EP257 - Cookies, IDFA, and Commerce Deep Dive
EP257 - Cookies, IDFA, and Commerce Deep Dive Changes in mobile tracking (IDFA), and browser tracking (third party cookies) are likely to disrupt digital commerce. Here is everything you need to know. Background Privacy Law Changes California Consumer Privacy Act of 2020 (CPRA) California Consumer Privacy Act of 2018 (CCPA) EU General Data Protection Regulation (GDPR) Third Party Cookies Safari (19% share) 3P cookies blocked as of March 2020 Firefox (4% share) 3P blocked as of Sept 2019 Chrome (64% share) will block 3P January 2022 Mobile Tracking (Digital License Plates for Mobile Users) Apple Identifier for Advertisers (IDFA) – Goes from Opt Out to Opt In Q1 2021 Google Play Services ID for Android (GPS ADID) – Still Opt Out Use Cases that are impacted by IDFA/3P changes Audience Activation and Retargeting Frequency Capping and Suppression Media Attribution Audience Insights and Segmentation Personalization Alternative Solutions 1P Walled Gardens (Facebook, Google, Amazon) Real ID Systems (Trade Desk, Liveramp, Epsilon) Clean Rooms Cohorts – Google Privacy Sandbox: FloC (Federated Learning of Cohorts) Impacted Businesses Google – Biggest winner, built a business based on relaxed privacy standards, now pulling the ladder up behind them Apple – See Google, but with a smaller share of browser market Facebook – Lose ground to Google/Apple but gain on everyone else Amazon – Winner. Forcing more ad dollars to Amazon walled garden Shopify – Loser. Forcing Facebook to capture more commerce instead of referring to Shopify sites. Publishers – Loser. Harder to make ad model work Other Retailers – Loser for customer acquisition, slight benefit for retail media networks Conclusion Advertising rates go down which depreciates ad based business models (content sites and games). More businesses pivot from ad based to paywalls. Greater focus on Customer Lifetime Value (via subscription and platform approaches), more cleanrooms. Much harder for new businesses to challenge incumbent walled gardens. Episode 257 of the Jason & Scot show was recorded live on Wednesday March 17, 2021. http://jasonandscot.com Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:24] Welcome to the Jason and Scott show this is episode 257 being recorded on Wednesday March 17th 2021 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo. Scot: [0:41] Hey Jason and welcome back Jason Scott show listeners. Jason has you know when we look at our analytics and based on feedback we get from listeners some of our most popular shows over the years are where we get super-dee-duper geeky and we go really deep on one topic. We call those with what I think is a genius of marketing we call those deep Dives. Jason: [1:05] Jason and Scot show Deep dive. Scot: [1:18] So we have been I’ve been reading a ton about a big change coming to the overall ecosystem of advertising and it’s initiated by Apple and it’s called idfa. And as you know I read a lot of Wall Street stuff and some of the Wall Street folks are freaking out because they’re basically saying this is going to be big and the world’s not paying enough attention. And you know in my mind I’m kind of that sad world that doesn’t really impact e-commerce but then I started to see it getting really noisy around the impact to folks on the converse side too. So I looked around and called everyone I know and none of them were experts on the so I last ditch effort I said maybe my podcast co-host knows a little bit about this, seeing as he works for one of the world’s largest ad agencies and lo and behold I was right you do you are a Ninja on this. So I know enough about this topic to have a lot of questions but I have no answers so, we’re going to kind of flip it a little bit here and I’m going to interview you on this topic how does that feel how does it feel to be in the chair. Jason: [2:28] I’m terrified I like being the one to ask the questions and know the questions in advance so I feel like that the I should have come to rehearsal. Scot: [2:38] Yeah put some curveballs in here and we’ll see how it goes so. Let’s start at the top the maybe a little bit of background on this issue kind of starts with cookies so if we if we do the Wayback machine let’s start at cookies and I think a lot of us know the basics of cookies but just to kind of make sure, because a lot of some people in e-commerce start really worried about this just because it works right you don’t really have to worry about it per se but you know, I’m pretty familiar with first-party and third-party cookies but maybe maybe start at the beginning and why do cookies exist what’s the difference between first and third party cookies and then we’ll go from there. Jason: [3:19] Yeah awesome and let me be one precursor I you’ve are vastly oversold me I definitely don’t want to claim to be an expert in this stuff the. Scot: [3:30] You’re the chief digital retail cookie tracking idfa officer. Jason: [3:37] You would so one would think therefore that I was at Tech Guru but let me just say this stuff is super complicated. It’s an alphabet soup by the way anyone that’s an expert in the space is apparently not by contract not allowed to use any full words they can only use acronyms for everything which is super complicated. And it’s been my experience like I’ve been in the room with CMOS that spend a fortune on all these digital ad products and programmatic products, and the more you talk to them you start to realize oh my God they don’t understand these ad products either so I would just say like, no one should feel bad that doesn’t completely grasp this topic because it is really complicated and you and I will do our best to simplify that and so what so great Point let’s start with cookies. Scot: [4:28] I’ll also give you a pass because this thing the idfa we’re going to talk about isn’t even out yet so so we’re anticipating a lot of stuff and it’s sure to be I think will be closed and there’s enough to know kind of the general topic but some of the specific details may change once it’s released. Jason: [4:45] Yeah a lot of changes still in flight for sure. So cookies cookies are just a simple little text file that sits on your computer that stores data from your browser and so the. Kind of fundamental first use case is. You like to read The Wall Street Journal every day and you have an account with the Wall Street Journal and you don’t have to type your username in every single time you go to the Wall Street Journal so you check that little boxing remember me. Um so the way the Wall Street Journal remembers you is they get to write a little text file on on your hard drive, that says I’m the Wall Street Journal cookie and username equals Scot Wingo, um so it’s a way for websites to store data on your computer that they can use in future visits. Scot: [5:34] Side note Wall Street Journal is the worst example because they apparently ignore my cookie but go ahead I know that’s the intent but they’re like the absolute worst. Jason: [5:42] So so that I mean but the original intent of what are called first-party cookies is for a website to store data about their user that could be used to improve, their experience in subsequent visits right and it was originally about