Google is Keeping Cookies, Maybe Selling Chrome, and Scaling AI Overviews | Behind the Numbers
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Hey gang, it's Monday, May 5th. You're a Jeremy Allen listener. Welcome to Behind the Numbers, an eMarketer video podcast made possible by Rocked. I'm Marcus, and today we'll be discussing the impact of Google keeping cookies, how AI overviews is getting on, and what a Chrome sale would look like. Join me for that conversation. We have two people let's meet them. We start with our Pittsburgh analyst and desk lead for the advertising, media, and tech teams based in New Jersey. It's Uri Wormser.

Hey Marcus, how are you? Hey fellow, very good sir. How are you? Very good. Terrific. Whoa. Well, I mean, yeah, for a Monday. No, no, no, it's good. Jeremy, apparently, who loves Mondays. He is our Senior Director of Briefings living in New York, Jeremy Goldman. Hello there, or should I say hola and happy Cinco de Mayo. I would be happy even if it was not one of my favorite holidays.

Jeremy likes Mondays and me and Yuri and everyone else on the call were saying dial it back. Sorry, not happening. Anyway, today's fact. The most commonly eaten fish. I don't know if this is a good one. I'm going to be honest. It's either really good or God awful. You decide. The most commonly eaten fish by volume or weight in the world is what? Sardines? Sardines.

Sardines? No. Cod? Cod's a good guess. Sardines is a terrible... Sardines? Do people eat those? Yeah. I mean, in some places. Portugal loves them. Tuna. I thought it was like a trick question. That would have been the first thing I would have said. Oh, man. By value, salmon is the largest single fish commodity in the world. But by volume or weight, it's tuna. In the US, salmon's one. Tuna's two.

by per capita consumption. Where are all these fish being caught? Good question. The water. It is in the ocean.

nearly 60% of all oceanic wild-caught fish are captured in the Pacific, 60%, 25% from the Atlantic, 15% from the Indian Ocean, and a few from the Southern and the Arctic. That said, Pallavi Rao of the Visual Capitalist was noting that we now farm more fish than we catch, but wild-caught fish still make up about 49% of the world's fish production.

Was that a good one? Probably not. Did you fact check that? Because it seemed a little fishy. Just when you thought it couldn't get worse. Sorry. I can save the day with another fact. I brought a backup because I thought that would be terrible. And I was right. Smithsonian Ocean notes that there are an estimated 3 million shipwrecks scattered across the ocean floor, according to the United Nations Educational, Scientific and Cultural Organization. You're welcome, fish.

We're the worst. Anyway, today's real topic, Google, cookies, Chrome, and AI overviews.

So lots to talk about with regards to Google. We start by talking about cookies. Google recently said it will keep cookies in their current form on its Chrome browser and will walk back a previous commitment to build a simple opt-out tool for users who don't wish to be tracked, writes Kendra Barnett and Lucinda Southern of Adweek. Jeremy.

I'll start with you. What's your biggest takeaway from Google saying that actually after five years, however long, decades, we're keeping cookies in their current form?

Yeah, I mean, this is obviously a really big deal because this is something that has been, I would say, brewing for how many years at this point, right? It's interesting that I think on one hand, you can make an argument that Google's tried to be responsive to advertisers who felt a little bit concerned about the new model and privacy sandbox in general, but also at the same time,

Is this necessarily good if you've had years to figure this out and develop a roadmap and get people, you know, going and rowing in the same direction and on the plan that you thought was, you know, better for you as Google and Chrome and the Internet in general and the advertising ecosystem? And I think that this is kind of an

a clear admission that no, uh, there were still a lot of things to be sorted out. Then not everybody was, uh, really comfortable with privacy sandbox moving forward as like the de facto way of advertising, uh, operating on the internet. Yeah, no, I mean, I think it's good news. I agree with Jeremy. I, I think it's good news for advertisers, advertisers, because, uh,

having the signal of cookies is just, it's just the best, it's better signal than you would get without it for advertising and targeting. On the flip side, the majority of internet visits, paid internet advertising is still not going to have access to cookies. So all the movement towards advertising

alternative identity solutions is still going to be necessary, even with cookies still remaining. Yeah, that's a big part of this, isn't it? There was a quote from exactly what you're saying, Eric Seafoot. I'm saying that right. A media leading media strategist was saying, quote, the privacy environment can only get more restrictive since the industry is moving away from deterministic IDs. Even if third party cookies aren't going anywhere in Chrome, the marketing ecosystem is moving or evolving away from deterministic identity. Yeah.

Still quite a lot of people using them. We have this chart that said one in five Americans always opted into cookies when given a choice, according to a study we did last year. But if you add up the people who said always, often, or sometimes, it's 80% of people. So there's still definitely a...

