Why Google's FLoCs are a Faustian Bargain for Marketers

FLoCs: Federated Learning of Cohorts. This is Google's proposition to the marketer as an alternative to targeting cookies and mobile ad IDs (MAIDs), after Google unilaterally announced that they would stop supporting cookies and MAIDs in Chrome.

I like Google. I use pretty much all of their consumer and business apps, all the time. My life is better for it. And I don't mind letting their algorithms use the data I create with my searches, maps, shopping, location, and everything else I do to make my life better, and, yes, to send me better advertising for products that I might be actually be interested in. That's a value exchange that I'm comfortable with.

Further, the principles behind shutting down support for third party cookies and "anonymous" IDs are solid: consumer privacy. Google's not wrong that things have gone too far in the digital marketing ecosystem. Even the government - usually loathe to slow anything that's driving economic growth - was starting to put new regulation in place with GDPR and CCPA.

Something had to change, because the whole thing had become an intractable mess.

1. The advertising ecosystem became expert at surreptitiously harvesting the exhaust of consumer internet browsing through hidden pixels, tags, and backroom trading of sensitive consumer data - all for dwindling margins in support of multi-billion dollar venture capital investments at ridiculous valuations

2. Consumers had no idea how their data was being sold and used to manipulate themselves and others - even to the point of becoming unwitting pawns in the political landscape

That's evidence of a good thing gone bad, in an ecosystem that had (mostly) accidentally evolved to explicitly exploit consumer data.

Don't [Seem] Evil

Google, throughout this digital revolution, has largely held true to its simple and admirable founding principle of "Don't Be Evil." So, bravo Google for stepping up and making a very controversial decision that will impact a huge number of businesses (and the VCs who back them) and incur a lot of wrath.

But something else had been happening during that digital evolution that was inadvertently good for Google.

3. Brands have been losing control of their own customers to the tech giants like Google (and, to be fair, Facebook and Amazon too), who are much better at capturing the identity and attributes of people, packaging it up, and selling it back to the brands without a hint of shame.

And FLoCs are going to make it worse.

FLoCs are good for Google, but bad for Brands

FLoCs are groups of consumers who share certain interests and behaviors that only Google can see, and are predicted by Google's all-seeing, all-knowing, constantly-learning algorithms to be receptive to different kinds of advertising.

• The design, composition, and optimization of FLoCs are Google's

• The behaviors used to build the the FLoC are observed, captured and analyzed by Google across Google's massive empire of search, content, and apps

• The algorithms are Google's

And each time a FLoC is assembled for an advertiser, the FLoC gathers and processes more data about the consumer, and how that consumer may relate to each brand. That incremental intelligence, too, is Google's.

Here's why brands should proceed with caution regarding FLoCs

When you spend money with Google to find your target audiences, you are buying access to your own customer or target. And, unfortunately, in this transaction you learn nothing, Google retains 100% of the intelligence, while you get to put your ad in front of someone for a split second.

In the new world of FLoCs, the marketer is paying Google to become smarter about the brand's own audience. And the smarter Google gets, the more leverage they have over the brand to access that consumer's attention. It's a Faustian bargain, where the brand trades short term ROI for long term servitude... to Google.

Google already knows more about the brand's audience than the brand knows themselves. Every time a campaign gets executed through a FLoC, Google's machine learning gets smarter about who the consumer is, what causes them to respond, and which attributes make a difference in performance. And each time the FLoC runs, it will take the intelligence from the last campaign and run just a little bit better. Over and over again. Google will capture and own all the improvements from this iterative learning process, giving nothing back to the brand, and the brand will keep paying them.

The knowledge derived from the FLoC process creates lasting, compounding value for Google. That's much more valuable than the momentary attention to the advertising.

FLoCs help Google get smarter about YOUR customers on YOUR dime, while you learn nothing - and steadily become even more dependent on Google.

Marketers need to be acutely aware

Marketers need to calculate the risks associated with handing over everything to Google and the other walled gardens, because down the road it will be costly. They should evaluate alternatives that will allow them to build intelligence around their consumer interactions and own the resulting proprietary data asset.

Is there another way forward?

Yes. Truthset is working with major data providers, brands, publishers, and platforms in the digital marketing industry to test an alternative wherein brands will be able to:

1. Build target audiences using highly accurate, validated demographics tied to HEMs

2. Activate them in any consented, authenticated environment (including Google)

3. Measure reach, on-target-percentage, and ROI

And most importantly, shift the power dynamic so that the brands can retain the compound knowledge generated from their advertising dollars.

Learn more

If you are a major brand advertiser, a publisher with large authenticated audience, or platform that is interested in supporting the next version of the open internet, send a note to dmc3@truthset.io to learn more about this initiative.