user experiences but pretty quickly. Evil advertisers figured out that it was a valuable tool to improve and Target advertising. And to facilitate that the browsers were extended to support a new kind of cookie called a third-party cookie. So a first-party cookie is the Wall Street Journal storing your username on the Wall Street Journal. And and literally the I want to say the name of that cookie file on your computer is like is the Wall Street Journal URL, and so that websites allowed to open that cookie, what third party cookies are is a way for one website to write a piece of information that then can be read by another website. [6:45] So by default the New York Times can’t read The Wall Street Journal cookie so it can’t like steal your username from The Wall Street Journal. But now websites could write these third-party cookies that became really useful for advertising so for example. You could be shopping for some skis on Backcountry.com and they could write a third party cookie that says you have a ski, in the cart that you didn’t buy and then when you go to read The Wall Street Journal, you could see an ad for those skis because the Wall Street Journal is allowed to read Backcountry dot-coms third-party cookie and then run a retargeting ad for you. So those third-party cookies are super useful for tracking you across the web and spamming you with ads from each others. Websites. And that is one of the things that is being phased out in the Privacy world is the use of third-party cookies. [7:53] Just getting one thing so a ton of people call this the Cookie list future and that’s kind of a misnomer because no one’s doing anything to first-party cookies like so there, they’re not going away third party cookies have been turned off by two of the big browser so Safari are ready. Has third party cookies off by default you can opt in the turn them back on and Facebook blocks third-party cookies and so that the only browser that still supports. For third-party cookies is the browser that’s owned by the largest advertising Network in the world which is Google. And they have now announced that they’re going to be eliminating third party cookies in early 2022. Scot: [8:41] How about Microsoft with ie or Edge I think is the official new name of their browser are they have they already. Jason: [8:49] Here’s what I’m getting into a slightly gray area there are two flavors of edge there’s kind of Microsoft’s old browsers and the modern versions of edge are based on chromium. And I believe but I’m not certain that the that third-party cookies are not. Have not been depreciated in any Chromium browser as of yet but I could be I could be mistaken. Scot: [9:21] Okay and then give us an idea of the scale of this like if third party cookies all went away. How many users are being tracked with them and you know what are some of the you mentioned what’s classically called retargeting that seems to be like squarely in the cross hairs here but what are some of the other things that would be if I if I do a Google CPC at is that going to be impacted by this. Jason: [9:47] Yeah so. [9:50] So scale wise as we sit here today in this moves around a little bit but as far as about 19 percent of the worldwide browser share so third party cookies already don’t work there, Firefox is like 4% third-party cookies don’t work and chrome is about 64 percent so it’s it’s. Third party cookies have been going away for a couple of years I think this started in 2017 that Safari started turning off some third-party cookies and. When Chrome turns them off like they will essentially be dead, the turnoff has been very graceful so far because like Safari didn’t even just say all third-party cookies are off what they said is third party cookies are going to have a very short life span so maybe they used to live forever, now they automatically get deleted every two weeks and then they automatically get deleted every week so we’ve kind of had this, slow gradual erosion of third-party cookies but once Chrome turns them off. The expectation is that nobody’s going to bother to use them because even if there’s some Niche browsers that still leave them on or a few people opt-in for them they’re just not going to be. [10:58] Ubiquitous enough to be very useful for advertisers and so so yeah when you think about the use cases for those third-party cookies, one very definite one is the retargeting add that we just talked about that you’ve got something in your cart and you didn’t buy and now I as a merchant can buy ads on other websites you go to to advertise that item right so that’s a highly personalized 121. [11:22] The what you may not notice is there’s a much more mild version of that that’s happening to you a lot more right so. [11:32] Lexus wants to sell sell you a car and so they want to show you Lexus car ads right well, one of the best places Alexis could buy a car at would be on Car and Driver webs.com right because. By default the majority of people on car driver.com are car enthusiasts there they’re more likely to be in market for a new vehicle and so you know the. One of the most affected places I could place an a car ad would be on a car Enthusiast website. That’s also the most expensive place to buy a car ad right and so maybe. Dubai some car ads on that site or maybe I can’t afford any car ads on that site but I’d like to advertise to car enthusiasts even though I can’t afford the the car and driver ad rate right, so what third party cookies let me do is say I would like to buy an add-on cnet.com. [12:31] For people that have previously visited car and driver.com right so it’s not a personalized ad it’s not a unique add to Scot Wingo, but it’s an add to a cohort of car Enthusiast and I probably don’t specifically say I want to buy, visitors from Carmen driver.com I probably say I want to buy ads from anyone that has visited anyone of a bundle of car enthusiasts websites. So so there’s a ton of ads you see on the the the web that are lightly targeted. Based on your previous browsing Behavior. Scot: [13:09] Right and the so they’re kind of like these real-time options right so someone’s going to see net and CNET says hey I’ve got a pageview coming up here from this this cohort you know that we’re going to call car buyers who wants who wants to pay for this person and there’s like a little mini auction that goes on that’s kind of how the Ed ad networks work right. Jason: [13:28] Exactly and so they’re highly efficient they get the maximum amount of money they can’t that the market will bear for all of those ads and by the way. Well advertising people love these and AD Network to have sewing these ads like it’s it’s debatable how effective they are because in my hypothetical example you’re never going to buy a Lexus. Like I like I know you’re a Tesla guy the fact that you go to turn car and driver doesn’t actually mean you have a greater affinity for buying a Lexus if you see a net. [14:00] But that’s the supposition and in all of these ads so they’re more likely to be more more buyers in that pool so that they like their clearly has some efficacy but sometimes people go overboard and thinking about how effective they are. Um but third-party cookies are useful for a couple other use cases as