Activity tracking via third-party cookies is on the dawn of extinction as the digital advertising industry pivots to provide companies with the targeting data they need and consumers with the privacy they deserve.
Cross-site tracking with third-party cookies has been a monitoring practice since the early 1990s, and advertisers have depended on the method for things like reaching a target audience, managing ad campaigns and even measuring performance. But the move to enter into a cookieless online world amid privacy concerns is now forcing the AdTech industry to think outside of the cookie jar. And what they are finding are new promising avenues that are poised to further disrupt the industry.
What are third-party cookies?
Cookies are sets of information about the web user that have been collected and stored. The purpose in doing so, however, can differ depending on who is collecting the data.
First-party cookies are collected by the website publisher, and stored only for the site, to enhance the user experience with things like remembering log-in information and offering suggestions based on browser history on the website. A great example of first-party cookie usage is a saved cart on an E-commerce site. Say a consumer has logged into his or her account and placed items in a shopping cart. If the user exits the website but comes back at a later time and logs back in, the items have remained in their cart for purchase.
Third-party cookies are sets of tracking information that have been stored into a cookie, often used for displaying targeted advertising on another website (other than the one the consumer is currently viewing). For example, a consumer is browsing the website of a company that sells candles. Later in the day, the consumer accesses the internet to pay a utility bill and sees an ad for candles from the previously visited website. The ad has been placed there via third-party cookies as they follow the consumer’s internet usage activity, most often without the user’s consent or knowledge that it is happening.
The ability to collect, analyze and make decisions based on crucial information about users has been a substantial benefit to publishers and advertisers who are looking to get their products and services in front of potential customers, even when they are not looking for them.
The phase out
Despite the value third-party cookies have held for publishers and advertisers, they have long been scrutinized as an invasion of privacy. Throughout the first two decades of the 21st century, legislative officials around the globe have addressed these privacy concerns, putting into place regulations regarding their usage. By 2018, the European Union enacted the General Data Protection Regulation, which is considered the most stringent privacy law in the world. The law outlines seven data principles that must be followed when handling online data.
While there is no federal law that encompasses the United States as a whole, individual states within the country do have laws that address third-party cookies, including the California Consumer Privacy Act. The law, passed in 2018, currently presents the strongest privacy law in the United States.
Outside of governmental agencies, tech giants Mozilla Firefox and Apple Safari have made the move to ban third-party cookies on their platforms over the last few years. Google plans to phase out third-party cookies with its Chrome web browser in 2024. While Google has been slow in doing away with third-party cookies, postponing the blockage from 2022 to 2024, when it does happen, it will have the most significant impact as the Chrome platform accounts for 65 per cent of the global browser market.
Growing in a post-cookie era
The need for advertisers to shift gears in how to best reach the target audience wasn’t a surprise move by any means. AdTech companies have long seen the writing on the wall regarding the practice of third-party cookies and have been anticipating the disruption in the industry. In fact, big tech movements like machine learning with its ability to extract and analyse useful information for companies has outpaced the somewhat outdated practice of third-party cookies, anyway.
The innovation in new tech tools not only led publishers and advertisers to more privacy-friendly methods but pushed them beyond the limits of what third-party cookies ever did. Because of this, advertisers aren’t waiting for the last crumb to fall in 2024 and have already abandoned the third-party cookie approach. Forward-thinking AdTech agencies are adopting new alternative digital advertising strategies that are already proving successful and giving them the competitive edge. Here are some examples:
First- and second-party cookies
First-party cookies are one way publishers and advertisers can still receive information from customers, and it can be an effective way to leverage that data for growth. Companies are increasing their focus on the touchpoints they do have through first-party cookies, like what the consumer is viewing on the website and what kind of device they are using.
The general information is a good identifiable start that can later be expanded upon with the user’s consent. For example, many companies will offer discounts or coupons to incentivize users to give more information about themselves. McKinsey & Company, a global management consulting firm, notes that review site Yelp does this effectively by asking users to specify their dining habits, thus drawing in more information about them.
Complementing the use of first-party cookies, is the use of second-party cookies, which many agencies are turning to, to reinforce their advertising efforts. Second-party cookies are information that essentially is shared (usually sold) between two organizations. The difference between second-party cookies and the first- and third-party cookies is that the information is never stored on the internet (with the help of cookies) or used to track a user’s activity. It is exchanged by companies that have a shared interest in the user and formed a partnership.
Contextual advertising
Another high-tech option for displaying relevant advertising in the Post Cookie Era is through contextual advertising. The science behind this type of advertising is targeting based on the site’s context and works independently from the third-party cookie model.
How exactly does it work? It is through the use of machine learning to detect what a user is consuming at the moment and match relevant advertising instantly. Say a user is viewing a video about cooking, that user can then be presented with matching meal kit services. Contextual advertising is a leading force in the post-cookie Era, delivering the privacy that consumers want without sacrificing the personalized treatment that elevates their experience.
Compado, a B2B tech platform based in Berlin, Germany, is revolutionizing the industry with their contextual advertising technology. Through the use of machine learning and artificial intelligence, the company connects purchase-motivated audiences with value-driven brands. The company targets users on media, content and review sites and limits the matches to only the best contextual fit, which result in higher conversion rates.
Open-source intelligence
Social media sites have long skirted privacy issues with an advertising approach that targets users, based on their data, but it is conducted in groups or categories rather than by individual. Open-source intelligence uses data that users have made public to help them gain insights and effectively reach consumers.
In a similar approach, Google has produced The Privacy Sandbox, to bridge the gap between privacy and advertising. Currently in the testing phase, Google’s Privacy Sandbox promises extensive application programming interfaces that give users more control over their privacy and give advertisers more opportunity to analyze data and measure performance.
The differences between third-party cookie tracking and open-source intelligence like Google’s initiative is that users are not cross-site tracked and the data collected is not detailed for unique users but rather analysed in groups based on similar browsing activities.
Advertising in a new era
With each advancing wave of technology, new tools and strategies emerge that overshadow and often overpower what had been in place. It is no different in the case of the deprecation of third-party cookies.
Businesses are rallying to the challenge of providing innovative solutions that lead the charge in protecting the privacy of consumers while uniting web users and brands in unique and effective ways.