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The Future of Search Part 2: Google’s Path Through the Post-Cookie World
This is part two of a five-part series detailing the near-term evolution and potential long-term future state of search. The first section detailed how Google will attempt to comply with the loss of third-party cookies. This second section focuses on Google’s potential efforts to mitigate damage related to compliance, and how lingering effects could reshape how they view and deploy their capabilities.

Google in the Post-Cookie World

For digital advertising, the deprecation of cookies is understood as an eventual path towards a modernized, less invasive, more personal way of targeting consumers.

For Google, the ends don’t justify the means. For them, it brings a near-term loss in targeting prowess along with a reduction in outcome-driven visibility. The extent of their reliance on third party identifiers and tracking is evident in their continued hesitation to move on. They know their platform, as is, will experience growing pains once they flip the switch.

As noted on the targeting side, they hope to fill that gap by retaining a sense of audience-driven focus with Topics. On the reporting side, what they’ll lose in tracking they’ll attempt to make up in modeling.

But in both instances, they’ll be hamstrung early on.

Take reporting as an example. Google has historically calculated one of their in-store metrics – store sales direct (SSD) revenue – in this same modeling-driven manner.

SSD is a feature that companies with in-store loyalty card transactions can deploy by providing Google access to loyalty card transactional data. Google can then match transactions to any Google Advertising interactions to attribute value. They then fill in the remainder of their attributable in-store sales (i.e., non-loyalty transactions influenced by Google Advertising) via modeling. They take a known fraction and use it to help extrapolate an unknown total.

The problem is most Google-funded modeling efforts need to be taken with a grain of salt. In the case of the previously noted SSD data, only a fraction of what Google’s models pump out can be trusted – i.e., their models often exaggerate. This leaves advertisers needing to adjust – or downplay – the numbers provided. This begs the question: Will their modeling efforts in relation to cookie deprecation be met with the same level of skepticism?

If so, marketers will see a reduction in their revenue-based output from platforms like Google Ads simply due to in-house metric adjustments. And when the perceived revenue for one tactic goes down, marketers are often forced to push dollars towards other, more reliable tactics. This could easily happen to Google, especially if the expected performance dips associated with cookie deprecation infiltrate tried and true tactics like paid search.

If Google starts to see a downward trend in revenue, how will they respond? Their most recent quarterly reporting demonstrates just how reliant their revenue totals are on their advertising platforms. How – beyond a shift towards a more contextual focus – will Google look to right the ship that might extend beyond its advertising platforms, potentially affecting Alphabet as a whole?

Driving Profit in the Future?

Google is constantly investigating additional revenue streams. They know they can’t forever lean on their ad platforms. They’ll eventually need to capitalize on profit centers beyond media ventures.

One great example is their cloud offering, which they’ve done a tremendous job driving revenue through to date. However, this offering only comprised 7.5 percent of total revenue in 2021. The lion’s share, as expected, went to their advertising products (such as Ads, GDN, YouTube, etc.). These platforms constituted a whopping 81.3 percent of total revenue this past year. Long story short, if revenue via ad platforms is going to be diluted by the upcoming cookie deprecation, other revenue streams need to become a focal point.

Amazon, for example, just had its first quarter wherein revenue derived from services outweighed revenue driven by sales. Think about that for a second. The world’s largest online retailer no longer specializes in retail. Amazon is now just as much a services company as it is a purveyor of goods.

Google has watched this growth firsthand. Fewer and fewer product searches begin on Google. And even when they do, Google has become no more than a conduit for consumers to reach – and transact via – Amazon. Don’t think that’s been lost on them. That they’re not going to do everything within their power to pull off the same level of flawless, 180° about-face Amazon so effortlessly executed.

Interested in learning about a potential about-face as it relates to Google’s profit center? Read Part 3.