well, um so so one that I suspect we’ll talk about a lot later is our friends at Facebook right and Facebook invented one of the most evilly genius things on the web, they invented this like button and so you know when you’re on Facebook you see these these like buttons you can click for various content to say you like it and they’re a bunch of reasons that useful for Facebook. [14:40] Facebook conda bunch of other websites in also having a like button on their website right and almost every time you see an article there’s probably a like button that you could click on that article. And guess what that’s doing like that’s putting data in a third-party cookie that Facebook can read. And so it actually gives Facebook a ton of insight about how Facebook users behave. All across the web and so Facebook absorbs all that data and they can use it in two ways they can actually sell ads on. Properties other than their own and both Facebook and Google do this so they sell ads off of their their endemic properties and Those ads are highly targeted just like on their endemic properties, and they’re targeted using this third-party cookie metaphor. But then also Facebook is collecting a bunch of data that they put into their machine learning models and learn more, how customers behave and what their propensity to buy and do certain things is so one of Facebook’s most popular. Add products is this thing called a look-alike audience and so essentially you go to Facebook and you say. I’ve got a thousand customers it gets Biffy that are my most valuable customers. [15:58] And I would like to buy ads that get shown to people that are exactly like those customers. And Facebook says great give me their email addresses and they look at the you you hand them your email addresses for your thousand favorite customers and they use a. Super secret Black Box algorithm of machine learning that they run that through they find those users which they likely already know those users to through all of these these various Network touch points. And then they say what similarities do they have with the other billion users we have on Facebook and they. They find you a gentleman we 50,000 more customers that are probably pretty similar to your thousand best customers and then they run a really expensive auction to get you to buy. Ads targeting those those customers and so even if that ad shows up on Facebook and they didn’t need a third party ad to show that a third-party cookie to show that ad. They relied on a lot of data they collected from third-party cookies in order to build that look-alike audience in the first place. Scot: [17:05] Got it so when I say give me a look like audience they’re not just saying okay it’s you know females that are 22 to 40 their the demographic they’re saying and they also go to these websites and they also you know, login to so there that 3p data the third party cookie the first party stuff they know already like what you’re doing on Facebook but they’re also tracking all that off Facebook activity and that helps them build a better profile. Jason: [17:32] Exactly so like like a dumb or programmatic at is to just Target the ad based on the demographic or psychographic I want to. Buy ads for people that live within you know in a geography where gets biffy’s offered right I don’t want to waste money running ads and geographies in the few geographies where there’s not a good spiffy yet, so that that makes sense as an ad that super simple it’s just a kind of a hard rule show that in these zip codes not in these zip codes, um but maybe you know people in a certain age range or certain gender have a better propensity or or even a certain income bracket or something like that you know you can, you can Target based on all these apps are Buttes and and most of these at networks offer hundreds of demographic and psychographic attributes, but the look-alike audience is even fancier than that they they won’t tell you what goes into the look like audience. It’s more likely to yield customers, that behave the same way as the customers you give them then just a demographic or psychographic profile would get you. Scot: [18:37] Got it. Okay so that’s good setup so third-party cookies are under assault and we have you talked about idfa it so Along Comes This idfa and this is kind of like step I don’t know six to ten somewhere in there of a multi-step Journey where you know more and more privacy issues or initiatives are limiting, not only cookies but any tracking so maybe give us a little background on these these these other things that have kind of led to idfa. Jason: [19:09] So so again I’m trying to avoid the acronym soup idfa is a. Is an acronym from Apple and it’s called the Apple identifier for advertisers. And the this is something that’s specific to mobile apps in the way to think of this is It’s a, a unique serial number for every mobile device that has Apple. Apple’s operating system so some people like to call this like a nice metaphor for this is It’s a digital license plate so that see you know people can identify. Your car uniquely when it when it drives drives through the mobile echo system, um the of course your device has a unique number on the modem called the MAC address which is the actual leg serial number of your modem and you have a unique number from the wireless carrier, um so but those numbers it’s been illegal for for. App developers to use for a while like the because of privacy concerns and so and so the idfa was invented so the Apple would have a unique number for every user the advertisers could use and marketers could use. But that a user could change or delete or opt out of if they wanted to write like you can’t delete your your modem serial number which is why I advertised are not allowed to use that but you can and have been able to for a long time. [20:37] Opt out of having your idfa be public so by default your idea phase public everyone can see it you can in fact opt-out and and, allegedly about 30 percent of Apple users opt out of idfa so so today about 30% of users already have turned this off, um but they had to know how to dig into the Apple settings and turn it off, it said the big change that Apple’s talking about is instead of making idfa opt-out they’re going to make it opt-in which means everyone that wants to use the idfa in their mobile apps is going to have to, explicitly as your permission before they do that and I know you have some questions but side note. There’s a an exact equivalent that Google offers for the Android operating system. And it’s called Google Play service ID for Android which you’ll hear This Acronym way last but it’s it’s GPS a d ID so. Apple and Google each have a yeah digital license plate and Apple has some time last year Apple announced that, sometime this year and probably March or April is the the latest date they’re going to Pivot to from opt out of that digital license plate to opt-in for that digital license plate. Scot: [22:06] So that means on my so they recently did a change on my iPhone where you know I would, the default was you would share your your your location for example the GPS and then it got like. Now for example it will very occasionally pop up and say hey this apps tracking where you