Google's advertising boss says that it won't sacrifice privacy to boost its slowing ads business (GOOG, GOOGL)

Prabhakar Raghavan

Prabhakar Raghavan, who recently transitioned to his new role as Google's head of advertising and commerce products last October, finds himself in a tricky situation.
At a time when consumer concerns over privacy are seemingly at an all-time high, Google's money-minting ads business is showing signs of sluggishness.
This week at Google Marketing Live — the company's annual event for advertising partners — Raghavan and his team unveiled several new ad and commerce products that try to strike a balance between being useful to advertisers while also being respectful of consumer privacy.
"I don't think any of my colleagues, or Sundar [Pichai], or I think of how much revenue will that deduct," Raghavan said of his team's re-tooling around privacy-focused products. "We think about how this is setting us up for success in the long run."
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When Prabhakar Raghavan was teaching at Stanford University some 20 years ago, he was recruited by two grad students — Larry Page and Sergey Brin — to help run their search engine startup company. He turned down the offer. Raghavan's response to the young founders: "You'll never make any money."

Today, Raghavan is responsible for how Google — worth $700 billion-plus — makes almost all of its money: advertisements.

But Raghavan, who transitioned to his new role as ads chief last October after leading Google Apps for the company, finds himself in a tricky situation. At a time when consumer concerns over privacy are seemingly at an all-time high, Google's money-minting ads business is showing signs of sluggishness. On last quarter's earnings call, Google announced slower than expected ad revenues, signaling concerns to Wall Street and sinking its stock more than 7% in after-hours trading.

To boost business in a post-Cambridge Analytica climate, Raghavan knows he can't merely give advertisers more access to user information. Instead, he needs to find the right balance between advertiser demands and user privacy.

This week at Google Marketing Live — the company's annual event for advertising partners — Raghavan and his team unveiled several new ad and commerce products to help Google boost its business with advertisers while driving home the message that it's respectful of privacy.

"To remain the leader in our space, we'll have to be the leader in user trust," Raghavan said at a press event this week. "That's super critical."

A few days after the event, reports emerged that a feature in Google keeps a log of users' purchases based on emailed receipts. Google said the information helps create personalized features, like asking Google Assistant when a package will be delivered, and is not used to serve ads. Still, news that Google was keeping a log of its users' purchases took many people by surprise and underscored the challenges facing Raghavan and the company as they try to earn consumers' trust.

More ads in more places

That privacy-first mantra can be easily lost in Google's barrage of launches and updates at this week's Marketing Live event.

For the first time, Google will now allow ads on Discover — the social feed that's front-and-center on Google's apps and on the home page of its mobile website. Last September, Google said Discover had 800 million people using the product each month. Also announced this week, Google will make it easier for businesses to run single ad campaigns across YouTube, Discover, and the "promotions" tab in Gmail.

Raghavan maintains that more ads aren't necessarily an infringement on user privacy. Most of the information Google knows about its users is used to create a better "consumer experience" rather than for creating personalized ads, he says.

"The wealth of the data is really used for personalizing consumer experiences far more than the little fraction that's used for advertising," Raghavan said. "But that's the kind of thing that very hard to articulate. People don't really get it."

Perhaps, the articulation is difficult because for Google, the line between its ad products and "consumer experiences" is being blurred.

As part of its announcements this week, the tech giant also signaled a major push into online retail, allowing users to not only make purchases from its Google Shopping platform, but also directly from ads surfaced on Search, Images, and even, YouTube. Click on an ad, check out on Google.

And, as the newly discovered log of Google users' purchase history shows, it's not always clear how much personal information is being collected and organized by Google, and why.

Building for the future

Raghavan himself is no stranger to the long-lasting effects of breaching user trust. While under his watch, Google had been scanning Gmail inboxes for information that could then be used to serve more personalized ads. Google rolled back its practice in 2017 amid pressures from privacy critics and businesses, but, as Raghavan told us, the concerns still linger on today.

"Even well-informed friends come to me and say, 'When are you going to stop scanning my Drive for advertisements,'" he said.

When asked if a focus on privacy was the reason for the recent revenue slowdowns, the ads chief contemplated his response.

Raghavan acknowledged the demands it has put on his staff. For instance, to comply with the European Union's recent data protection regulations, known as GDPR, Raghavan said it took "several hundred engineering years."

But ultimately, Raghavan said the privacy-first mentality has pushed his team to innovate and come up with a new generation of advertising products, built for today's landscape. In the past, the ads chief said the company might have thrown "more data" at creating more sophisticated offerings — like knowing a buyer's intent. But now much of those inferences are being made possible by more computing. "Doing more with less data" is a phrase Raghavan likes to use.

"I think it's a good thing for us. It sets a good tone for the industry," Raghavan said of his team's re-tooling around privacy-focused products. "I don't think any of my colleagues, or Sundar [Pichai], or I think of how much revenue will that deduct. We think about how this is setting us up for success in the long run."

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