Daily Tech Snippet: Friday, April 17

• Forcing Login Helps Facebook Solve the Global Cookie Shortage: The company tracks app users across devices to prove ads work. For advertisers, one of the Web’s advantages over TV is the ability to track which ads get clicks and lead to sales. However, most mobile apps block cookies, leaving marketers blind. This cookie crunch has become a full-blown crisis as shopping on smartphones and tablets has exploded. Last year, U.S. marketers bought about $19 billion worth of ads on phones and $32 billion on PCs, according to researcher EMarketer; this year, the company estimates, the total will be $29 billion on phones and $30 billion on PCs. Enter Facebook, which promises the more than 1 million businesses that advertise through its Atlas Solutions network that they can follow 1.4 billion users from PCs to smartphones to tablets and back. To use Facebook, you have to log in, and the social network records identifying information about each device you’ve logged in from. That data is stored in your profile, so Facebook knows it’s you online, even when you’re visiting other sites. Atlas is an ad network, like Google’s AdSense, that Facebook bought from Microsoft in 2013 and relaunched late last year. Its advantage lies in the depth of Facebook’s knowledge of its consumers. Even though advertisers don’t know the identity of specific users, the demographic information Facebook gives them, broken down by characteristics such as age and gender, can help them tailor ad campaigns for different audiences, says Jonathan Nelson, chief executive officer of Omnicom Digital, an early adopter of Atlas. “If you can connect the dots backwards, you can understand, ‘How did that happen?’ ” Nelson says. “That’s a gold mine.” The Atlas network can also track Facebook users’ behavior on other websites, says Brad Smallwood, vice president for marketing science. Retailers can embed special Atlas code into their websites or apps that detect whether a customer buying a blouse she saw on her mobile browser viewed a related ad on Facebook. Atlas is an important test for Facebook, which gets more than 90 percent of its revenue from ads, as it tries to boost its appeal to mobile advertisers and compete with Google. The search giant commanded 37 percent of U.S. mobile ad revenue in 2014, more than double Facebook’s share, and has also begun tracking people across devices by using login data. Facebook’s ads, however, are more tailored to individual users based on what it knows about them.

• Etsy Closes Up 86 Percent On First Day Of Trading: Etsy, the online marketplace for handmade goods, went public today. Shares opened at $31 on the NASDAQ, popping up 94 percent from the initial set price of $16 per share. The company closed its first day of trading at $30 per share, an 86% percent rise from its initial price. The company raised over $287 million by selling 16.7 million shares before trading, valuing the company at nearly $1.8 billion. Stock went up close to $35 by mid morning. Etsy is now worth more than $3.5 billion. The handmade crafts company is not yet turning a profit, but has seen year-over-year growth in revenue for the past few years, rocketing from $74.6 million in 2012, to $125 million in 2013 and to $195.59 million last year. It had 1.4 million active sellers and 19.8 million active buyers as of December. The success of the company’s IPO bodes well for the technology liquidity market, as it could spur other firms waiting on the sidelines to pull the trigger on their own IPOs. The technology IPO market has been slow so far in 2015. Box listed its shares earlier this year, receiving a massive 70 percent day one pop. Box’s shares, however, have since receded. The success of Etsy’s IPO could shine especially bright for Shopify, another company that recently filed for its own initial offering. They are related, if not analogous companies; Shopify provides e-commerce tools to small and medium-sized business, a moderate contrast to Etsy’s own solution. Still, the companies both track the aggregate dollar flow through their respective platforms. Etsy saw gross merchandise sales (GMS) in 2014 of $1.93 billion, while Shopify saw gross merchandise volume (GMV) of $3.76 billion in the same period. Etsy derives, as you expect, more revenue per dollar-through-platform given its intimate status as the marketplace network itself, in contrast to Shopify’s SaaS solution that helps others build their own sales channels. Given the enthusiastic reception of Etsy by investors, Shopify might anticipate a similiary warm reaction given the shared overtones of the two companies. The latter company has yet to price.