are do you want to allow that never just while it’s running or always so is that going to be what the user experience is down the road I’m going to some I’ll be using an app and it will say hey this app is tracking you do you want to allow it or not is is that kind of what. Jason: [22:44] So if you were starting in in iOS from scratch you buy the new device you and you install that you know from scratch, every time you installed an app that wanted access to your your digital license plate your idfa, um a a requester would come up saying this app intends to do x y and z. Do you allow tracking or not allow tracking and there’s some controversy over that language so we could talk about that later if you want, um so that’s how it would work on a go-forward basis but as you pointed out, you likely already have a phone that has hundreds of apps installed on it and you’re likely going to upgrade to this new variant of Apple’s IOS 14 when it comes out, and and you have a bunch of apps where you by default already opted into idfa so the way Apple handles that is over some short grace period, every time you try to use one of those apps, it’s going to reconfirm that you’re still okay with idfa being turned on by popping up this requester and saying, Facebook has been tracking you across all the mobile apps you use on the website do you want to continue to allow them to track or do you want to disallow it. Scot: [23:59] Got it okay so just to reorient a lot of the cookie stuff is really kind of browser-based a lot of this this idfa and these these little digital license plate you things they’re more app-based but they’re both under pressure and the idfa is essentially the same as getting rid of third-party cookies but. Way abstract use that is that a. Jason: [24:21] For iOS yes. Scot: [24:22] Fireless got it and this is this is material because you know we see these stats all the time that you know over half of e-commerce you know transactions now I guess our mobile and more than 60 70 percent of traffic is mobile and then you know iOS is something like 60 70 % of e-commerce for some reason it over index is even though you know there that’s about I think, Android has higher market share iOS has higher e-commerce share is that. Jason: [24:54] In general worldwide shares about 50/50, between Android and Apple but Apple users 10 in a variety of ways to spend more money so from a consumer standpoint they’re more valuable. Scot: [25:10] Got it and then I think you said it in there but this is going to come out in Spring of 2021 it’s going to be a part of a new 14 iOS 14 release, I heard today someone say end of March so maybe that’s maybe it’s coming pretty soon. Jason: [25:26] Yeah it’s the beta is out so this Behavior like developers and even if you’re not a developer I think you can now install there’s an open version of this beta so it’s just a matter of when they push it and they haven’t announced the exact push date but it’s you know given that, that it’s in open Beta right now it can’t it’s not going to be too long. Scot: [25:48] Yes so our listeners are out there and hopefully they’ve stuck through this and so they’re kind of thinking what’s this mean for me. So number one third party cookies a lot of them rely on that but then number two a lot of us in the e-commerce ecosystem and. Full disclosure this is true it’s Biffy. You know it seems like the Google type of AD spend will still work pretty well because you got your keyword and all that stuff’s pretty linear if you will. But it seems like this could really break Facebook because Facebook so you know, Facebook’s largest shares through the app there’s some bazillion people logged into that app all the time every day doing a lot of activity and when I say Facebook I’m including Instagram in the whole family there and you know so now. Now either Facebook won’t be able to track, totally or there they will be hobbled because they’re no longer able to use a bunch of other data so seems like this will decrease the efficacy of e-commerce people that are using Facebook as a channel is that, is that kind of how it all ties together. Jason: [26:56] Potentially I think it’s definitely fair to say that Facebook is kind of that odd man out in all these games right because essentially we haven’t really. Explicitly said this but there’s there’s this interesting conflict between two popular Trends right right, there’s a there’s a popular privacy Trend in the world where users are saying we should have more privacy and big corporations shouldn’t be allowed to do a bunch of stuff with our data and monetize us without our permission right so there’s kind of you know a lot of laws that have been passed in California and Europe that you know kind of impact how we all do business on the web that are more privacy Centric and so you, um and Google Apple and Facebook have all been sued, um for violations of these privacy laws right and and some of the things they’ve explicitly been sued for are these mechanisms like third-party cookies and idfa advertising, and so one way to avoid getting sued is to, make these more privacy Centric changes right and so you know if you asked them if you ask Google and and apple why they’re making these changes it’s because. Because users want privacy and we don’t think that you know these things are the right thing to do would be there kind of. Like not completely credible self-serving. Scot: [28:17] Yeah they want to know legislations coming and they’ve kind of want to get in front of it like you can either you can be legislated or you can solve. Jason: [28:24] And that is for sure the talking point and that it has the added advantage of being at least partially true right, but the the second huge Trend in the world the I know is your favorite topic of all times is antitrust right and, like are there certain companies that have this monopolistic power and they’re so powerful that they can do things that aren’t in a, in a consumers best interest and there are a lot of people that accuse. [28:52] Apple and Google of using their their alleged Monopoly power, in in this privacy dispute right right because for example, Google the main Google ad product is buying ads that show up in search results on Google right and those are not impacted by any of the changes we just talked about right if you type Lexus into a search term, Google can show you a Lexus ad and they make a fortune. [29:24] Doing that right and so they’re they’re collecting unique information about Scott searches and. Selling ads to advertisers based on your search Behavior, um what they’re what they’re saying is other people shouldn’t be allowed to do that using web browsing behavior in the same way we do it for search Behavior right and, um a lot of people would say Google built this huge business they that business enabled them to get a ton of traffic and now that they have a ton of traffic and users are locked into their echo system, now they’re making it way harder for anyone else to come behind them and do what they did right. Apple equally like one of the kind of Nefarious things and all this is Apple, sells ads you can buy an ad in the App Store. Shows up in search to try to entice users to install your mobile app that you then make money