Three reasons why analysts view Google’s delayed cookie change as good news for ad tech stocks

Published Fri, Jun 25 202110:25 AM EDTUpdated Fri, Jun 25 20211:21 PM EDT

Google said Thursday it was pushing back its timeline to kill third-party tracking cookies, sending ad tech stocks flying. Though the change is still slated to happen in 2023, analysts say more time is a positive for players like The Trade Desk and Criteo . Cookies are small pieces of code that websites deliver to a visitor's browser and stick around as the person visits other sites. They can be used to track users across multiple sites to target ads and see how they perform. Google said last year it would end support for those cookies in Chrome by early 2022 once it figured out how to address the needs of users, publishers and advertisers, and come up with tools to mitigate workarounds. But this week, Google updated that timeline , saying in a blog post that it was clear more time was needed. "We believe this is ... good news for ad tech stocks, as it removes a near-term overhang, pushing it out by up to two years, with further delays possible," Macquarie analysts wrote Thursday. The Trade Desk surged 16% on Thursday. Magnite closed up 8% on Thursday. Criteo jumped to a new 52-week-high Friday, up 1% after closing 12% higher Thursday. Here are three ways analysts see the change as a positive for ad tech stocks: More time to diversify revenue away from cookies Needham analysts wrote that the delay impacts the allocation of $400 billion a year globally of digital ad revenue between walled gardens like Google and Facebook and open internet ad tech companies like The Trade Desk or Magnite. They wrote that the delay means cookie-based revenues at those open internet companies will be lesser at the time of the change. Companies like The Trade Desk and Magnite have a growing presence in connected TV, a sector that's not impacted by the cookie change. Keybanc analysts agree the updated timeline gives companies more time to grow in cookie-free channels like CTV. "By the time 3P cookies are deprecated, we believe there is a strong likelihood advertisers and AdTech providers will have lower revenue exposures to 3P cookies and face minimal (if any) business disruption," they wrote. Targeting alternatives have more time Ad tech firms and industry bodies have been working together on other types of solutions for a post-cookie future. Unified ID 2.0, an initiative that some top ad-tech firms are working on together, would rely on email addresses that are hashed and encrypted from consumers who give their consent. Public company LiveRamp also has what it calls its "Authenticated Traffic Solution," which it says involves consumers opting in to gain control of their data, and on the other side, brands and publishers being able to use that data. Analysts said the delay means more time for these alternatives to gain traction. "People-based targeting substitutes to Cookies, such as Unified ID 2.0 and ATS, will now have 2 additional years to aggregate consumers and ecosystem partners," Needham analysts wrote. Truist analysts agreed. "A delay in cookie deprecation should give TTD and others more time to refine their offering, attract more partners and increase adoption, in our view," they wrote. Potential of more delays U.K. antitrust authorities said earlier this year they are investigating whether the plan to remove third-party cookies from Chrome could hurt online ad competition. The Competition and Markets Authority said it will look into whether Google's plans could cause advertisers to shift spend to Google's own tools at the expense of its competitors. "Subject to our engagement with the United Kingdom's Competition and Markets Authority (CMA) and in line with the commitments we have offered, Chrome could then phase out third-party cookies over a three month period, starting in mid-2023 and ending in late 2023," Google's post Thursday said. But Needham analysts seem skeptical about that timeline. "We believe late 2023 will not be long enough since the UK's Competition and Markets Authority (CMA) has agreed to oversee and approve any Chrome changes," they wrote. "Google said its new timeline was in line with this UK settlement agreement, but our view is that 2 years is too fast for governments to accomplish such a large economic transfer of wealth, such as reallocating economics between Walled Gardens and the Open Internet. Since politicians are victims of every group that's injured in the change, we think this increases the likelihood that it takes longer than 2 years and/or that it never happens." — CNBC's Michael Bloom contributed reporting.

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