As a result, Google will join Firefox and Safari in announcing that it will phase out the third-party cookie on Chrome browsers, which are responsible for more than half of all web traffic, by 2022.
To examine the changes further, STAPHAUS Co-Founder, Kyle Knapp sat down with Brett Goverman, Senior Customer Success Manager at Permutive, an audience platform for publishers and advertisers. Brett explains what this means for the future of digital advertising, who stands to benefit the most and what publishers and brands need to be ready for a new marketing landscape.
Kyle: Simply speaking, what exactly is a third-party cookie and why is Google phasing them out?
Brett: Cookies are small pieces of code that are stored on your browser (Chrome, Safari, Firefox etc.) that enable a website to recognize and remember your activity when you come back to the site. In practice, cookies enable sites to remember what a user put in their cart or items they viewed. This kind of data collection is generally done with a first-party cookie because the user has a direct relationship with the party collecting the data (the site). An example of first-party data collection would be if I'm on Target's website and put a kitchen appliance in my cart but don't checkout. Target can identify me when I come back to their site and alert me of an active item in my cart to drive purchases.
Third-party cookies are generated, managed, and owned by an entity outside of the direct relationship between the user and the site. This is why it’s called “third-party”. These cookies and the data they generate are generally owned by advertisers or ad networks (like Facebook). The notable difference between first-party and third-party cookies is that third-party cookies can be used to track users across domains. This enables an advertiser to track and collect web activity for a specific user regardless of what site they are on. Here's an example - I log onto Facebook to check a friend's update, then go to ESPN to read about Football, and then go to Amazon to shop for new sunglasses. With third party cookies, Facebook can track that I have read about the Dallas Cowboys and have looked at Ray-Ban sunglasses. When I return to Facebook this information collected outside of the Facebook environment can be used to serve me targeted ads.
Kyle: It's estimated that about 80% of advertisers still rely on third-party cookies. What does a cookieless world look like for advertisers?
Brett: Consumer privacy is reshaping how the ecosystem functions at its core. The deprecation of cookies will have significant impacts on marketers that are still reliant on third-party cookies.
The first and most notable change will be reduced scale. Marketers accustomed to targeting large audiences based on demographic data like age, gender, income or location will need to change tactics to reach the same amount of users. This is because third-party cookies are the key identifier used to append data to users. When third-party cookies are no longer supported, the only way to identify users of a certain age or gender will be those users that have willingly provided this information and given consent to use this information for targeting.
The second change will be an increased reliance on cohort targeting. A cohort is an anonymous group of users that share common interests and online behavior. This is fundamentally different to targeting based on third-party cookies because marketers have no ability to identify a single user when targeting with cohorts. The privacy changes hitting the industry will result in a fragmented ecosystem, and cohorts will be the only way to navigate it effectively. Apple, Google, and Facebook are all taking a different stance on what a privacy-compliant digital advertising ecosystem looks like. This will make it incredibly hard to understand what marketing tactics work in each environment. For example, targeting based on email identifiers will work in Safari, but not in Apple apps. Alternatively, those same email identifiers will not work in Chrome. To reduce complication and reach the right audience at scale, marketers will need to rely on targeting cohorts of users instead of individuals.
Kyle: Who stands to benefit most from the deprecation of cookies?
Brett: Consumers. The point of regulations like GDPR, CCPA, and CPRA is to give users more control over how their data is collected, stored, and sold. When Google announced they would no longer be supporting third-party cookies, one of the reasons they cited was that: "Users are demanding greater privacy--including transparency, choice and control over how their data is used--and it’s clear the web ecosystem needs to evolve to meet these increasing demands."
Instead of allowing hidden third-party companies to collect user data by default, individuals now have control over how their data is used. This is incredibly important in a world in which our digital identity and footprint have consequences in the real world.
Kyle: What will replace third-party cookies and how should brands and publishers be preparing for this change?
Brett: Many solutions are being proposed as replacements to third-party data including Google FLoCs, ID consortiums such as Liveramp ATS, and contextual targeting. The reality is that there will be no silver bullet. A successful media campaign will require many different tools and strategies. What we do know is that publishers will be the owners and guardians of user data across the web. This is because the publisher will be the only entity that can generate a first-party relationship with its users. This is important because to collect and process user data moving forward a first-party relationship will be required. This means that brands and agencies will need to work more closely with publishers than ever before. While there will certainly be growing pains, this is a net benefit for the industry. The ad dollars that traditionally went to third-party data aggregators will now be shifted towards the publishers that have invested time and money in creating premium content and attracting a loyal audience.
Kyle: What's Permutive's role in all this?
Brett: Permutive is a platform that enables publishers and marketers to succeed in a world without third-party cookies. Permutive's technology helps the buy-side and sell-side leverage first-party data to build, understand, and activate their audiences. Permutive has always been a privacy-first organization. We want to be part of an ecosystem that gives users more control of their data while enabling marketers to develop a relationship with their target audience in a privacy-compliant way.