on right and, the number one place you’re competing with for that ad is an ad on Facebook to get you to install an, and so what is Apple doing they’re making it way harder for Facebook to sell an ad to get you to install an app but it’s exactly. [30:39] Equal I mean it’s exactly as easy as it’s always been for Apple to sell you that ad and so, the there’s this weird conflict between antitrust and privacy and apple and. Google are both rapping their themselves in the flags of privacy and potentially getting a little more smelly an antitrust, and Facebook is the odd man out here right because, privacy is controlled by the echo system the browser echo system in the mobile app ecosystem right so Google is the big winner because they have a mobile app and a browser the biggest browser, um Apple has the most valuable mobile ecosystem Facebook has neither right so they’ve been a huge beneficiary of, of programmatic ads and tracking consumers to create better add products and monetizing their customer base and now they’re their Destiny is the least in their own hands because, all of that data you know is is going through these these doors that are controlled by. By their there sometimes Rivals Apple and Google and so you know one way I like to talk about this. These companies built these huge businesses and they’re trying to make it harder for people to follow in their footsteps it’s kind of like they climbed up a really tall ladder and now that they’re the top of the hill they’re pulling up the ladder behind them so that no one can follow them. Scot: [32:07] Yes so Apple and Google or winners in this because they just control so much and then Facebook is going to be under pressure but there. Ginormous so they’ll be fine but it’s you know there’s an argument to be made it will stifle innovation in this this whole world because you know it’s going to get it almost impossible for another ecosystem to be born at this point because the new rules favor the the existing folks. Jason: [32:33] Yeah so the way they think of that is definitely Facebook is a loser compared to Apple and Google in these changes but the only compared to those two compared to anyone else, Facebook has this huge Advantage because they have a ton of their own users and they still get to collect first-party data about their own users when they’re on. Facebook great so so a way bigger loser would be Conde Nast like someone that produces content and tries to monetize that content through ads, the doesn’t have near the user base that Facebook has right so all of these content publishers. Get more hurt by this than Facebook does and who gets more hurt than any of them is, some new startup content Venture that that you know is going to be born tomorrow and it’s going to be much harder for them to build their business than it was the incumbents. Scot: [33:23] Because the Publishers are almost all getting the optimization of their ads through either an app kind of a thing like we’ve talked about or through third-party cookies so they’re getting kind of the effectively ad-supported content is going to be under a ton of pressure. Jason: [33:38] Exactly and and that’s particularly where yeah the third party cookies come in is the. A lot of the ads you see on all those Publishers are placed by Google or Facebook using these look like audiences and and the third party cookies so that’s one of the. The services that gets be diminished, as third party cookies are less popular and increasingly people are consuming a lot of content and news through mobile apps, so they would use the idfa to do those same services and and so the all of those things are breaking if if you were a mobile app. Um that that monetized yourself by selling ads in your mobile app as many games for example do. It’s the ads you can sell are going to be way less valuable after idfa is opt-in than they are today and so like yeah. Scot: [34:33] Yeah how about user behavior let’s say I’m Best Buy and I have an app out there and I’ve got all this cool tracking where you know. Maybe log in and out who you are but maybe you don’t log in and I try to do some personalization or something or even I have a little ad Network inside of there what’s going to broke break in the Best Buy app if someone this idfa thing goes into effect I get that question and the way they’re working the question it’s essentially like you know do you want to sell your soul to the devil yes or no so so I assume a lot of people are going to say no do you have a point of view on how many people will say yes or no. Jason: [35:07] Yeah so it’s all speculation and in the beta the the language has changed a bunch of times and so how, the language matters a lot in the likelihood of opting in, um so for example like same question it’s the same idfa question if I say this website uses your behavior across the web to improve your customer experience can I continue, um [35:34] A lot of people will say sure but if the if the question says this website tracks you across a bunch of other websites and uses that to sell ads to you. Um Can can they continue to track the way you’re going to say no it’s. So so the vernacular matters a lot it started out in these betas more friendly and it’s getting more overt. I don’t think that that we’ve landed on the final language I actually do believe that in the release the Publishers going to be able to make a case for why you should opt in so I think they’re going to be able to provide some of the language, but the text on the button they don’t get to control and the text on the button right now is pretty negative it says. Wow to track it doesn’t say like enable experience or anything like that it says like allowed attract and viscerally people don’t want to get trapped, so today the estimates are that about seventy percent of people have idfa turned on because you, it’s opt out you’d have to opt out to not do it the. [36:49] The speculation is that only 10 or 15 percent of users will click allow to track now. Some of that is Chicken Little saying the the sky is falling right like Facebook is saying no one’s going to opt into that, because they’re arguing in favor of changing it and not doing it right and so they’re trying to paint the most dire version of this for now I don’t know if they really believe that diversion or not but that that that’s kind of the order of magnitude we could go from. Fifteen percent of the mobile apps having users that are identified or 70% having apps that are identifiable to 10. Scot: [37:28] Got it okay back to my Best by example sorry so so now I’m Best Buy I’ve spent billions of dollars in this awesome app and yeah I pop up this thing that says hey we’re going to try to offer you a custom experience and then the button says allow tracking then you know most people say no what’s going to happen to my Best Buy up like what’s you know what am I going to lose as the retailer. Jason: [37:51] Yeah so the in the app a couple of things like you. You there maybe retargeting app ads in some mobile apps right so maybe you read The Wall Street Journal in a mobile app. Maybe you read it through Apple news feed or you read it through Google news or some other app, um their best by may have popped up a retargeting add-on that in that