The privacy era is upon us. It's probably a good thing for consumers, but it will cause ad buyers and sellers to prepare for massive changes that will rock the $108 billion digital advertising business.

The most recent change is Google's plan to smash the third-party cookie in two years.

Many marketers are unprepared for the changes they'll have to make to their business, which many believe could dent publishers and just end up strengthening Google and Facebook.

No one is happy with the proposed cookie replacements, from the IAB's proposed collaboration to the ideas adtech middlemen are hatching.

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There's more ability than ever to measure people's online behavior. But what if it all went away?

The privacy era is upon us, and while it's probably good for us as consumers, it's rocking marketers and publishers and their intermediaries that have to prepare for massive changes to the $108 billion digital advertising business.

Big web browsers and Europe's sweeping privacy law, GDPR, had started making it harder for advertisers to collect data on people and follow them around the web with ads in recent years. Then in January Google set the date for the end of third-party cookies in its Chrome browser.

Marketers have long relied on those cookies to power digital advertising, and with Google accounting for more than two-thirds of the browsing market, the news sent tremors through the industry.

The removal of those cookies and their associated targeting could render advertising less effective and dent publishers' ad revenue. According to Google's own estimates, the cost of ads without third-party data would plummet 57%.

Two of advertisers' biggest trade groups the 4As and ANA condemned Google's move, saying it "would threaten to substantially disrupt much of the infrastructure of today's Internet without providing any viable alternative, and it may choke off the economic oxygen from advertising that startups and emerging companies need to survive."

Google has said that it's developed workarounds for advertisers and that it's giving two years to prepare for the cookie phase-out. But all the stakeholders are worried now about how the change will force them to fundamentally change when critical data used to target ads dries up.

Ken Nelson, Hux by Deloitte Digital Ecosystem lead, said the last shift in data-driven marketing this size was the Y2K bug that spread jitters throughout the business world. But Y2K had a known fix. This time, marketers have no clue what to do.

"It's a shock and requires transformation," he said. "If they do nothing? For most companies, it's going to have a material impact on their business growth."

Online advertising had become a mess

To some, online advertising was due for a correction. Digital advertising had already become rife with fraud, intrusive pop-ups, and annoying ads. Fully one-fourth of people have fought back with ad blockers. Some of the advertisers' biggest players including Procter & Gamble, JPMorgan Chase, and Adidas have pulled money out of digital advertising.

Still, Google's plan to smash the third-party cookie sent industry players scrambling.

The trade group Interactive Advertising Bureau's proposed a method to replace the cookie and adtech middlemen are building products that will do similar things. But no one is convinced those proposed solutions will satisfy advertisers' demand to target and track the efficacy of their ads as well as they used to and may instead just create more confusion with different targeting methods out there from different companies.

Not only are marketers hearing different things from the IAB and adtech vendors, but governments and privacy advocates are putting forth their own agenda, said Ari Paparo, CEO of Beeswax, an adtech firm that helps marketers in-house programmatic advertising. "It shouldn't be surprising that it's really confusing and complicated."

If there's one thing people seem to agree on it's that Google's move will push marketers further into the embrace of proven channels backed with first-party data: Google and Facebook.

Here's a look at the stakeholders, one by one, and the implications they face.

Advertisers could go the P&G route, ditching digital ads for traditional TV

With the loss of third-party cookies, the worry is, advertisers won't be able to track their ads' effectiveness. Advertisers could also have trouble capping the frequency of their ads and improving them, which gets back to the reason people started blocking ads in the first place.

Workarounds and identifiers being pitched by Google, the IAB, and adtech companies like Index Exchange and OpenX theoretically would replace the cookies and still let marketers track people while respecting their anonymity.

Everyone agrees the ID needs to be standardized, but also that doing so would be extremely difficult because it would mean reconciling processes across platforms, operating systems, and hardware.

Jon Halvorson, VP of global media, digital, and data at Oreo and Ritz maker Mondelez, said the company insulated itself by limiting its reliance on the third-party cookie to measure its advertising and by working with big-box stores to connect the dots between advertising and sales.

But advertisers who relied on the more cookie-reliant method of measuring advertising stand to lose the most. He said many CMOs are behind and will shift spending to Google and Facebook out of uncertainty about how well their advertising is working.

"People who overinvested in MTA are screwed," he said, referring to multi-touch attribution. "Careers are getting screwed over it. CMOs never had to talk about data in this way. And no one has a clear answer on what's next."

That's got to worry people whose businesses rely on digital advertising.

