What happened
Ad tech stocks were soaring today on news that Alphabet's (GOOG -1.10%) (GOOGL -1.23%) Google Chrome web browser would delay until 2023 the removal of third-party cookies that help advertisers track internet users.
The original decision to remove cookies, which Google had been building toward since 2019, was seen as a negative for ad tech platforms as it would make it harder for them to track user activity and therefore deliver value for clients.
Among the winners on the news today were The Trade Desk (TTD -4.34%), which was up 14.2% as of 1:13 p.m. EDT; Criteo (CRTO 3.08%), which had gained 11.2%; SEMRush Holdings (SEMR), which was up 27.8%; and Magnite (MGNI -2.08%), which was 7.8% higher.
Image source: Getty Images.
So what
Ad tech stocks plunged in early March when Google reiterated that it would remove third-party cookies and not replace it with alternate identifiers to track web users. Google made the decision as part of its Privacy Sandbox initiative to give users more control over their data, aiming to replace individual tracking with cohorts so advertisers can follow groups of similar users rather than individuals.
The March announcement did not include a timeline, but in the past, the company has said it was targeting January 2022 for the removal of third-party cookies. In this morning's blog post, Google said, "While there's considerable progress with this initiative, it's become clear that more time is needed across the ecosystem to get this right." The company now expects to phase out third-party cookies over a three-month period beginning in mid-2023.
The delay is understandably positive for the range of stocks that depend on cookies for advertising.
The Trade Desk, the biggest ad tech stock on the market and the leading demand-side platform, says in its Risk Factors that if the use of third-party cookies is restricted, "our performance may decline, and we may lose advertisers or revenue." Partly in response to the Google initiative, the company is building out an open-source identity framework it calls Unified ID 2.0 that can direct relevant advertising without the use of third-party cookies.
Criteo, an online display advertising company, also has several strategies to make it less reliant on third-party cookies, including using more first-party data, directly from Google for example, and The Trade Desk's Unified ID 2.0 protocol.
Recent IPO SEMRush helps companies with online visibility, or tracking internet traffic and advertising data. The company also acknowledges that restrictions on third-party cookies are a risk, though it's unclear how it plans to change when Google bans third-party cookies.
Finally, Magnite is a leading supply-side platform, increasingly focused on connected TV, which is mostly outside of Google's domain. Magnite acknowledges the risk in the third-party cookies model being disrupted, but says it could benefit from that shift as a sell-side platform. This would give more power to the publishers that are Magnite's clients and have better access to user data.
Now what
Alphabet's stock barely moved today, but Google's announcement shows how much power it wields in digital advertising. While the news is ostensibly good for the ad tech firms, it also shows that many of them are at the whims of the tech giants who control much of the online advertising ecosystem.
It's also worth remembering that the delay does not remove the threat of third-party cookies disappearing. Google still fully intends to do that, just later than it had planned.
That gives these companies, which have been growth stock darlings over the last year, more time to plan alternative ad identifiers. As The Trade Desk's development of UID 2.0 shows, they appear to be well on their way to doing so.