mobile app when it sees that you had a Sony PlayStation 5 in your box and they finally got them back in stock. Hypothetical because I know they don’t have any the. So the their ability to do those retargeting ads in other apps goes away the, but the bigger deal I would argue for retailers and their mobile apps is, the the amount of insight they get about their users goes away right so at the moment when your opted in and you’ve installed the Best Buy app on your phone Best Buy can use that idfa to see what other apps you run, and so they can build. [39:04] Profiles of you that they put in their customer database what they would call their CDP their customer data profile, that you know say hey Scott is a Best Buy Rewards member he has the Best Buy Mobile app installed and we also know that he spends an awful lot of time in Pokemon. [39:23] And so that they may find other hypothetically speaking of course, and so they may find that like oh there are other other people in Scotts age bracket that are also rewards members and and spend a lot of time in Pokemon do this and so. They could use that in a whole variety of ways so it gives them, less visibility about their users I would argue that the third-party cookie changes more material for a wholesale retailer like Best Buy than the idfa changes because just to be honest. Outside of a few retailers it’s a very small percentage of a Retailer’s traffic comes through a mobile app retailers haven’t been super successful at getting. Getting their mobile app used but if you’re a publisher and particularly if you’re a gain in the game industry, um the or if you’re in advertising and particularly if you’re advertising for installation and mobile apps those are all the. The segments that are likely to get most wall up by idfa. Scot: [40:29] Cool that is a good segue because it wouldn’t be a Jason Scott show if we didn’t talk about Amazon. So Amazon is the one retailer you know you and I are we get a lot of the data and when you look at the comps core data their app is kind of in the pole position it’s always the highest use retail app they’ve said, think publicly that you know over half of their volume comes from the Apple app or the Amazon App what’s the impact to Amazon on both the app side and then also if they lose this third-party cookie thing what happens to Amazon. Jason: [41:06] So there are negatives for Amazon in both, so again because they have way more mobile app users then than others they get to they’ll lose some insight that they’re gaining right now about a big chunk of their customer base, um they do run a bunch of ads all over the Internet and so they’ll have a little less visibility about how those customers are behaving on on third-party sites but, all of that is outweighed by the fact that. It actually makes buying an ad from Amazon way more valuable right so when when. The idfa and the third party cookies are really about. Um using behavior on one property to Target a user on another property, and fundamentally when that practice goes away then the best advertisers are going to be the ones that have the most eyeballs on their own properties, and the the cust the companies that know the most about those users about those eyeballs right and so you think about. Scot: [42:22] And they have ads inside their property to it. Jason: [42:24] Exactly and exactly so those those are called first-party ads and like they’re not affected by any of these changes so Amazon can still use. Every browsing behavior and purchase Behavior you’ve ever done in the Amazon Echo System on their website or their app too. [42:43] Run their own ads to you when you’re on an Amazon property or run any other advertiser’s ads for you while they’re on their own property right and so what happens is, when the the open internet becomes harder to advertise on because of all these changes. Um you’re more likely to want to buy ads in a Walled Garden where the ad network has a bunch of data about their users so you’re more likely to buy an ad that shows up on Facebook. For Facebook users you’re more likely to buy a search ad on Google in their first party echo system and you’re way more likely to buy an ad on Amazon, because you’re your ability to do cross-site advertising on Conde Nast content sites gets diminished so. I would I would argue that well there’s some I’m sure there’s some negatives for an Amazon and some annoyances net-net, it’s going to dry consolidate more advertising on to Amazon and and help them more to a lesser extent, it actually makes it more appealing for other very large retailers to lean into their own advertising networks for that same reason so I would also argue, Walmart for example is a beneficiary, of this trend and you and we’ve seen them in the last year making huge investments in selling selling their ads they’re not as successful as Amazon. [44:07] Their upside is actually as big or bigger than Amazon because they can also sell ads and now do, two customers that walk in a Walmart store they show ads on the self-service checkout and they show ads on the TV wall and you can buy programmatic ads and all of those things through Walmart connect which is kind of their version of, Amazon marketing. Scot: [44:31] Publisher thing was interesting because it almost made me think well if I’m Amazon I go to Conde Nast and say Let me let me host your content and I can actually, monetize it for you and you know I know Google and you know to some extent Facebook do that through that that accelerator you thing what does that three letter acronym for it where they do it because they claim it’s faster right. But I wonder if you think you think that’s going to be part of what this does is it starts. Jason: [45:00] It does it gives them leverage to keep more users on their echo system and it potentially Force other people to, Syndicate experiences and content to them that otherwise might not want to do that right and so, for sure like Amazon is a significant Publishers you know like they have their own you know the wildly popular TV channel and am in Prime video, and now they’re doing live streaming video and they’re doing all these these and twitch that they already are a publisher so it’s it’ll be Supernatural for them too, to leverage this endemic Advantage the another Super interesting impact along those same lines is, today Facebook was perfectly happy to run an ad on its Network and then send you to a Shopify site to buy something. [45:51] Right because they using third-party cookies they could actually know that you bought that thing on on the Shopify site and tell that Advertiser that they had worked, um and and they had a nice little Echo System well with third-party cookies going away it’s actually way better for Facebook to say you know what we should be selling stuff on Facebook and so in in my mind. Increases the priority on Facebook to capture the Commerce activity, on their platform because otherwise they look at Amazon catch nipping at their heels and saying oh my God Amazon’s running a lot more about their their consumers in their Walled Garden and we are in our Walled Garden and we’re going to keep leaking advertisers from Facebook to Amazon and so I think. Facebook had already figured this out but I think