We’ve all been hearing for a while about the coming death of third-party cookies, but what many people don’t realize is that even with cookies still functioning on Chrome, their effectiveness is already greatly diminished. Campaigns powered by third-party cookies are commonly matching audiences at around 40%, meaning that advertisers are reaching less than half of the people they want to connect with. Signal is less reliable, presenting challenges for targeting and measurement. This is happening now, not in some imagined future.
How did we get here? And what can brands do about it?
Read on – this article delves into the deprecation of third-party cookies, its impact on enterprises, and strategies for navigating the post-third-party cookie era.
Back in the heyday of third-party cookies
Few individual elements have played a more pivotal role in the evolution of digital advertising than third-party cookies, which functioned for years as the basis for data collection and user tracking.
These small pieces of data, stored by a user's browser while visiting a website, allowed businesses to gain insights into user behavior, making it possible to launch highly targeted advertising campaigns. As a result, businesses have enjoyed the ability to deliver tailored content, boost conversion rates, and maximize returns on advertising investments.
But with mounting privacy concerns and a shifting regulatory landscape, the era of third-party cookies is drawing to a close. Firefox and Safari have already phased out support for these tracking mechanisms and while Google keeps kicking the can down the road it will eventually sunset cookies on Chrome; enterprises must now adapt to a new reality that places user privacy and consent at the forefront.
The decline of third-party cookies
While third-party cookies have been instrumental in shaping the digital marketing landscape, their ongoing deprecation signifies a monumental shift. Various factors have converged to accelerate the demise of these cookies.
Heightened concerns over user privacy and data security have led to stricter regulations such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Browsers like Firefox and Safari already block third-party cookies by default, and Chrome has started their phased approach to blocking them by default. Additionally, the twin trends of advancements in technology enabling greater controls users have over their data and media coverage on the topic has led to a demand for increased transparency and consent.
The impact of the third-party cookie deprecation on enterprises
The shift away from third-party cookies holds profound implications for enterprises, particularly in the realm of data collection and tracking mechanisms, which have a major downstream impact on their advertising efforts. Over the better part of the last two decades, third-party cookies have been instrumental in facilitating user profiling, allowing businesses to create finely-tuned customer segments for targeted marketing efforts. Moreover, they have underpinned retargeting strategies, ensuring that users are exposed to ads relevant to their browsing history.
With third-party cookies on the brink of obsolescence, enterprises face a twofold challenge:
Targeting: The precision of user targeting is expected to diminish, potentially leading to ad waste and reduced campaign efficiency.
Measurement: The strategies and tools that businesses have long relied upon for data-driven decision-making are undergoing significant disruption. For example, many attribution tools depend on third-party cookies to allocate advertising budgets - without which it becomes little more than guesswork.
Navigating the post-third-party cookie era
Here’s the good news: The challenges presented by the decline of third-party cookies are by no means insurmountable. Enterprises can adopt several strategies to thrive in this new landscape, prioritizing both privacy and effective marketing.
Embracing first-party data collection
In the post-third-party cookie era, enterprises must pivot towards a first-party data strategy. Instead of relying heavily on external data sources, businesses must focus on building direct relationships with their customers to gather first-party data with consumer consent. This approach not only addresses privacy and consent concerns but also offers a more accurate and reliable source of information, since the data comes directly from the customers and not through a network of vendors where pieces get lost in translation.
At the top of this article we referenced advertising match rates based on third-party cookies commonly dipping to 40%. When Google phases out cookie support on chrome, this is projected to plummet down to 10%. In contrast, match rates based on first-party data often reach as high as 90% due to the higher accuracy and reliability of data collected directly from customers.
Here are a few things to think about when it comes to collecting first-party data:
Building direct relationships
Enterprises can encourage users to share data by establishing clear value propositions. Brands should emphasize the benefits of sharing data, such as receiving personalized recommendations, exclusive offers, or improved user experiences. By fostering trust and transparency, and particularly by making it clear why the customer stands to benefit from sharing their data, enterprises can motivate users to willingly provide information.
Consent for data sharing
Gone are the days of passive data collection through third-party cookies. In the new landscape, enterprises should prioritize obtaining user consent for data collection. Implementing clear and user-friendly opt-in mechanisms empowers users to make informed decisions about sharing their data. Consent forms should be concise, jargon-free, and easily accessible.
Keeping an eye on the other alternatives across the industry
While building a strong first-party data program is by our estimation the best and most durable solution moving forward, there are also several alternatives being put forth by the industry that are worth keeping an eye on.
Solutions like The Trade Desk’s UID 2.0 and Google’s FLoC take novel approaches by using advanced data science and AI to provide a degree of accuracy while maintaining user privacy without the use of third-party cookies. Several other technology vendors have also introduced their own solution.
As of the time of this writing, a clear winner has not emerged. Furthermore, Google has announced that they will not be supporting universal identifiers as a replacement for third-party cookies.