The cookies, they are a-changin’. Third-party cookies are leaving, first-party cookies are staying, and the folks who relied on having both to do their jobs are looking for ways to adapt. What does this change mean? Who will it affect the most? And what can people do to adjust?
To set the scene: Cookies have been around since the mid-90’s, and for at least the past decade they’ve been a central part of how marketers and advertisers have been able to target online ads, personalize user experience, and measure ad effectiveness.
First-party cookies are what a site generates to remember a user and their preferences within that site. Say for example you puts an item in you cart, leave the site, then come back; that item will still be waiting in your cart thanks to the cookie.
Third-party cookies, on the other hand, are generated by someone other than the owner of the site where the user is browsing, often an ad network or measurement vendor, and that cookie enables the advertiser to follow the user to different sites. The third party cookie experience should be familiar: you look at a new non-stick frying pan, say, and then for the next several days you see ads for kitchen ware across the web, on news sites and social media and places that ostensibly have nothing to do with frying pans. And it’s not just re-targeting based on the products you’ve looked at: third-party cookies make inferences about users based on browsing behavior across the web, so ads seem to speak to your age, location, and interests.
Beyond personalized ad-targeting, the third-party cookie has also helped marketers measure their efforts. Because the cookie gave them a view into all the impressions and interactions their cross-channel ads have made possible, they would have a better sense of how to allocate their budget and how to justify the budget they propose.
Over the past few years, though, there has been growing momentum among operators of web browsers to block the use of third-party cookies. Citing consumer privacy concerns, Apple and Mozilla took steps to limit and then disallow third-party cookies on Safari and Firefox respectively, eventually followed by a similar move by Google with Chrome. Safari and Firefox were the canaries in the coalmine, given their lower share of use (approximately 18% for Safari and 5% for Firefox). But when Google announced in January 2020 that Chrome, the most widely used browser in the world, would phase out third party cookies by the end of 2021, the reality started to set in.
Who does this affect the most?
The deprecation of the third-party cookie will have a wide-ranging impact across the digital ecosystem. Here’s a brief look at how the loss of third-party cookies affects three key constituencies:
Advertisers and Marketers
Losing third party cookies will limit the precision of ad targeting and personalization, and thereby the effectiveness of advertising as it’s now commonly practiced. Without being able to pinpoint ads, it will be harder to make the most of limited marketing dollars. Cookie deprecation will also complicate the measurement of marketing effectiveness — for companies that don’t have a robust media mix modeling process and rely on third-party cookies for attribution, it will be more difficult to optimize the mix of digital media and channels and to demonstrate how marketing is contributing to revenue. This means a less nuanced understanding of how a potential customer has interacted with marketing and a more difficult time justifying requests for marketing budgets.
Publishers are arguably the most severely affected by the forthcoming loss of the third-party cookie. In many cases, users don’t pay directly to access the content that publishers produce — instead they “pay” by exposing themselves to ads, which will now be less personalized and therefore less valuable. Advertisers won’t pay as much to place ads with publishers if they don’t think these will be effective. Projections of the impact to revenue for publishers have varied, with Google’s own estimate suggesting as much as a 52% decline. While some have questioned those numbers, it does stand to reason that the chance of someone clicking a random ad is much lower than an ad targeted toward their behavior and preferences.
Third-party cookies have been a critical tool for many retailers to tailor online shopping experiences to consumers, as they power many tools like personalization engines and shopping carts. With the third-party cookie going away, companies will need to shift to a first-party cookie. First-party cookies work within a given site to help recall past purchase behavior, browsing history, and other signals of purchase intent that are baked into the shopping experience today, but these require the right infrastructure. Brands that don’t have a first-party solution set up will need to seek out new ways to personalize the site experience.
Who won't be affected as much?
Anyone whose service involves a direct login and offers users an extensive environment where they are likely to spend a lot of time. Operators like Google, Facebook, Amazon, Ebay, Snapchat, Pinterest, and Twitter, as well as the rapidly growing world of streaming media including Netflix, Hulu, Amazon Prime, and other similar services are all first-party by default because they require a login from each user. By creating a profile and logging in, users are consenting to let the company use their data, getting around the privacy concerns with third-party cookies cited by Google and others. The consent inherent in the login then gives these businesses full access to the rich behavioral data gleaned from everything users do during the often large amount of time they spend on these platforms, and that data powers segmentation and targeting within these systems.
These closed ecosystems command a significant portion of ad dollars, and are comparatively insulated from the effects of cookie deprecation. But as ad dollars concentrate into a few players, it makes sense to question how that might raise ad rates and decrease the overall effectiveness of your spend within these platforms. And even though these channels account for a large chunk of ad spend, smaller alternative digital channels are non-trivial and still represent an area of opportunity.
So what are advertisers, publishers, and retailers able to do? Many have been preparing for a cookieless future for some time, but the third-party cookie’s impending demise has added fresh urgency to the need to adopt new technology and infrastructure that can support personalization and targeting based on first-party data and identity resolution. There will be new alternatives to the third-party cookie, but any viable digital advertising strategy for the future requires a level of mastery in accessing, managing, and deploying customer data that they obtain with the user’s consent in the context of a direct relationship as well as trusted second-party partner relationships.
Read on for an overview of what alternatives are likely to spring up in the wake of the third-party cookie and tips on what you can do now to help prepare.