Apple and European regulators. The only long-term solution may be for websites to be more explicit about how they make money from customer data.

Citing privacy concerns, Apple launched a feature on its Safari browser in September called Intelligent Tracking Prevention, which limited the use of cookies to track users’ browsing histories. These cookies are heavily used by ad-tech companies, which maximize the value of online ads by matching them with internet users most likely to click on them.

The big victims of Apple’s move are therefore independent ad-tech players, particularly Paris-based Criteo. It specializes in so-called retargeting: showing ads to consumers who have already looked at a product online. Its Nasdaq-listed shares, previously among the best performers in a sector with more than its fair share of dogs, have more than halved since the start of June, when Apple announced the update.

Meanwhile, the European legislative machine is rolling out its own form of system update: the General Data Protection Regulation, due to take effect in May. A related package of “ePrivacy” rules is causing particular worries. The small print has yet to be written, and probably won’t be implemented for some time after the data regulation, but the legislation could force companies that plant cookies to obtain much clearer consent from European internet users. This will be far easier for Google or Facebook, given their direct interface with consumers, than for unfamiliar platforms like Criteo.

Criteo has adapted to changes in the ad-tech environment before, notes Jefferies analyst Brian Fitzgerald. The company initially exploited loopholes in Safari to come up with a workaround, but another Apple update this month closed them, prompting a Criteo sales warning.

Criteo is now working on another fix. If it works, the shares seem likely to bounce, given a rock-bottom valuation, but the situation is precarious. As Chief Financial Officer Benoit Fouilland anticipated in September, it is playing a “cat and mouse game” with the world’s largest public company.

Beyond the media giants’ walled gardens, ad tech’s best hope may be for publishers to explain better to consumers the value they derive from retargeting and other marketing innovations. Internet users like free media content, but seem only vaguely aware that it is increasingly funded by their browsing data. The industry needs to do a better job of advertising this bargain.

Source: wsj