What Google’s latest cookie news means for the best ad technology stocks

Analysts are ranting about Google’s latest guidelines on its promise not to use technologies that people individually track on the Internet. Some analysts say their opinion has not changed. But others at BMO have downgraded an ad technology share, noting that “it’s too hot in the kitchen.”

Google said in a blog post on Wednesday that it will only use “ privacy-protecting technologies ” that rely on methods such as anonymization or aggregation of data after it no longer supports cookies. Cookies are small pieces of code that websites deliver to a visitor’s browser and remain while that person visits other sites. They have been used to track users across multiple sites to target ads and see how they are performing. Google announced plans in January 2020 to end support for third-party cookies, which power much of the digital ad ecosystem, on its Chrome browser within two years.

The blog post raised questions in the industry about the future of ad technology initiatives from players who have been working on ways to balance consumer privacy while preserving personalization in ads after not being able to use cookies .

Following the announcement, here’s what analysts are saying about the shakeout for public ad technology companies, including Google:

Bank of America analysts said Thursday that Google’s comments “suggest that app developers and publishers will need to move away from all individual ID alternatives, which could make Google’s ‘privacy sandbox’ capabilities even more valuable in the industry.”

Analysts cite figures from Jounce Media, which estimate that 40% of the money flowing from advertisers to publishers on the open Internet goes through Google’s ad-buying tools.

KeyBanc analysts said their real question was whether Google plans to restrict Google product alternate IDs. They said such a move “would clearly favor Google over the open internet and pose an interesting dilemma for regulators – how should consumer privacy be balanced against market power?”

Google said on Wednesday that its blog post was about how its own ad products will work, and it won’t limit what can be done by third parties in Chrome. The company said it will not use Unified ID 2.0 or LiveRamp ATS, two tools that say they would help target ads in a more privacy-aware way, but would not specifically talk about any particular initiative. There is still uncertainty as to whether Google will limit that activity in Chrome in the future.

“We believe that the inherent problem with the current attempts to regulate Internet companies is that attempts to provide more privacy simply make the largest companies stronger,” said KeyBanc analysts. “Until a compromise between privacy and competition is considered, we suspect that regulation threatens to stifle competition.”

Macquarie analysts said they believe this move “more clearly defines the role Google will play in online advertising versus the roles that open Internet ad technology companies such as The Trade Desk, LiveRamp and Criteo will play.”

“It appears to be putting Google in a different part of the ad targeting business – which it can afford given its scale and probably should do given privacy concerns and the government’s increasing scrutiny over its methods,” Macquarie analysts said. . But it still throws up the walls around its yard even further, as any advertiser working with Google’s ad serving technology will have to adopt Google’s new API-based protocols, which target consumers in a very different way. . ”

Google’s stock rose nearly 1% after the market opened on Thursday.

KeyBanc analysts said The Trade Desk will challenge changes to Google’s Chrome browser if it restricts the use of alternate IDs.

The Trade Desk led the creation of Unified ID 2.0, a framework that relies on email addresses hashed and encrypted from consumers giving their consent. The Trade Desk has portrayed the identifier as a superior alternative to cookies that better explain to consumers how relevant ads fund the content and experiences they read or use on the Internet. The Trade Desk handed over control of Unified ID 2.0 to a nonprofit called Prebid in February.

“In short, Unified ID 2.0 puts privacy in the hands of consumers, which appears to be consistent with the privacy goals and value exchange of the open Internet,” said KeyBanc analysts. “If Google can restrict alternate IDs, Google has just become even more powerful in the ad industry.”

Macquarie analysts said on Wednesday that the announcement appears to limit The Trade Desk’s ability to purchase ads using identifiers on Google’s exchange or supply platform.

“… But that only encourages TTD to work directly and with a wide spectrum of other publishers [supply-side platforms] through private marketplace transactions, “they wrote.” We expect Unified ID 2.0 to continue to evolve as a device and browser independent industry standard with [opt-in] and consent between publishers and consumers, and TTD will continue to use its position as by far the largest independent DSP to help advertisers reach consumers on the open web outside of Google. ”

A Trade Desk spokesperson said in a statement that there is “significant industry focus on building a new identity solution that preserves the value of relevant ads while protecting consumer privacy.”

“Unified ID 2.0 puts the consumer in the driver’s seat, making them unidentifiable and giving them control over how their data is used,” he said.

The Trade Desk stock fell 5% on Thursday morning.

BMO downgraded LiveRamp Thursday in a note titled “Too Hot in the Kitchen.”

Analysts said they believe Google’s confirmation that it will not integrate “alternative identifiers” could slow LiveRamp’s sales cycle as players in the ecosystem re-evaluate how best to move forward this year.

In late October, LiveRamp said the Unified ID 2.0 will be available to publishers through its platform, which helps advertisers target real people rather than cookie-based profiles or devices. LiveRamp has what it calls its “Authenticated Traffic Solution,” which it says allows consumers to choose to take control of their data. On the other hand, brands and publishers can tap into that data. It is the company’s solution to address the abolition of third-party cookies.

“We think more clarity and renewed revenue growth are possible in 2022 (when GOOG completes its cookie roadmap, among other things), but visibility is limited today,” BMO analysts wrote. They said the industry is still waiting for Google to provide more clarity on how it will handle alternative options.

MET analysts said they believe the revenue impact on LiveRamp is likely to be limited in the near term, but warned against a smaller likelihood of revisions to the estimates.

Macquarie analysts said the kind of announcement that came from Google on Wednesday was mostly stock volatility caused by the alleged main risk. “But we believe that while this is yet another turn in the evolving ad technology landscape, the outlook for TTD, RAMP and CRTO is more or less unchanged.”

In a blog post responding to the news, LiveRamp said Google’s announcement is in line with what it advocates. LiveRamp argued that its ATS solution embraces the ideas of first-party consumer relationships, transparency and consumer control.

“In short – marketers will continue to be able to purchase human-based inventory on DV360 with LiveRamp,” the post said. DV360 is a Google ad technology product.

The LiveRamp stock fell 7.7% on Thursday morning.

Ad technology company Criteo said in a statement that Google’s post Wednesday “in no way changes or affects Criteo’s plan and roadmap.”

“As we said earlier, we will continue to invest in our first-party media network, as well as in cohort-based and contextual ads, which allow marketers to communicate effectively with their customers in a privacy-safe and permissible manner,” a company spokesman said. “User consent and consent are at the heart of our solution.”

At the end of October, Criteo announced its involvement in the partnership with Unified ID 2.0. The company said it will provide the sign-up solution and help develop a “transparency portal” that gives consumers more control over their ad experience.

Macquarie analysts said the company’s outlook for Criteo was unchanged after Google’s announcement, noting that Criteo has been an active contributor to Google’s privacy initiatives.

MET analysts raised their target price from $ 25 to $ 45 and said they are building more confidence in Criteo’s turnaround efforts as it repositions its retargeting-heavy businesses.

“For CRTO, we expect the basic usage of re-targeting to continue to demand investors,” said MET analysts. “But we continue to believe that CRTO has developed alternative techniques to effectively reach consumers who have previously shown interest in an advertiser’s products.”

The MET analysts said that, in the future, the changes may require a shift from one-to-one targeting to messaging a group of users who have shown similar interests in an advertiser’s product.

“Coupled with strong machine learning, we believe CRTO can continue to improve in its core business of helping advertisers remarket interested customers,” they wrote.

The Criteo stock fell 5.4% on Thursday morning.

CNBCs Michael Bloom contributed reporting.