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Google’s Privacy Sandbox is creating an uneven playing field, say small ad tech firms

Smaller ad tech firms are raising concerns about competition from Google’s long-lived cookie alternative, the Privacy Sandbox, at a time when the internet giant’s digital ad business is already under US and UK scrutiny.

US and UK regulators suspect that the Privacy Sandbox, five years in the making, could give Google greater control over the digital advertising market, harming competition.

Google’s dominance of the Chrome and Android platforms, which control the majority of Internet users, makes adapting to the Privacy Sandbox a critical requirement for ad tech firms.

However, the investigation and potential technology development delays are hurting smaller ad firms, as increased costs due to delays in Privacy Sandbox adoption will put them at a disadvantage against well-heeled competitors.

At least 11 ad executives told Reuters that the Privacy Sandbox could create an uneven playing field in favor of big firms with big funding and technical prowess.

Privacy Sandbox is a set of technologies that aim to improve user privacy by anonymizing data, implementing strict access controls, and targeting groups of users rather than individuals. It is designed to replace cookies, which are used to track and identify individual users.

Google’s initial plan to eliminate third-party cookies in Chrome and replace them with the Privacy Voice Box met with significant opposition from ad-tech ad companies and antitrust regulators, forcing the search giant to back down.

“We designed and implemented the Privacy Sandbox to support a competitive and efficient marketplace,” the Internet giant said, adding that Google has seen the ad industry invest in solutions to opt out of third-party cookies.

An uneven playing field

“Smaller ad companies don’t have the engineering teams or financial resources to successfully build privacy sandbox platforms that can be used at scale – they’re at a complete disadvantage,” said Drew Stein, CEO of advertising firm Audigent. .

Firms face significant financial risk as the Privacy Sandbox’s uncertain timeline extends development costs beyond the initial $5 million to $10 million investment they were expecting.

Stein said Audigent, which helps advertisers improve ad targeting and publishers increase ad revenue, has invested “several million dollars” in Privacy Sandbox over the past few years, which represents a significant investment considering its estimated annual revenue of $150 million.

At the time, big firms like Raptive and Index Exchange invested less than 3% of their revenue in Privacy Sandbox engineering services, according to sources familiar with the matter.

“Having an entire team of engineers, spending years on a project is a huge investment for a mid-sized company,” said Luckey Harpley, staff product manager at Remerge.

Experts said that while major ad tech companies such as Taboola and Index Exchange may not be affected by the introduction of the new technology, regulatory efforts to ensure fair competition will be important in preventing Google from further consolidating its dominant position.

“I don’t think Google is going to be in the position of dominance that some people say it will,” said Dennis Buchheim, CTO at ThinkMedium and former CEO of the IAB Tech Lab.

“Don’t think it will be allowed.”

-Akash Sriram and Harshita Mary Varghese, Reuters

Additional reporting by Kenrick Cai in San Francisco.


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