Web Giants Threaten End to Cookie Tracking

 

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.



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.

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.

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.
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."

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.

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.