I thought his quote from that ad week piece was quite fitting, kind of sums up how a lot of people probably are feeling given this news. Digital ad ecosystem, which has invested significant resources and manpower to develop cookie-less ways to track and target audiences and measure media performance responded with a mix of shock, exasperation and relief.

Yeah, there was actually some data that we cited by Supermetrics in a recent briefing to clients that I thought was really interesting. Marketers foresaw that with the decline of third-party cookies, 57%

believed that they would see a decrease in effectiveness of targeted advertising. And to Yuri's point before, I mean, that's a significant number when you think about how many dollars are thrown into this. And you can just imagine, if you're Google, do you really want to risk having less people throw money at a channel that you largely dominate because they don't think that the targeted ads are going to necessarily have the same ROI? Yeah.

What's the real impact here? Because there's some, this piece, it was in Adweek, yeah, they split out kind of the winners and the losers from this. They were saying some of the winners, a lot of winners, the Trade Desk, Plutomatic, Vox Media, et cetera, et cetera. They had a lot of folks, a lot of different groups. The biggest losers from this, they say Google, reputational damage, privacy advocates, third-party cookies still exist, and consumers losing privacy protections, etc.

that Google had promised. But is this just going to be a situation where Google says, actually, we changed our minds. We're not doing this. All parties kind of walk away from the table and there are no kind of ramifications. I guess Google doesn't have to do this. Maybe it's better to say, actually, we've tried it for however long and it's not something we want to move ahead with just because we started it. Does Google suffer much as a result of this at all?

I think Google, it's a relatively smart move for Google to do right now for a couple of reasons. One, they're facing antitrust issues. Part of the...

Part of what happened in Europe is that Apple has been fined for its app tracking transparency, its version of taking away identity and providing an alternate identity. By taking away cookies, their alternative was the privacy sandbox, and that is something that would likely have given them an advantage. So from an antitrust perspective, it makes a lot of sense.

But at the same time, and we were kind of debating this a little bit recently, I can see it both ways in the sense that it also helps shine a light on look at the relative market power of Google that they can do this move. And everybody says, wow, this has a major implication for the advertising ecosystem. Does it show maybe that they're a good actor in some ways? I guess. But

If I was them and I saw the writing on the wall, it would have been more fortuitous to try to do a move like this maybe six months ago. That's all. Yeah. And they've gone back and forth so much, so long that it's been handled incredibly poorly. No doubt. So in that way, I agree with you, Jeremy. Yeah. There's been a lot of antitrust.

Uh, we covered the ad tech monopoly. So two big ones. Uh, one is the ad tech monopoly antitrust trial. We covered that in an episode that came out last Monday, April 28th. The other, the search monopoly antitrust trial is in remedies phase. Um,

Google said it will appeal once the remedies portion is finished because they lost that case. They have been called an illegal monopoly by Judge Amit Mesa from last year. One suggestion, one of the remedies suggested from the DOJ is that Google divest from Chrome, its web browser, Imran Rao,

Raman Jones at the BBC noting that chat GPT maker OpenAI would be interested in buying Chrome if Google was forced to sell it. So is AI company Perplexity they're interested and internet staple Yahoo as well. Yuri, what would the search world look like if Google was forced to sell Chrome? All of these revenues are going at really two things. One is Google's built-in advantage in data.

that just makes its algorithms work better. And it also, the fact that they've created these default, Google is a default search engine across the internet. By taking away Chrome, both those things are seriously reduced. Chrome is just a really strong source of signal for Google, not just in advertising, but in search functionality.

It, along with the other remedies, could just totally alter search by giving other search engines the chance to be the default engine, to work better, and just to have a lot more visibility and functionality than they do now. I fully agree with all that. And because of that, I am not going to just echo what Yuri just said. I really think that if you look at the overall evaluation of Chrome,

And if you look at the fact that there are two cases going on, one of them, you know, tied to, for lack of a better term, like search and then the other one more so on ad tech. I think it makes sense to see like a bit of a compromise on the ad tech side that leaves some of Google's consumer search business.

more whole, in part because how many people out there can reasonably, credibly purchase Chrome? It's a very high-risk move for anybody who could actually buy it. But there are very few people. Well, simply because of the price that it's going to command, right? You can have somebody who drives up the price simply because they're not going to buy it, but they know that you'll pay a bit more, right? It is...

More difficult to get a strong ROI when you're paying out $50 billion with a B, which is what some people think that Chrome could command on the open market. And also that part of the business is what Google would like to hang on to. The ad tech business is lucrative, but it's still a fraction of Google's overall revenues. So they would probably prefer to give that up as a bit of a compromise in order to keep the consumer search business intact. Yeah.