this like really accelerates Facebook’s need to win endemic Commerce and I would argue in the long run, that’s that’s not super favorable to Shopify because there’s a ton of the D to see companies that, that have been most successful on Shopify like their primary source of traffic is buying ads on Facebook and increasingly Facebook is going to want to say hey let’s close those sales on Facebook. Scot: [47:04] Yes one of the reasons I really want to talk about this because I started to read some articles that are. And I can’t tell how Chicken Little they are but they’re essentially saying you know look a big chunk of the Shopify world is going to be the attacked so supervised getting attacked from Amazon we’ve talked generally you know we’ve talked about this and you and I have different opinions of how, how that’s going to happen but I think I think we all agree that Amazon has Shopify in their sights but now you have effectively Facebook’s been a good partner for Shopify, but this change caused by Apple has a domino effect that if I’m now Facebook I want to cut Shopify out of that because I want to own the checkout so that’s another side and then you know. Some large percentage of Shopify sales are driven through these DMV bees and these brands that are by influencers that are really living off of either the third-party cookie to track that stuff, or the you know the idfa changes it’s an app it’s going to change pretty dramatically is there a way to. First of all do you agree with that and then second you know is this a 2% thing is this like half of half of Shopify I know they don’t disclose it but I’m just kind of wondering. Jason: [48:21] Yeah I don’t think there’s any way. Scot: [48:22] Scale of them packed. Jason: [48:23] For really know and and again like this I think the. The force behavioral changes are going to be pretty significant, whether that Force Behavior change like really Wallop Shopify or not I think is even harder to predict and like again at the moment like everybody’s crying pop or right and it’s a little bit like, everybody who’s under antitrust investigation you know says oh my gosh if we’re forced to split up like it’s going to be the worst outcome for consumers ever, um and internally they may or may not really believe that but they want to paint the most dire picture so that you know they can mitigate what happens to them, a lot of that’s happening right now right so I you know Facebook is saying hey an individual advertisers ad Effectiveness might go down by 50% because of this change. So Scot: [49:16] But it’s Amplified because they’re trying to make the same worsens. Jason: [49:19] Yeah but they’re they are painting the worst-case pit picture and what they really mean is, a Facebook ad that’s not on Facebook right which is like seven percent of Facebook sad so, so seven percent of their ads might go down by 50% and but the as they’re on Facebook might be a little less effective because Facebook gets a little less data but it’s probably not as bad so. I think it’s hard. Um quantify these things but I do think it’s it’s potentially in a hate to use this word but like I think it potentially is a paradigm shift for some of these things and just just. Scot: [49:57] A paradigm shift we need an audio for paradigm shift. Jason: [50:00] Yeah we’ll have to get one of those but I do I think fundamentally like you have this open web and there’s this like notion of, of interoperability between multiple sites and experiences across multiple sites and and as these privacy changes get locked down essentially what it does is it says. The best most effective experiences are going to be, for users inside of a Walled Garden and an inside of a large well-established wild garden the got built before these changes were implemented so it’s really favorable to the incumbents, it’s really favorable to the the kind of fang. Um guys of you will and I and you know they were already winning but I do think this this makes it harder to imagine. You know some some new version of Instagram emerging and growing really big really fast or Tick Tock you know or you know monetizing as quickly or any of those kinds of things so. It’s. Scot: [51:00] Do you think it’ll be like a severe enough that like it’s interesting you mentioned Fang because the in and Fang is Netflix and you know they have a massive amount of first-party data right so you know are they going to add like some publisher e kinds of things because they have all this data. Jason: [51:15] I bet you they are all all of the good walled Gardens are right now saying hey some of that money that’s getting broken that was out in the rest of the internet like how do I get you know it’s more than my fair share of that. Scot: [51:27] Right so we got some good stock picks from Jason straight away here. Jason: [51:33] Yeah yeah side side out yeah I’m the world’s worst stock picker. Scot: [51:39] Don’t take Financial advice from a chief digital retail idfa officer. Jason: [51:44] Yeah you probably shouldn’t even take like digital Commerce advice from you for sure should not take stock advice. Scot: [51:50] But here you are listening this show okay. Jason: [51:52] I put all my money and get spiffy franchises. Scot: [51:55] Awesome summer okay where do we go from here so I think that’s all interesting but let’s project forward a little bit you know cookies they’re kind of on their deathbed mobile app tracking is all this. Open internet going to more clothes internet what were some of the Alternatives that are people and then I saw Google also just announced not only at the Chrome level but just generally they’re going to get rid of. Tracking old school tracking. But then they talked about this new thing which is kind of like some machine learning thing will just kind of assign you it was even keep your like because the machine will just decide. Jason: [52:28] Yeah it has an awesome acronym but I’ll wait to unveil it for a. Scot: [52:31] Okay alright where do we go from here and be sure to highlight all the awesome acronyms. Jason: [52:36] Yeah so there’s a couple of alternatives to cookies right like so what. The fundamentally the cookie got processed in a server and so what Google is saying is we think I’m more privacy Centric way is, to keep all the personal data on the on the browser and never send it to the server so so a lot of these ships are too kind of move from server based solutions to browser-based Solutions, um the and I’ll come back to Google specific alternative in a minute as we already talked about like what this does a ton is push people onto walled Gardens for all of these highly targeted advertising networks because they get to all. Um work with their first party data and nothing really changes. [53:21] There are a bunch of third parties that have what I like to call real ID systems and so. Side note cookies always suck they were they were highly imperfect we treated them like they were a person but they weren’t they were a, a specific browser and a lot of people ran three browsers on their laptop and then they also had a different browser on their mobile device, and oh by the way they may have set cookies to get deleted every two weeks or whatever like so cookies were pretty broken before and