Is there a conflict haunting browser ad models?

I’m Alan Chapell. I’ve been working at the intersection of privacy, competition and advertising law for decades and I’m now writing for The Monopoly Report. If you have a tip or story idea you want to share in confidence, ping me at my last name at G-mail. Check out our latest Monopoly Report podcast with Megan Gray of Gray Matters where we talk about the TikTok ban.

Browser 2.0

Last week, I wrote about the history of Do Not Track in order to place the current browser and ad marketplaces into historical context. At the end of the piece, I asked you to keep the following in mind:

• Historically, browsers have been philosophically aligned with privacy advocates – but when the browser is owned by big tech company with a robust ads business, tensions have ensued.

• Browsers have pushed back on anything they felt would get in the way of their relationship with their users - and don’t want anyone telling them what features to offer and how to present those features.

• One person’s “tracking” is another person’s “personalization”.

• Economics sometimes play a bigger role in privacy discussions than some might have us believe.

This week, I’m writing about how the browsers may need to re-invent themselves, how they might go about that re-invention, and the headwinds they’ll face in part due to the very issues I’ve cited above.

The End of the Browser Subsidy?

One of the takeaways from the Google search antitrust trial was revelation of the massive payments that Google makes to perpetuate its monopoly in search. In addition to the billions per year payment to Apple, Google also reportedly pays big money to Mozilla and Opera. While there’s certainly a debate to be had when it comes to remedies in Google’s antitrust cases, there’s a consensus that at least part of the remedies will include a reduction if not cessation of those payments. And while that might be helpful in terms of curbing Google’s monopoly practices, it is also likely to create a revenue shortfall for many of the above browsers - including Chrome if Google’s browser is spun out of Google as some are predicting.

And that revenue shortfall will need to be made up somehow.

How can browsers survive a revenue gap?

First, I want to acknowledge that the revenue shortfall described above won’t hit every browser in the same way. There are a couple of schools of thought when it comes to browsers operating without the benefit of the Google subsidy:

• Turn browsers into public utilities - Some (including Ari Paparo and Randall Rothenberg) have suggested that browsers’ unique role as user agent means that they should be regulated like electricity or water utilities. Presumably, this would keep browsers free to serve the interests of their users without the distraction of worrying about chasing revenue opportunities. It’s an interesting idea for sure - although one could argue that such a highly regulated approach wouldn’t necessarily encourage competition or innovation over the long term. It would be fun to imagine co-hosting an annual PBS / Chrome pledge drive with Adtech God. #DareToDream.

• Browsers license out Ad IDs as standard identifiers - Years ago, the ad tech community asked browsers to create pseudonymous user IDs as a cookie replacement which was sort of analogous to both pre-ATT IDFA in iOS or the mythical X-client ID in Chrome. Leaving aside any legal issues, browsers have historically had trouble stomaching cross-context behavioral advertising - making this type of request a non-starter. Will some of the browsers rethink this? I don’t know. But I will point you to something similar coming out of the EU. Familiarize yourself with Utiq - a joint venture backed by a number of EU telcos. They offer an pseudonymous ad identifier that has received the blessing of EU regulators. (Imagine that…. an EU company that facilitates cross-site tracking being approved by EU regulators.) I recognize that telcos have not exactly enjoyed long-term success in the ad tech space, but I find Utiq intriguing.

• Strangle your browser’s functionality so few(er) consumers will want to use it - This is more of an indirect revenue strategy, but seems to be Apple’s approach on iOS. Offer a browser experience that allegedly offers limited functionality so that you push everyone towards the app ecosystem that you own, control, and are solely able to monetize. And then force the other browsers in iOS to use your Webkit browser engine so that they can’t create a better experience. (Kudos to the EU for pushing back on Apple here.)

• Browsers as walled garden ad platforms - This seems to be the model that is most likely to emerge. Brave and DuckDuckGo already leverage ad models, and Mozilla continues to invest in advertising and measurement as demonstrated by its purchase of Anonym. Microsoft just made a big announcement re: their Ad Selection API. And don’t forget; the Privacy Sandbox doesn’t seem to be going anywhere. (Some interesting back and forth on Google’s approach to the Sandbox is available here).

And now we get to the heart of the matter - what happens if browsers go all-in on advertising?

The browser’s dilemma - can they serve consumers AND advertisers?

