What’s all the fuss about FLoC?

As the updates around Google’s cookie replacement—the Federated Learning of Cohorts (FLoC)—keep on coming, those of us in the advertising industry are likely glued to our screens wondering what’s next. So far we’ve heard concerns around privacy, algorithmic bias, and antitrust issues, culminating in Google’s recent announcement that their Chrome web browser will not fully block cookies until late 2023—delaying the move by almost two years.

And perhaps the delay makes sense, since FLoC will likely need time to take off in countries with strong data protection and antitrust laws such as Germany and other European countries. Fundamentally, FLoC still relies on IDs that presents one’s private browsing history to advertisers, (albeit anonymised) which may still be leveraged as a point of entry for fingerprinting.

With FLoC though, the issue is not only about data protection. Google’s announcement to delay the FLoC rollout comes amid a European Union investigation on whether Google holds an unfair advantage over rivals, while another antitrust probe in the United States evaluates the overall market dominance of big tech—both could have huge implications for a company that generates almost all of its revenue through online ads.

There are also concerns around algorithmic bias. FLoC replaces the tracking and targeting enabled by individual-level data and instead classifies internet users into cohorts based on their online behaviour like the websites they visit. While the intention is to provide greater individual level privacy, there have been growing concerns about the possibility of the FLoC method unfairly categorising people and enabling discriminatory targeting.

These concerns have led to many publishers and browsers rejecting FLoC—and Google itself has said they will not be testing the product in places where General Data Protection Regulation (GDPR) is in place, such as Europe.

In spite of recent bumps on the road to a cookieless future Google seems to be pushing through with FLoC as a permanent replacement for third-party cookies. So, what does it mean for advertisers and publishers?

With the death of cookies, publishers and advertisers, it seems, will depend largely on first-party data. This means that advertisers and adtech providers who opt not to use FLoC will need to collect enough first-party data to effectively amass sufficient reach for a meaningful campaign—that’s a tall order, especially for the APAC region.

A post-cookie solution in APAC

In acquiring first-party data, APAC unfortunately trails behind much of the world which may also pose greater challenges for the region in a post-cookie setting. Many businesses in the region are still in their early stages of their digital marketing journey, with even more lacking access to privacy-centric first-party data and identifiers. Additionally, SMEs, which make up more than 98% of enterprises in APAC and contribute up to 50% of the region’s GDP, will bear a bigger brunt as they would find it tight to dedicate additional resources to build and maintain their own databases, especially when compared to the bigger MNCs.

What’s more, the region has a significant userbase for Android products—which run mainly on Google’s browser—and that can make it even more difficult for advertisers to find alternatives.

While APAC may not be a frontrunner in the first-party data race right now, the move by Google to retire cookies will push more companies in the region to prioritise this. On top of that, we will still see emerging technologies and alternatives to the cookie come out of this region. Though of these emerging technologies, not all are tried and tested. The delay in FLoC buys advertisers some time to find a good alternative to cookies and I predict that the dust will settle in the next 12 months. As companies embark on a test and learn approach over time, a consistent and sustainable alternative will eventually emerge. The biggest mistake would be to put the search for a cookie alternative on the back burner, under the false impression that the delay buys more time.

In my observation, contextual targeting—which matches a site’s content with audience behaviours to place relevant ads—is one of many viable alternatives to cookies alongside other new ‘ID-free’ advertising tools. Of course the vast amount of data and the speed of which content is constantly pushed online makes it a task that is beyond human capabilities. There are technologies in the market that leverage AI to aggregate, process and match behaviours with content offering one continuous, seamless flow in the digital targeting ecosystem. This has yielded better results than both cookies and first-party data.

AI-driven behavioural targeting capabilities that are browser agnostic and compatible with major DSPs and SSPs will be a game-changer and some companies are already moving in this direction.

The pandemic has accelerated digital transformation, and now the tide has turned forever. Online advertising will dominate over traditional ad placements. In Asia particularly, the boom in digital advertising will only continue to grow—even with the death of the cookie—as brands and publishers keep looking for more effective ways to target audiences. As we enter the last days of cookie-based targeting, it opens the door for a truly privacy-compliant precision targeting solution that does not just rely on first party data. I am optimistic that it will eventually be a win-win for both advertisers and consumers alike, as long as the industry uses this time wisely.

Ian Chapman-Banks is co-founder and CEO of Singapore-based artificial intelligence company Sqreem Technologies