could only track you on the web, so the big evil marketing Geniuses would say, hey let’s make our own serial number for Scot wingo and let’s collect a ton of data about him, um across all of his devices and let’s by data from the Publishers about how he behaves on the publisher site and let’s buy data from the credit card companies about how he spends money and we can build this huge. Um database about Scot Wingo not some random cookie but about Scot wingo and then we can use that data to Target Scott so, said the big evil ad tech companies have have these real ID systems and so. [54:33] There’s a company called trade desk that has the unified ID they’re partnering with Walmart now live ramp is a big data provider and they have this authenticated traffic solution, and my evil corporate overlords own a huge data provider called Epsilon and we have a product called core ID so so a lot of us are saying hey we have a better idea system then, then idfa or third-party cookies anyway and and side note Google, published a letter last week saying we think like we’re not going to ban those approaches but we don’t think those approaches are very customer privacy Centric and we don’t like them, so there now is a dispute about the future of those but that you can buy those services from from any of these marketing agencies. In the short run they’re certainly going to benefit from the these more popular options going away. [55:31] A lot of people used to do what’s called browser fingerprinting which is they used a lot of signals from your browser to identify you without your cookies that’s mostly been banned by privacy laws so we won’t see a lot of that. Um there’s increasingly this thing called clean rooms where a publisher and an advertising Network might bring their their uniquely personally identifiable data together too, too kind of a, a safe room that’s not on the internet and temporarily merge their data to build a targeting cohort or to build some some cross-channel analytics take the insight and then both take their data and leave so that they never kind of. Give the other party a chance to see your steal their data but they get to marry their data temporarily so so there’s a lot of products kind of, that are leveraging these clean rooms to do kind of batch processing now that we can’t do this real-time third party cookies and then the. The the Google approach is to do what we what I would generally call cohorts so instead of saying hey we’re going to advertise uniquely to Scot Wingo because we know he’s a car Enthusiast and we’re going to show him Alexis. [56:42] Google is going to build a cohort of people that it thinks are in the cars. And it’s not gonna put that cohort on a server it’s going to put a store your membership in that cohort on your browser, so an ad can pop up for Scott that’s a car ad in the car company can buy an ad for just people that have a high affinity for cars. [57:05] The. No personally identifiable information about Scott ever get sent to a server only Scott’s browser knows to show him that ad and so Google calls this kind of browser-based cohort, um a Federated learning of cohorts and they’re using machine learning to build them and so that the that F loc is an acronym flock f f loc and so Google’s, official replacement for third-party cookies is the advertisers can buy, ads based on on these these machine learning Black Box generated machine learning cohorts called flock. Scot: [57:50] Okay Federated learning of coal that just rolls right up I like Flock better than Federated learning of many. Jason: [57:58] The idea is just that like hey there’s going to be some taxonomy on your browser and there’s going to be a checkbox next to things that your browser thinks you’re interested in, and then those are the things that you know they’re going to be like ads that only trigger when when your browser has one of those boxes. Scot: [58:17] Got it okay awesome, so as is our custom at the Jason Scott show we’re kind of getting past time but and you’ve talked about a lot of implications but it’s probably a good kind of summary to kind of walk through all right you know so listeners out there they are they’re loving the Deep dive what’s this mean for e-commerce world and then also the larger add world and the internet. Jason: [58:42] Well so I think it is likely that a lot of digital ads a lot of programmatic digital ads are likely to be. Either a little or a lot less effective than they were before and so the net impact of that is the amount that an Advertiser should be willing to pay for one of those ads should go down so the. So CPM rates for advertisers will go down and in general what that means is if you built your business based on selling ads you gave away your game for free but you show Dads in the, in that game you gave away your content for free on your new site but you sold ads in that content. [59:21] That ad based business model is less attractive than it used to be so I suspect, that one impact we’re going to see is a lot of people are going to Pivot from ad based business models to Alternatives right so that meat might mean. [59:36] Some newspapers that were on the fence about ad-based or pay walls are more likely to move to pay walls because, the ad model Works glass it means a lot of people that use Dad’s to find you and sell you one thing I’m more likely to focus on. Customer lifetime value they’re more likely to want to sell you a subscription they’re more likely to want to lock you into a platform because all of these kind of, one-time ad-based sales are just more expensive less effective than they used to be so I think those are kind of some of the, the key changes I do think this cleanroom thing you know continues to grow and overall the big winners are the people that have the most first-party data have the most traffic to their own property so the walled Gardens the the big retailers, ten to win. You know I think this privacy versus antitrust thing is gonna you know get really ugly and play out in terms in all kinds of governmental actions and legislative actions and things and who knows how any of that, that plays out. And I doubt Facebook gets creamed by any of this but they you know they do probably slightly lose to Apple and Google and all these changes. Scot: [1:00:56] Well it is happened again we’ve used up all our allotted time for listeners that are with us and and enjoying these deep Dives we would love to get your review, you know the the best place to review this is over on iOS in the Apple podcast listener so even if you listen somewhere else head over there leave us a review we would really appreciate that if you like this kind of content that’s what keeps us going Jason appreciate having you on the show this week if people want to track you on the internet or learn more about this this idfa topic work in the where would you send them. Jason: [1:01:34] Yeah well they should listen to the Jason and Scott Show podcast first and foremost but you know you can also always find me on Twitter under under retailgeek and, just a quick disclaimer the Jason Scott showed doesn’t track you or know you in any way and never will so. Exactly so we but we sure do appreciate you listening and until next time happy Commercing.