates warn the kinds of hyper-targeting capabilities in tech
giants' cookie industry replacements will spawn even more invasive advertising
in people's lives. One company named as a partner in Microsoft's announcement
on Wednesday, MediaBrix, says it offers "proprietary emotional
targeting" to "reach game players at natural, critical points in game
play where they are most receptive to brand messages."
"There
is going to be an economic incentive to find out when people are most impulsive
and vulnerable," said Ryan Calo, assistant professor at the University of
Washington School of Law.
While most
of the estimated 1,600 firms that place browser cookies help advertisers target
ads and monitor the success of ad campaigns, amassing consumer profiles is
itself a valuable business that extends beyond marketing. Banks use them to decide
what credit cards to offer; campaigns use them to tailor political messages.
Some of the
new technology could bring consumers greater transparency and choice.
Microsoft's unique ID will have a switch-off setting, as does Apple's. Facebook
lets members opt out of cookie-based ads; Google hasn't said either way.
While the
possibilities are great, some marketers fear that the tech giants will make
them pay a premium for their deeper, more complete profiles. "We don't
want that walled garden," says Steve Sullivan, vice president of
advertising technology at the Interactive Advertising Bureau, a trade group.
As each of
the giants develops its own approach to tracking, Facebook may be the best
positioned to benefit. Google has far more users for its Android tablet devices
and Web browsers than Microsoft has users of apps on its Windows tablets.
But
Google's wealth of information can't compare to Facebook's detailed knowledge
of more than a billion people's feelings and tastes. For example, if a person
posts a comment while vacationing in Florida ,
Facebook could display an ad for a local restaurant nearby.
"What
scares Google most about Facebook is Facebook's bulletproof user set,"
said Mark Naples, managing partner at the digital media consulting firm WIT Strategy,
"Google is huge, but it's not deep."
Faced with
changing dynamics that could leave them behind, companies in the marketing
technology industry are jockeying for position. The larger players are bulking
up on mobile-tracking technologies and strengthening relationships with the
tech giants. Experian, a data broker that places cookies, paid $324 million
this month to acquire 41st Parameter, a company that trails users across
devices. Three other major data brokers, Acxiom, Datalogix and Epsilon, joined
with Facebook this year to help advertisers reach Facebook users. By marrying
what Facebook knows to the brokers' user profiles, the companies get more pull
with advertisers.
For all its
limitations, the cookie isn't going to disappear any time soon, says Zach
Coelius, CEO of Triggit Inc., an online advertising company that buys ads from
Facebook, Google and other online exchanges. "It's not trivial to replace
a piece of underlying technology on which the entire Web depends," he
says.
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