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Way back in early 2020, Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google division said it would tighten up the privacy protections in its market-leading Chrome web browser. Advertisers and website managers would soon need to figure out how to do their business without third-party tracking cookies because they would go away over the next two years.

But the deadline was pushed back, then delayed again. And now, in the summer of 2024, Google finally stopped kicking that privacy can down the road. Rather than eliminating third-party cookies entirely, they will remain available in Chrome for the foreseeable future. Instead, Google is promoting the Privacy Sandbox, a set of technologies aimed at replacing third-party cookies with more privacy-conscious alternatives.

This may sound like a storm in a digital teacup, but it's actually a big deal. Entire industries have been bracing for the loss of tracking cookies since the pre-coronavirus era. It's a market-moving policy, and leaders in the fields of digital advertising, online content publishing, e-commerce, and data analytics must now readjust to the long-term availability of tracking cookies in Chrome.

How will Google Chrome tackle privacy protection from now on, and what does it mean for the heaviest users of tracking cookies? Let's have a look, and then I'll talk about what it all means for investors.

Decoding Google's Privacy Sandbox

The Privacy Sandbox was announced in the summer of 2019, but Google didn't make it generally available until last September. It's an alternative approach to data collection around internet traffic and usage.

Both systems provide useful targeting data to advertisers and user tracking for site editors, but in different ways. The cookies store browsing data in your web browser's memory, like digital Post-it notes with useful information tacked onto specific websites and mobile apps. By contrast, the Privacy Sandbox aims to keep your browsing information more private by grouping you with other users who share similar interests, without revealing your individual identity to advertisers.

Google argues that the Sandbox makes it harder to identify specific web users through their browsing habits and still provides valuable data to stakeholders on the other side of the cloud. But regulators raised concerns about the Privacy Sandbox's effectiiveness, and consumer protection groups, like the Electronic Frontier Foundation (EFF), feel that Google is trying to control the ad data to its own benefit. These concerns contributed to delays, and now, Google is shifting toward a more user-centric approach.

In a blog post this week, Privacy Sandbox VP Anthony Chavez presented the Privacy Sandbox as the cure for many user privacy issues but acknowledged that it will take time to shift the entire web and its accompanying industries over to this alternative approach.

"In light of this, we are proposing an updated approach that elevates user choice," Chavez wrote. "Instead of deprecating third-party cookies, we would introduce a new experience in Chrome that lets people make an informed choice that applies across their web browsing, and they'd be able to adjust that choice at any time."

Cookies may stick around for the foreseeable future, while users get a simpler way to control their browsing data's availability. And it's all wrapped up in the Privacy Sandbox concept.

Adapting to a cookie-free future -- or not

Google's keeping the cookie jar open for now, but things have changed over the last four years.

Rival browsers, such as Apple's (NASDAQ: AAPL) popular Safari, the privacy-focused Brave, and the fiercely independent Mozilla Firefox, have already limited the use of third-party tracking cookies, so there's no going back to the cookie-munching ways of old. With Chrome's dominant market share, it's easy to forget that 34% of users are already browsing with stricter cookie controls. It's true that most rivals from Safari to Brave are built on Chrome's basic app engine nowadays (with the notable exception of Firefox), but they can all control user-facing details, such as cookie management and other privacy shields.

In the face of crumbling cookie walls, ad-tech companies have been scrambling to build new foundations for targeted advertising. The Trade Desk (NASDAQ: TTD) champions its Unified ID 2.0 (UID2) initiative, a universal identifier that puts users in control of their data while still allowing for personalized advertising. While UID2's adoption may slow down after Google's policy-shifting announcement, it remains a promising solution for a cookie-less long-term future.

Meanwhile, media-streaming technology veteran Roku (NASDAQ: ROKU), with a wealth of first-party data from its streaming platform, is well-positioned for this transition. However, it's not resting on its laurels -- the company is surely exploring additional ways to leverage its data and enhance its ad-targeting capabilities. Making third-party cookies more accessible in Chrome should broaden Roku's array of possible ad-tech improvements.

Opportunities emerge as the cookies stop crumbling

The tumultuous cookie landscape is a mixed bag for investors. Google's delay in phasing out third-party cookies may offer a short-term boost to companies that rely on traditional online advertising powered by cookie-based traffic data, but the long-term trend toward privacy-centric solutions is undeniable.

Alphabet's future in advertising hinges on the successful adoption of its Privacy Sandbox, and I mean outside the walls of the Googleplex headquarters. Investors should closely watch the development and acceptance of this alternative technology, which could require some tweaks before becoming a true industry standard.

The Trade Desk faces uncertainty as UID2's adoption may slow down, but the company's commitment to privacy-focused solutions positions it well for the long run. Its investors should keep an eye on UID2's progress and its potential to become a viable alternative to cookies and the Privacy Sandbox.

Roku, with its wealth of first-party user data, is less reliant on third-party cookies but stands to benefit from enhanced targeting capabilities if Chrome continues to allow them. Furthermore, it should benefit from selling ad space on its platform, leveraging both the company's own data and those good old tracking cookies. Investors should track how Roku leverages this very real data advantage.

Overall, investors in the ad-tech space should focus on companies that are actively investing in privacy-conscious advertising solutions. The ad-tech market is evolving before your eyes, and the thriving winners of tomorrow may not be the same as the ad industry titans of yesteryear.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Roku, and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Apple, Roku, and The Trade Desk. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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