• European Regulators Are Stifling the Ad Business for Google, Facebook and Others: Regulators, consumers fight some of their best tactics: This week, Google was the latest, and perhaps the hardest hit, by the scrutiny overseas, as the European Union charged it with anti-trust practices by favoring its own Web properties in search results over rivals. Often, Google serves up results for shopping items to the detriment of e-commerce competitors, and it delivers instant reviews, keeping traffic away from rivals like Yelp. The ultimate penalty could force Google to change its search tactics, but the probe could also veer into other aspects of its business that impact advertising. Here in the U.S., regulators declined to label Google a search monopoly when they fully investigated the company in 2013, but they still closely watch how it competes with rivals and deals with consumers. The Mountainview, Calif.-company is not alone in these tense situations with European leaders. Facebook has been hit over user privacy, especially in Germany. The continent also is going after tech companies over taxes and security issues. The less the companies are able to operate freely, the less data they can accumulate, and the less finely tuned—and less valuable—their ads are, according to marketing experts. This week, industry research group eMarketer, which tracks global marketing spending, found social ad revenue is growing more slowly in western Europe than in North America or Asia. Meanwhile central and eastern Europe lagged further behind, and the disparity in overall digital growth was even greater. A number of factors drive digital ad dollars, but one is the ease with which tech companies can collect data on users, target ads and charge for such messages. European attitudes could hinder one of the most effective types of digital advertising, retargeting. "One of the main attractions to social media from advertisers (particularly to Facebook and Twitter, who own 75 percent of spending in this market) is the ability to use data to target customized audiences," said Dan Marcec, public relations director at eMarketer, in an email. "So any restriction on that would have an effect." Google wants to give brands new retargeting tools for search ads, according to reports this week. A source confirmed the company is interested in using advertisers' e-mail lists to do so. When reached for comment, Google said it always considers new products, but had nothing to share at this time. Another digital advertising source said Google's interest in retargeting could attract more regulatory spotlights. Fair or not, while Twitter and Facebook build fully integrated data machines for targeted ads across the Web, Google sometimes gets closer review in the U.S. and Europe. "It's clear Google is starting to think about using search to inform more advertising, and it runs a risk with regulators," the ad executive said, speaking on condition of anonymity. Some of Google's top rivals, including Microsoft, are said to be leading the charge in tipping off regulators about practices they see as unfair—practices that touch on all corners of its business, like search, data, privacy and advertising.

• China Halts New Policy on Tech for Banks: China has suspended a policy that would have effectively pushed foreign technology companies out of the country’s banking sector, according to a note sent by Chinese regulators to banks. Dated Monday, the letter called for banks to “suspend implementation” of the rules, which have been at the center of a brewing trade conflict between the United States and China. The rules, put into effect at the end of last year, called for companies that sell computer equipment to Chinese banks to turn over intellectual property and submit source code, in addition to other demands. At stake is billions of dollars of business for major American companies that make the advanced computing hardware and software that crunches numbers for banks across China. Trade groups representing companies including Microsoft, IBM and Apple have complained that such policies are protectionist. Yet the development is only a small reprieve for American tech companies. The suspension is temporary as authorities revise the rules. It is unclear how regulators will change the rules, but industry officials say a new version — even if it avoids more contentious issues like forcing the disclosure of source code — will still be problematic to multinational tech companies. China’s vice minister of finance, Zhu Guangyao, informed Nathan Sheets, the Treasury’s under secretary, of the decision to suspend the rules during a meeting in Washington, a senior administration official said. The recent trade debate is part of a wider clash between China and the United States over online security and technology policy. Such backpedaling is rare for Chinese policy makers, yet there is a precedent. In 2009, China said all computers imported to the country must come with filtering software called Green Dam-Youth Escort preinstalled. After heavy international pressure, China suspended the rule indefinitely.

• With Eye on Mobile, Yahoo Revises Its Search Partnership With Microsoft: Yahoo and Microsoft announced on Thursday that they had amended their 10-year search partnership to allow Yahoo to deliver its own search results and ads for up to half the searches made by visitors to Yahoo sites and apps. Under the original agreement, struck five years ago, Yahoo was required to use Microsoft’s Bing search results and ads for all desktop searches, although it was free to use alternatives on mobile devices. Yahoo’s one billion users will not see a new search experience immediately, and any changes will probably be gradual. The venerable Internet company, which dominated web search before the rise of Google, sold its search technology to Microsoft under the original agreement and has only a small team devoted to search now. But Ms. Mayer, who oversaw the interface and other major elements of the search experience at Google, has made it clear that she wants Yahoo to innovate on search, and the company has been experimenting with new approaches on mobile devices, particularly in personalizing results and presenting ads. Search is vital to Yahoo’s business, accounting for 35 percent of the company’s revenue last year, or $1.8 billion. Under the original agreement, Microsoft gives Yahoo about 90 percent of the revenue from ads it shows on Yahoo. The companies said that under the revised deal, “this existing underlying economic structure remains unchanged.” Desktop users in the United States conducted 12.7 percent of their searches on Yahoo and 20.1 percent on Bing in March, according to comScore, a research firm. Google dominated the market with 64.4 percent of searches. Ms. Mayer and Microsoft’s chief executive, Satya Nadella, were both personally involved in the negotiations. Microsoft has poured billions of dollars into search, and Mr. Nadella is committed to remaining in the business. Microsoft was a primary agitator behind the European Commission’s decision on Wednesday to bring antitrust charges against Google, accusing the company of abusing its dominance in search to hurt consumers and competitors. Yahoo will now be able to sell desktop search ads to advertisers through its Gemini platform, which the company is building into a one-stop shop for buying ads across all Yahoo properties as well as other apps and sites in its network. Microsoft will gradually take over sales of all ads for Bing search, allowing it to integrate the team more closely with the people developing search technology. Previously, the premium ads were sold by Yahoo sales representatives.