It's not just about search, though. It's also about AI. And Google is moving in the same direction with Gemini. It's AI chatbot, as it had done with search and trying to lock it in all over the internet. And without the data from Chrome, without that default engine, it puts it behind. It hinders its efforts to become the leader in search that it had become. I mean, the leader in AI that it had become in search.

Absolutely. It's more like if you took the AI out of the picture, they would really want to hold on to Chrome. But when you layer what you just said, they really want to hold on to Chrome even more. This also seems like OpenAI...

ChatGPT maker saying, putting their hand up and saying, hey, we'll buy it. Dan Primack of Axios was noting, wouldn't this just be solving one antitrust problem to begin building another? Because they have, I mean, there's some data here from SimilarWeb, global monthly web visits to AI chatbots. ChatGPT, close to 300 million. Second place, DeepSeek and Gemini, about six times fewer than

And deep seats go in the wrong direction. Chat GPT is going up and up and up. So a lot of the problems with these antitrust cases, as we talked about on the episode, is you have good intentions, but you end up kind of breaking things off. And that just kind of forms, whether you sell it or whether you just break it off, that ends up forming its own

Monopoly elsewhere later in like 20 years or so or longer. And I think sorry Yeah, please no no no, please please no I mean that's you're making Google's argument because part of what Google was said it has been saying in the remedies trial is That their lead in search is significantly less than it was in

a year ago or during, you know, as the trial was actually being argued that JGPT has increased

traffic and increased Presence within the chat bot space is really merging or an overlapping research And that's you know, that's kind of Google's argument right now. Why don't we all think these these remedies make sense? Yeah, I mean it is a tricky thing to say it would have made more sense to break us up a few years ago, which I know is not exactly their argument, but just because

Again, I'm trying to make a bit of the counterpoint to yours. Just because it made more sense to try to break up or have some remedies against Google a few years ago doesn't mean that it doesn't make sense now. It is very true that somebody benefits.

And then a few years from now, you could very well see a situation where you have an antitrust case against somebody who benefited in the same way that Google benefited from the Microsoft case from the late 90s. But it doesn't mean that it's not necessarily worth doing from the government's perspective, even though it does, to your point, create an issue that has to be dealt with later. Yeah.

So Google's AI overviews now reach over 1.5 billion people every month, Google just said. Despite that, Mark Stenberg and Paul Hebert of Adweek are noting that one year in, Google's AI overviews are not a chronic condition for publishers yet.

uh yuri should google be happy with the impact ai overviews have had on search so far i think that they probably are pretty pretty thrilled uh by it so far i mean with their end earnings you did we did not see a meaningful dip in search ad revenues to the contrary they did pretty well it means they're monetizing ai over overviews well um they're able to monetize it

Really, equivalently to this point, they were with regular search. And that was the real danger, that AI overviews and generative search would cannibalize its existing business model. And so far, they've been able to navigate that pretty well and have avoided that happening. Yeah, 10% growth in Q1 for the search piece of Google's ad business.

Jeremy, what's your take here? Because there was some numbers, actually Marissa Jones, who's on your team, was saying that they actually, AI overviews appear to be affecting click-through rates. She was writing that a new RF study, I think that's how you say it, found that Google AI overviews and search results significantly decreased click-through rates by 34% for top ranking pages compared to similar informational keywords without AI overviews.

Yeah. So one thing that I think is really important for us to like we talk about publishers like they're a monolith. And the truth of the matter is there are different types of publishers. We've looked into this and not just the RF study, but in a few other places. And it turns out it depends on what kind of thing you're publishing, for lack of a better term, you know, like a world encyclopedia, for instance.

that somebody has the fact that has been surfaced through an AI overview, you need no additional information, and then you're not clicking through there. But then there are other types of publishers that somebody very well might click through at a more consistent basis.

So this is something that Google has to get right because there have been other instances where Google has, let's say, starved a publisher to some degree from revenue and traffic, which then keeps that publisher afloat. And obviously, Google thrives when it has a vibrant publisher ecosystem to pull data from, right? Like they don't actually want to necessarily fund all of that themselves. They want publishers to be creating great things that then they can turn into

them into AI overviews. So it's a really tricky balance where they have to keep their ad revenue going up higher and higher year after year as a public company, while at the same time making sure that these publishers, I don't want to say they have to necessarily thrive, but they certainly have to stay in business in order to keep feeding the beast that is Google, so to speak. Yeah. Yeah, these numbers didn't help the antitrust case at all.

