The Death of Third-Party Cookies: What You Need to Know
In March, Google confirmed it was phasing out third-party cookies, which, by 2023, will be blocked by Chrome web browsers.
Although this news is not a complete shock, the digital advertising community is understandably concerned. Since the '90s, third-party cookies have played a massive role in the business model of publishing on the internet.
Why is Google making this change? According to the tech giant itself, it wants to protect people's online privacy. This move is part of a general worldwide move by governments to tighten data privacy rules. For example, the 2018 introduction of GDPR. However, outsiders pose a less flattering theory — i.e. that Google wants to protect itself from the competition. After all, it will undoubtedly gain more control over the advertising market if it can force the adoption of its own proprietary first-party cookie.
Whatever the reason, it's clear that digital advertisers need to adapt. We can't stop Google from bringing in these changes, but we can find alternatives to relying on third-party cookies. What might these alternatives actually look like? How will they affect marketers?
First, let's take a closer look at cookies.
Small text files, cookies track user behaviour. First-party cookies are placed on a website by its owner. They are intended to improve the user's experience — for example, by remembering their login details and preferences such as language.
In contrast, third-party cookies are placed on a website by someone other than the owner. They track a user as this person moves from one website to the next, collecting information such as their age, gender and tastes. Which websites do they visit? What do they spend the most time looking at? Which social media sites and types of posts do they favour? This information can then be used to create profiles that act as powerful tools for the purpose of creating adverts. We've probably all had the experience of looking at a product on one website and later being shown an advert for this product on another website. This is the result of a third-party cookie.
Another benefit of third-party cookies for marketers is the ability to measure and track the success of campaigns on a granular level, helping them to improve their future efforts.
In terms of the user's perspective? Some might argue that showing people relevant adverts, rather than random ones, can be appealing. In general, however, there's increasing anxiety around the gathering and use of data by advertisers and other groups, which is seen as a form of digital surveillance. In 2019 the EU's Fundamental Rights Survey found that 41% of people don't want to share any personal data with private companies, and around 30% worry that advertisers, businesses and foreign governments have access to information without them knowing.
Why is the death of third-party cookies such a problem for advertisers?
Google Chrome will not be the first web browser to block third-party cookies. Safari and Firefox have already done so. But with two-thirds of the share of the global market, Chrome's change will have the most significant impact. Marketers who depend on detailed data for their online advertising efforts will need to rethink their strategies.
Some companies will likely revert to contextual advertising where adverts are matched to relevant content. However, here they'd suffer from a lack of targeting granularity. What's more, they'd struggle to measure the success of these types of adverts accurately.
What's also likely is we'll see more walled gardens. That is an enclosed online area where the user's access to specific websites and services is restricted. Facebook is a prime example. This tech giant profits from having a large pool of data that nobody else can access. More walled gardens will spell trouble for the industry as a whole. Alternative media sources will not be able to enter the market or grow, meaning less choice for advertisers and potentially a very difficult life for smaller publishers.
What might replace third-party cookies?
Currently, there are shifting ideas about the best alternatives to third-party cookies, but here are some of the most likely. It's possible a combination of all three might be used.
1) Tracking first-party data
While third-party cookies are coming to an end, marketers can still use first-party cookies. These are believed to be more ethical because they're based on transparent exchanges of value between publishers and users. In a perfect world, users explicitly allow a particular publisher to store their information for marketing purposes they understand — for example, sending them emails with news and discounts.
Using this approach, publishers will have to work hard to create these worthwhile engagements and win their users' trust. If they manage to collect this data, they can divide their audience into segments and sell advertising space to marketers.
However, the picture becomes more complex when we consider that brands can collect their own first-party data. And these brands can team up with publishers to create more targeted adverts. This will be possible if a brand and publisher know the same piece of information about a particular user, allowing them to form partnerships where they agree to share data. Some are concerned about this idea. How can users still give their permission and understand who, specifically, has access to information about them?
2) Tracking groups of people
This approach would protect an individual's privacy by dealing with aggregated data. Rather than save information about a person's movements on the web to a central server, the technology would store this locally on their computer. This person would then be assigned to a group of users who share common interests and behaviours. Each time they peruse the web, their browser would communicate with the site to indicate which adverts would be most relevant to them. Because the groups might consist of thousands of people and change each week based on new interests and preferences, the idea is that individuals remain anonymous to the advertisers.
Google is possibly the first to start testing a version of this — its Federated Learning of Cohorts (FLoC) model. We recommend that marketers watch out for updates to see how this progresses.
3) Tracking based on identity
Here, individuals would be assigned an advertising ID, most likely based on their email address. This would be encrypted so advertisers would only see a random string of letters rather than the email address itself. Users would need to log into a website using this email address and, if they did so, advertisers could track their browsing habits in the same way they currently do through third-party cookies. It's debatable whether this solution truly addresses concerns around privacy or merely gives us another version of what came before.
What we do know is that marketers must continue to rethink their advertising strategies. As the world becomes more preoccupied with digital surveillance and government policies change and multiply, no one can afford to rely on past methods. As always, it'll be the people who keep an open mind who can imagine a better way forward.
André Brown has a twenty-five-year background in e-commerce. He was the co-founder and former CEO of Attraqt Group PLC. More recently, he is the CEO of Advanced Commerce which provides a Merchandising platform (GrapheneHC) designed for Headless Commerce. You can connect to him on LinkedIn or email him at andre@advancedcommerce.io
