What is Happening?
Google has announced that it will phase out third-party cookies from its Chrome browser within the next two years. This follows earlier moves from Mozilla Firefox and Apple Safari, which already prevent third-party cookie tracking.
*First-party cookies will not be affected, so publishers can still track their own users.
Definitions:
- First Party Cookies – are stored by the domain (website) you are visiting directly. They allow website owners to collect analytics data, remember language settings, and perform other useful functions that help provide a good user experience.
- Third Party Cookies – are created by domains other than the one you are visiting directly, hence the name third-party. They are used for cross-site tracking, retargeting and ad-serving.
Why is this happening?
Google wants to “fundamentally enhance” online privacy for hundreds of millions of web users. Today, third-party cookies are the backbone of digital advertising. They allow us to target consumers throughout the web via audience targeting or remarketing, to gather behavioral data on consumers, and to track the consumer’s journey across devices and sites.
However, as targeting and data collection get more advanced and consumer privacy becomes a much larger concern, Google wants to make third-party cookies “obsolete” and hopes to develop alternative standards to “sustain an ad-supported web” that may be less invasive.
The result will be an end to current cookie-based targeting and measurement across the digital ecosystem—and the way many marketers are measuring performance today. Third-party cookies are what allow marketers to target across digital channels. So, without them, we would have less advertising personalization, decreased ability to retarget, and reduced conversion insights. If third party cookies were to disappear right now, those impacted the most would be DSPs (like Verizon DSP) and other programmatic platforms that depend on third-party cookies to identify individuals across sites.
Below are two illustrations which help explain why Google’s decision is so pivotal for our industry. The first is the breakdown of all RTB (programmatic) inventory:
31% of all inventory is on apps. This inventory is still “trackable” for now, meaning we can still use audience targeting, retarget, gather behavioral data, and track conversions via a DSP. This is because apps don’t use browsers.
69% of all inventory is on web browsers like Safari, Firefox, and Chrome. Below is a breakdown of all web inventory:
As you can see, Chrome is the largest web browser by a significant margin. Once they disable third-party cookie tracking, we will lose our largest inventory source that still allows cookies.
Who/What else does this affect?
- Google and Facebook: This strengthens the “walled gardens” of Google and Facebook. Google controls over 80% of the search market and over 60% of browser activity, and Facebook can reach over 70% of US adults (35% of the world). Google and Facebook don’t need third party cookies to track their users. Once cookie tracking is phased out, advertisers will have to lean on this duopoly even more than before to reach mass audiences and track their activity.
- Consumer Privacy: This will help ease consumers’ privacy concerns, as online activity can’t be tracked as easily by third parties without clear consent. The future infrastructure of the web will likely be more “privacy-first” by design.
- Open and Free Web: Consumers’ access to online content might be limited or at risk in the future. The web is open and free for consumers because of online advertising, which heavily relies on third-party cookies to function. Publishers may limit access to consumers or start charging access fees if ad revenue declines.
- Attribution and Measurement: Multi-touch attribution services from independent martech providers could become even more difficult. As the “walled gardens” of Google, Apple, Facebook, and Amazon grow stronger, attribution across these players will become increasingly difficult.
- Publishers: Publishers, especially less-known ones, depend heavily on advertising revenue to fund their content. The use of programmatic ad buying and ad exchanges gave publishers easy access to advertisers. Programmatic ad buying depends on third-party cookies. Alternative forms of making it easy for publishers and advertisers to connect will be critical to all but the largest publishers and for robust content on the web.
The Future and Possible Solutions
Scale Marketing and Programmatic:
The biggest thing affecting Scale Marketing is how the cookieless world will change the way that DSPs operate. Verizon DSP’s targeting, insights, and cross-device conversion attribution would all be very limited if the cookie were to disappear today.
Seeing how this change will severely disrupt the entire programmatic ecosystem, it’s likely that changes will be made to DSPs in the next two years that ensure targeting and conversion attribution will still function similarly to today. The industry will need to find new ways to enable targeting without tracking individual users across sites. The “how” will change, but the fundamentals of programmatic advertising will not.
A few possible solutions could be:
- Google’s “Privacy Sandbox” – Google wants to replace third-party cookies with 5 APIs for advertisers to use for targeting, measurement, and conversion attribution. Essentially, all user data remains in the browser on users’ devices and cannot be extracted, which ensures privacy. This is still in its infancy, however.
- Cookie Replacement – there is talk of using some sort of browser ID for all users. Essentially, your cookie profile is not what identifies you, it’s your ID number. However, if Mozilla, Google, and Apple enable this on their respective browsers, it further strengthens their power within the ecosystem and threatens the freedom of the open web.
- Authenticated Traffic Solution – essentially, users who “sign in” to a page or pass through some sort of authentication before viewing the content can be tracked without third-party cookies. Sites that have users authenticated or pass through a paywall will likely see success once Chrome goes cookieless. However, most sites do not do this, and long-tail sites would be in trouble as authentication requirements would erode their site visitor numbers.
- Contextual vs. Behavioral targeting – a more conservative view is abandoning behavioral or audience targeting altogether, and targeting contextually or by content type instead.
Conclusion and Key Takeaways
- We believe that within the next two years, a solution will be put in place that ensures DSPs will continue to be an effective way to run highly targeted and effective ad campaigns. The future of the web depends on programmatic ad revenue, and small and mid-sized businesses will suffer if the ecosystem gets drastically hindered by Chrome going cookieless.
- Brands’ first party data will have enormous value in the near future.
- Many publishers will start requiring some sort of user authentication before entering their site, or they will start charging users upon entry to offset any decline in ad revenue that Google’s announcement causes.
- Google and Facebook are not trying to end an ad-supported internet, so they will be offering alternatives that will give brands a way to buy and sell advertising inventory, although it may be focused on their individual walled gardens.
- Consumers will have a lot more control over their data and how it’s used by advertisers.
- Scale Marketing may have to reevaluate which DSP it uses in the programmatic space, based on each platform’s ability to navigate through this change and continue to offer precise targeting.