Google might be threatened with a breakup after losing two antitrust cases. But in the meantime, it can console itself with piles of money, joked David Straitfeld of the New York Times. Google hit $67 billion in ad revenue in Q1, up around 8% year on year. Solid, but down from a 13% growth from the last Q1. Jeremy, which part of Google's Q1 performance did you find most interesting and why?

So, a warning, this is a bit of a cheat, but bear with me. I think part of it, it's the fact that its business model is starting to look like a very well-oiled flywheel. The cloud business, which we don't talk about as much, is still growing at a pretty rapid rate, even though there's been some deceleration there overall year to year.

And all of this appetite for AI that Google is driving is actually helping those cloud revenues go up. But also, all of this investment in AI is creating new ad products that people are investing in, not to mention Gemini and all of the impact on workspaces. So I think the very fact that all of these different components are working very nicely together is something that stuck out to me a bit more this quarter.

Yeah, I think you're right. And their AI is really, they're succeeding with AI much more so than they were a half a year ago. Gemini is on objective benchmarks, is doing well. They're gaining users pretty quickly, still behind ChatGPT, but they're doing well in that way. And they're still investing heavily in AI capital expenditures. They haven't really slowed down as some of the other companies like Microsoft have.

has done. So their AI business is really, really doing well. I mean, they still have a lot of work to do to ward off, fend off open AI, but at the moment they're doing pretty well. It helps that they are insanely profitable.

because as soon as your margin starts down, investors start questioning why you're putting so much money into all these bells and whistles when the core product's not churning out the kind of profit that we're hoping for. They made $35 billion in profit in Q1, which is up nearly 50% year on year. They were saying much of that is from equity investments, not ops, but it's still money.

So it's not bad. It did seem that there was a kind of a noticeable slowdown though, the year on year ad revenue overall, as I said, went from 13% growth to eight search piece, which you were talking about earlier, went from 14 last Q1 to 10, this Q1 percent growth and YouTube went from 21 down to 10. I mean, how concerning is that? Is that any indicator of things to come? Do you guys think?

I think it's actually relatively good news. Everyone has been expecting some slowdown in the beginning of this year just because of business uncertainty. This is Q1, so this precedes the giant disruption caused by those April 2nd Liberation Day tariffs. But even so, there was a lot of uncertainty there.

It's a sign that ad revenues and therefore business was still chugging along at a pretty good rate in the first quarter, even if it wasn't quite as strong as it was last year, year over year. So I think it's generally good news. But going forward, Q2 and everything, it's a whole different story. Yeah. And Jeremy, we had forecast a slowdown. Our forecasting team had expected four-year growth for Google's ad revenues to be 12% last year and 9% this year. So we were baking in some of this.

Yeah, exactly. We were baking in some of this. Also, on top of that, Google's really good at figuring out what to guide people to and then how to beat it a little bit. And when they're a bigger company than most, that looks quite good. I think it's also important to note that in Q1, tariffs were a lot of

noise, not much bite. But the real test probably does lie ahead for Google. I think they were even asked that on their call. Tariffs didn't really dent their Q1 performance at all. But the real test is going to lie ahead, just like Yuri was saying. Some independent data from IAB said that budgets are going to really be impacted the most ad budgets in Q2, that that's where some of the greatest pain is going to occur.

occur, and not just for Google, but a lot of other companies. And we have already seen pullbacks like companies like Timu and Shein pulling back their Google Shopping and their meta ads. So you're going to expect to see a lot more of that, that we might be guided towards a little rougher path ahead for Google and the rest of the sector. Yeah. Both those companies being Chinese and this growing trade war between the US and China not helping things.

um, final thing for me on the performance. One thing, I mean, all, uh, positive across the line items, um, for top line, Google ads for search, um, cloud doing well for YouTube or the rest of it. But, um, Google network piece of Amazon's business still making about $7 billion a quarter. So not terrible. Uh, but they've been falling by a few percent year on year for 12 straight, nearly 12 straight quarters now, three years. So something to,

to keep an eye on. All right. That's all we've got time for, for today's episode. Thank you so much to my guests for hanging out with me today. Thank you to Yuri. Always great to be here. Yes. Thank you to Jeremy. Fantastic as always, sir. And thank you to the whole editing crew, Victoria, Lance, Danny, and John, who posted a clip of me saying that he's my favorite to the whole team.

the scandal. Thank you, Stuart, who runs the team. Sophie does our social media. Thanks to everyone for listening to Behind the Numbers, an email-to-video podcast made possible by Rocks. Make sure you subscribe and follow and leave a rating and review if you could, please. They mean the world to us, honestly. Sarah will be discussing the attack of the private labels on Wednesday, and I will see you, hopefully, on Friday.