Implications of Eliminating Third-Party Cookies

Mahmood
July 9, 2020

To understand how eliminating third-party cookies would affect marketing and advertising practices, it’s first necessary to grasp what cookies are and what they actually do. A cookie is essentially a piece of code that lives on your web browser and it stores information about you so that the browser can identify you, they essentially capture your digital footprint.

There are two key types of cookies: first-party cookies and third-party cookies. At a technical level, they are very similar as they capture almost the same type of information and they perform similar functions, the difference lies in how the information is gathered, shared and used.

First-party cookies are those that are launched by websites that a user is directly on. For example, if you visit the Shine website, the cookie knows you are there based on login details you provide. The website also recognizes you from your previous visits.

There is certain information already stored in the site and it is used to enhance your experience while you’re browsing. Content that is shown to you is personalised based on the information you’ve provided. So it makes the whole experience enjoyable because you’re consuming content that is relevant to you.

Third-party cookies, by contrast, are created by a domain other than the website you’re currently visiting. They use the information you provide to track your browsing activities across other websites. Third-party cookies are placed by advertisers with the goal of retargeting you for their ad delivery.

The third-party cookie lets other ad tech platforms know that you have visited the Shine website which simply means you’re being retargeted on their respective websites or platforms. That’s why you are served ads that are relevant to you or, at the very least, related to your most current online activity.

The ad platforms use the data they have acquired from third-party cookies to determine the types of ads to deliver to you. If you find that you are suddenly seeing ads that relate to your on and off Facebook and Google activities, that means the third-party cookie has done its job.

There are other things at play when it comes to third-party cookies. For instance, there’s the data management platforms where advertisers pay more to get access to people within that platform. This enables advertisers and businesses to identify their audience segments and target specific users in their marketing campaigns.

From a business standpoint, access to data is beneficial. Why then is Google phasing out third-party cookies in their Chrome web browser?

Evidently, in the third-party cookie system, there’s a thin line that separates privacy and user identification. Users are demanding privacy and transparency about how their data is being used.

It can be surmised that Google’s motivation behind the decision is that it is impacting the kind of information being shared by other publishers. Google will still track people’s information but they are going to do it in different ways. This is just Google’s way of responding to what Mozilla and Apple have been doing in limiting the use of cookies in obsessively tracking individual users to protect consumer privacy.

Instead of using third-party cookies, Google would use technologies like browser-based machine learning to deliver targeted ads to a group of people with similar interests instead of tracking individual users. Specifically, through Federated Learning of Cohorts (FLoC), tracking would be based on the browsing habits of a large group of users instead of the browsing activity of a single user.

Google’s drastic move will certainly affect ad platforms because targeting becomes more fragmented and less specific. The way that DMP’s acquire data will be significantly curtailed. So with the new update, DMP’s will be less effective in unlocking audiences and less accurate in measurement and attribution.

But this will not deter platforms that get user information. They will just find other ways without using third-party cookies. For instance, Facebook’s introduction of the first party cookie pixel. Simply put, Facebook’s new first-party cookie pixel is a workaround for cookie-blocking techniques like Apple’s ITP. The cookie looks like it’s coming from the site displaying the ad, while in fact it sends data back to Facebook and, as such, performs functions typical of third-party cookies.

This will significantly impact brands because they now have to leverage their own information, instead of relying on third parties. So the implication for brands is that they need to set up their websites or use technology in such a way where they are better at tracking the information that they get from users, especially brands with high volumes of traffic.

Customers give the brands their data and so they are allowed to advertise to them, which is still within the realms of first-party data. So if you hold customer information, you can essentially do as you like within the realms of the privacy policy and terms and conditions. It will require brands to be a bit smarter about how customers interact with them on their own platforms.

So the most important question is how will this affect creative and media consultancies like Shine?

There are quite several implications in the ad serving and media planning space and for advertisers that have built their strategies around third party data it will be back to basics such a return to contextual advertising, and more reliance on advertising within the walled gardens of Facebook and Google. The key opportunities will lie within first party data and having a first party customer data strategy will be paramount because there will be increased opportunities for audience monetisation for those organisations that have good control and insight of their first party data.

Clearly, it will require us to look at the customer data that we have on file and use that to its full potential. First-party data will now be utilised and this is where the integration between marketing technology platforms and ad technology platforms comes in.

Marketing technology will be anything that deals with engagement platforms such as the Adobe Suite, Marketo, Salesforce, Marketing Cloud, Pardot, and Hubspot. So it’s more around the promotion and looking at ways on how to communicate with the customers that you’ve already got on hand, so through the likes of emails, SMS, push notifications, and so on.  Ad tech platforms, on the other hand, are where you’re pushing information out on publisher’s sites such as your Facebook, Google, and websites.

With the elimination of third-party cookies, agencies could face difficulties with attribution. Attribution is the allocation of credit or weight across different touchpoints that lead to a conversion. This is why it is essential to capture those touchpoints through your first party data because media attribution is essential to maximising your media effectiveness – in the absence of first party and third party data, media attribution will take a step back to last click (which is a separate story on it’s own).

To summarise, the crumbling of the cookie is not something that is new or something that we should be shocked by. It is a natural evolution of digital marketing – advertisers need to focus on their own practice and their own information rather than reliance on what happens outside of their platforms. Focus on what your own customers and prospects are doing and how they behave to retain them and to attract more like them, it’s easier said than done but it’s becoming more apparent that that is the only way forward.

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