What does the demise of third-party cookies mean for the ad industry?

By October 29, 2020Uncategorized

The digital world is cracking down on privacy regulation. From GDPR in Europe to CCPA in the United States, the way that advertisers interact with consumers is constantly evolving. Although some browsers—including Safari and Mozilla Firefox—already do not support third-party cookies, Google is now joining the club. In early 2020, the search engine behemoth announced it will phase out third-party cookies in its Chrome web browser by 2022.

Apple and Firefox have made their opposition to cross-site tracking clear. But Google has an advertising empire to consider—and they’ve been careful as they cut down on tracking. The decision to follow the two, however, centered around the ongoing conversation on the future of web privacy. As Google outlines in their announcement on the topic, users are demanding increased transparency, choice, and control over their data.

Unlike Firefox and Apple, Google must still keep an eye on advertising, which accounts for the majority of Google’s total revenue. While many accuse Apple of building a walled-garden approach in the App Store, others lambast Google for furthering their ad-tracking monopoly. In the future, Google want to make it easy for advertisers to target demographics—while being less invasive for the user. They hope to replace third-party cookies with a new set of technical solutions to accomplish the same goals.

Advertisers have used cookies to track visits to websites.

Before we get much deeper, though, it’s important to outline third-party cookies—and how they compare to first-party extensions. Cookies are bits of information that websites store on your computer after you browse them. While first-party cookies are set by a site you’re visiting, third-party cookies are created by a domain other than the one you’re currently using. Cookies recognize your specific browser or information, were you to return to that same site. For example, your favorite news site may have a Facebook Like button on their site. By pressing that button, the news site will set a cookie that can be read by Facebook.

So how do third-party cookies affect you, the internet user? You’re probably familiar with the scenario. Let’s say you’re doing research into a new credit card. You visit relevant websites looking for information. And suddenly, no matter where you browse, ads follow you promoting credit cards. This isn’t serendipity—it’s third-party cookies. And these ads aren’t generated by the websites you’re visiting, but by third parties taking advantage of cookies.

The difference between first- and third-party cookies.

It’s important to know that first-party cookies are unaffected by these changes. In fact, first-party cookies are essential to a convenient user experience on the web—and most web browsers enable them. They allow websites to collect and remember analytics data, language settings, and other important information about their users. Without them, a website couldn’t keep track of your activity as you move between pages. For example, users couldn’t purchase multiple items in the same transaction without cookies. Instead, they’d be treated as new orders—and would require users to repeat the purchasing process ad nauseum.

But are third-party cookies inherently evil? Well, no. Third-party cookies create an ecosystem of personalization. As with their first-party counterpart, there’s nothing inherently destructive about third-party cookies. And there’s the argument that these cookies were never designed to contain or share as much information as they do. But there’s also the case that the advertising industry is partially at fault for where we’ve gotten. We’ve done very little to communicate to our end users exactly why we’re tracking them and why data can be used for their benefit.

Regardless, if advertisers are unable to rely on third-party cookies, what does the future look like? While the industry will invent new solutions to audience targeting and measurement, they may not look exactly like what we’re familiar with today.

What’s a future without cookies look like?

As of writing, there’s no technical replacement for cookies quite yet. The move away from cookies opens up the door for innovation, as data management platforms are beginning to look into alternative tools for advertisers to track data. Google has proposed its Privacy Sandbox, their solution in which websites would still gather some user information. Apple has also suggested creating an API for tracking these conversions. But the two companies are at odds on how much information should—or shouldn’t—be allowed. We’ll keep an eye on that.

It also repositions the focus of advertising on different types of solutions beyond the hyper-targeted pay-per-click model established by platforms like Google Ads. And it’s safe to say that contextual targeting has a bright future. This type of advertising considers the categories or keywords that consumers are viewing and serves them relevant ads based on this data. This information can then be sourced by the types of content, shows, and podcasts they prefer—all without the use of third-party cookies.

While third-party data did allow brands to place ads in front of specific user profiles, contextual advertising enables them to circulate ads on platforms that rank for similar keywords. So, what do CTV, audio, and digital OOH advertising have in common? None of them use cookies. Personalized, on-demand content is the new norm. And as the demand for privacy-friendly advertising solutions becomes a reality, we’ll probably see more brands turn to both contextual advertising and programmatic solutions—both of which are supported by CTV and OOH.

Ultimately, the demise of third-party cookies means a rise of transparency in an industry that was ripe for a shake-up. As targeting and measurement become more democratized, advertisers will be required to better understand which channels encourage the most audience engagement at the best prices. Let’s just say it’s a good time to consider platforms—much like the aforementioned CTV, audio, and digital OOH—that never relied on cookies in the first place.

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