FLoC, Proprietary Data Networks and What Privacy Really Means

By Craig Weiss
Chief Operating Officer, True Influence

As the era of the third-party cookie drags to a close, industry pundits and advertisers are asking how this upheaval in targeted display advertising technology will affect their businesses. If you’re a major internet tech platform vendor, the answer is likely “according to plan,” at least for now.

Google recently assured the market that it expects conversions-per-dollar on its display ads to hold at about 95 percent of current rates after it ends support of third-party cookies in its Chrome browser next year. This is due primarily to reported success with Google’s “privacy sandbox” initiative, particularly the headline-grabbing Federated Cohorts of Learning (FLoC) browser-centric tech that it proposes as an alternative to third-party cookies.

Of course, that’s if you do business with Google or its close network of partners. Otherwise, you may be back to bulk guesswork with your display dollars, which is good for no one – not advertisers, consumers or B2B purchase decision-makers.

Google is not alone in walling off access to meaningful targeting data for its own advertising business. But as a dominant force in the industry (it controls around 30 percent of U.S display dollars), Google’s plans can be viewed as a snapshot for the immediate future of the display market. The major platform owners are laying claim to behavioral data gathered in their “sandboxes,” pushing aside third parties who have previously relied on cookie data, all in the name of “consumer privacy.”

In this post, I look at where this trend is likely headed, how it will impact B2B sellers, and some possible options for finding and connecting with buyers who have actually shown that they likely want to hear from you.

We All Agree – Privacy Is Critical

First off, let me be clear – we at True Influence value individual’s privacy and work constantly to adhere to all privacy regulations and best practices. As such, we certainly understand and acknowledge that there has to be a better answer to behavioral data gathering than third-party cookies, which are often sloppily implemented and can pose a real security risk. Plus, they can (and have) been used to fuel marketing that can be a little intrusive.

We also believe that marketing is effective – for both the advertiser and buyer – when it’s tailored to the interests and needs of consumers. This is particularly critical in B2B, where the decision to buy is an extended process of research, evaluation and justification. B2B buyers want information that helps them make informed decisions, based on the current stage of their purchase journey and their role in the decision-making process.

So we fully endorse the evolution of open systems for personalized marketing – both display advertising and outbound tactics like email – that protect individuals’ privacy and are based on clearly expressed consent to contact.

But we, like a lot of vendors in the B2B marketing space, are concerned about the trend of major industry players building their own closed, black-box behavioral tracking systems under the guise of privacy. It’s bad for competition and, if continued, will ultimately undermine B2B marketers’ ability to create the one-to-one messaging that’s critical to closing multi-million dollar contracts.

What Is FLoC Anyway?

There’s a ton of coverage in the trade press on FLoC, based on the somewhat limited information Google is releasing. Again, this is not an open technological standard – Google does not release its foundational search algorithm, and it’s not going to release the exact details of how FLoC works, either.

In short, the Chrome browser (which claims about 65 percent of the global market) tracks user activity and uses that data to sort anonymized individuals into “cohorts” of consumers with like demographic and purchasing interests. The algorithm (called SimHash) that assigns cohorts can be run locally and re-calculated weekly. Google says its cohorts can be as small as 1,000 or so individuals – small enough for discreet display ad targeting, but too large for an outside bad actor to use them to identify specific PII.

Exactly how these cohorts can be used in traditional cross-segment targeting remains unclear, at least to people who don’t work at Google. This overview at The Verge notes that Google does not plan to label its cohorts with market-friendly terminology, so its close partners will have a leg up in knowing how to target successfully under the new system.

And FloC is just one of the components of Google’s new privacy/revenue plan. AdExchanger is particularly interested in FLEDGE, which reportedly is devoted to assembling brand-specific cohorts. Again, we don’t know how this works, but it’s safe to assume that it will be critical to retargeting, which is essential to any display run, be it B2C or B2B.

Exactly What Does Privacy Have to Do with This?

Motives aside, it’s clear that Google’s new tech, which does anonymize user identity, is at least on the surface more secure than dozens of third-party cookies cluttering your browser. However, critics are not confident in the promise of “privacy” for various reasons.

On one end of the spectrum, you have the Electronic Frontier Foundation, which describes Google’s privacy sandbox as just an extension of the “surveillance business model.” In all candor, the EFF basically is against all behavioral tracking outside of explicit, first-party interactions, and so its positions are unlikely to align with those of most marketers. Still, it points to the relatively small size of FLoC cohorts as posing a risk of “browser fingerprinting” and other tactics for discovering PII for what are purported to be anonymized users. Some niche browsers have announced they won’t support FloC, citing the same concerns.

My own concerns here are not in the technical details, but in the area of regulation. Essentially, we are trusting Google and other tech giants to set their own standards when it comes to privacy, as opposed to complying with open, shared standards (and even laws) in a competitive marketplace. Historically, that hasn’t worked out so well, and I can’t see why we expect it to here, either. Black boxes are not a good idea.

I share my specific concerns in Part 2 of this series on FLoC, privacy and data-driven marketing.

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