Color me skeptical. I’m not saying that it can’t be done, but I do think that trying to serve two masters can get very complicated - kind of like trading on both sides of an exchange that you also own. It might be even more difficult for browsers given their collective stance on consumer privacy and protecting their users. A browser will certainly be tempted to view its ad products as valuable “personalization” and everyone else’s as “horrible tracking”. Apple has perfected this way of thinking (albeit in iOS). But they aren’t the only company with a browser which makes value judgements that could be seen as self-serving. A few examples:

Using your browser to favor one product over another product. Back in April of 2023, Google quietly updated the cookie settings page in Chrome version 112 to remove the option to block all cookies. The Chrome cookie toggle previously allowed users to block both first and third-party cookies. But starting with Chrome version 112, only third-party cookies can be blocked in Chrome. One might view this as an example of Google preferencing its O&O properties over the third-party network business (i.e., the one that Google seems most willing to spin out as part of an antitrust settlement). This is particularly noteworthy given that there’s research which suggests that Google and other tech giants will be able to maintain almost all of their footprint in Chrome once TPC’s are deprecated.

Preferencing your tool(s) via default settings. When Mozilla launched privacy preserving attribution (PPA), they turned it on by default. In other words, Mozilla made a value judgement that that their PPA product is “privacy safe” while outside third-party targeting and measurement solutions that use TPC are not. I don’t want to start a debate on PPA - for all I know, Mozilla may very well be correct in their assessment. My point here is that over time, the pressures to increase revenues may make these types of evaluations more thorny. And in any event, just the decision to turn PPA on by default has created friction with privacy advocates and potential legal issues that Mozilla seemingly failed to anticipate. (More on that next week.)

Preferencing your tech stack over someone else’s tech stack. You might be thinking - yeah, whatever. Every walled garden makes judgments regarding what it will and will not allow. How might this trend impact me? Here’s a potential example that hits closer to home. HYPOTHETICALLY, what if the Microsoft Edge browser started treating Xandr cookies differently from other third-party cookies? For example, what if MSFT Edge tracking protection defaults carried an automatic exception for Xandr and other MSFT domains which had the effect of auto-blocking non-MSFT domains? I’m not saying that Microsoft would take those steps, but what if they did? Would it be OK for Microsoft to place a different value judgement on its third-party cookies than other third-party cookies? In my view, that would be odd at best - and potentially, anti-competitive. The impact of that type of policy decision would mean that if you want to reach Microsoft Edge Users, you’d need to use Xandr as your ad platform. That seems less than ideal.

What are the implications of all this?

Apologies if it feels like I’m dragging things out. But at least you’re not paying me by the hour.

This week, I made the case that some browsers could suffer a revenue hit as a result of the imposition of antitrust remedies on Google, and that those revenue pressures may create a conflict of interest for browsers as they chase ad dollars. Next week, I’ll walk through the potential ramification of that conflict.

Alan’s Hot Takes…

Here are a few stories that struck me over the past week:

• What are we solving for in a post-cookie world? - It’s been five years since Google announced the deprecation of TPC in Chrome. Might be time for a mini-report card on the various solutions being developed. We put together a chart (see below) comparing a few solutions in terms of privacy and utility that received interesting feedback from many of you. And AdTechGod put out a survey looking for insights from the industry re: the various solutions. Cast your vote today. But I’m still grappling with a key question: what problems are we trying to solve here? Seems like I get a different answer depending on who I ask.

• Advocates used precise location data to track a device to an abortion clinic – This article from 404 Media outlines how easy it is for advocates (and potentially, law enforcement) to track a mobile device from Alabama (where abortion is illegal) to Florida (where abortion is currently restricted but still legal). The precise location space needs some tough love - look for a pod on this topic soon.

• Manipulating search results via Reddit - Redditors have reportedly begun to write fake reviews to trick Google’s AI Overview into recommending the chain “Angus Steakhouse” in London in order to drive long lines of tourists away from their favorite local steakhouses. (Sean Harvey for the win).

• Pinterest receives GDPR complaint; LinkedIn fined €310 million - The “legal basis for targeted ads” debate continues for both Pinterest and LinkedIn (not Meta for a change). And for the real privacy geeks, here’s an interesting Twitter exchange on how the various EU laws may (or may not) interact re: consent for targeted ads.

If there’s an area that you want to see covered on these pages, if you agree/disagree with something I’ve written, if you want tell me you dig my music, or if you just want to yell at me, please reach out to me on LinkedIn or in the comments below. I’m also available to consult on how the ouija board of digital media is moving or to help with due diligence on M&A.