"The best and worst thing to happen to digital advertising is how accountable it is," said Joy Robins, chief revenue officer of The Washington Post. "If there's going to be this disruption, it's going to make brands hit the panic button and wonder if they should go into more traditional media. Measuring ROI can feel like a bit of a black box. Those that really worry about efficiency can wonder if digital, as they have come to think of it, is worth it."

Krystal Olivieri, SVP of global data strategy and partnerships at WPP ad agency GroupM, said she thought most advertisers were "level headed" and have plenty of runway before Google phases out the cookie for good. But, she said, "advertisers want to understand ROI. If they don't feel like a tactic is driving it, they'll shift tactic."

Publishers will divide into haves and have-nots

An often-voiced hope is that as marketers scramble to collect customer data on their own or hunt for other sources of it, there will be a flight to publishers. But only those rich in information on their audiences like their emails and reading behavior will benefit.

They include ones like The New York Times, Wall Street Journal, and Washington Post that are rich in reader data. In preparation for a cookie-less future, they've been building tools that advertisers can use to target readers.

In the fourth quarter of 2019, The Financial Times saw an 80% uptick in sales of behavior-based ads, suggesting a validation of its strategy. "It's encouraging," said Brendan Spain, the FT's VP of advertising for the Americas.

But it's hard to say if they can make up for the anticipated drop in programmatic ad revenue in these ways. And even the most prestige publishers can't compete with Google and Facebook for audience and data for marketers looking for an easy, safe place to put big ad budgets.

"We're doing the right things given where the world is going," said Josh Stinchcomb, chief revenue officer of the Journal. "But when I step back and say, what will it all mean? The walled gardens get stronger. The pie for everyone else gets a little bit smaller."

Facebook and Google may be the biggest winners of privacy

Facebook and Google have come to dominate digital ad budgets, to the disdain of publishers and adtech firms. A persistent worry is that Google's decision to remove third-party cookies will push even more advertising dollars to Facebook and Google because they have strong targeting abilities, due to the massive amount of data they collect on their billions of users.

The uncertainty around how adtech companies themselves will survive in a post-cookie world is also a concern, especially as browsers like Google's Chrome, Mozilla, and Apple cut out third-party cookies.

"Their proposals are interesting and in some cases promising, but they're very early and haven't been tested for reality," Beeswax's Paparo said. "There's some feeling in the industry that we don't have as much of a seat at the table — the engineers will do their thing and we'll be left out."

Adtech firms are building alternatives to the cookie

Firms like LiveRamp, LiveIntent, Merkle and ID5 are building alternatives to cookies for marketers while companies like Index Exchange and OpenX are working to manage the growing number of alternatives for publishers.

The problem is, each cookie alternative has its own use case. Some help with targeting and others hash email data anonymously, meaning that marketers have to work with more companies, potentially adding to the confusion.

"Having three walled gardens is OK, but having 15 to 20 small walled gardens on a media plan is not manageable," said Ana Milicevic, a principal and cofounder of the consulting firm Sparrow Advisers.

The IAB thinks it can create a standard for everyone to follow

The IAB would seem to be the natural body to get everyone on the same page. It's the biggest and most important digital trade organization, with some 800 members across digital publishing and marketing, and the stakes are high for it to come up with an alternative to third-party cookies for its members that also addresses privacy concerns from regulators and consumers.

It laid out a sweeping initiative at its Annual Leadership Meeting in Palm Springs, California, earlier in February. The effort called Project Rearc aims to create standards and guidelines around how marketers handle IDs.

Some question the IAB's ability to serve all its constituents equally when two of its members, Facebook and Google, stand over the others. The IAB was absent from the 4As and ANA letter, despite recently courting advertisers as members.

Dennis Buchheim, president of the IAB Tech Lab, pushed back on the idea that Facebook and Google dominate the IAB's leadership. He said that Facebook and Google represented 5% of the IAB Tech Lab's funding and representation in working groups and that they're among more than 750 companies that work with the IAB Tech Lab.

The IAB's record on creating tech isn't the strongest, said Amanda Martin, VP of enterprise partnerships at Goodway Group. For example, the IAB Tech Lab went through several iterations of its framework around GDPR in the leadup to the European law's rollout.

"Creating technology has not necessarily been their strong point — it's been more on rules and best practices with established technology," said Goodway Group's Martin.

And the IAB can't make anyone do anything. The IAB created a standard for how much of an ad has to be in view to be considered seen by a human, but some ad agencies ignored that and set higher viewability standards of their own anyway.

Buchheim from the IAB Tech Lab pointed out that the group is in talks with other trade organizations.

"IABs around the world and IAB Tech Lab are well-positioned to address the challenges associated with the end of third-party cookies, among other challenges, and we also seek to engage other trade orgs in the US and globally to ensure there is comprehensive representation," he said.