Let us say you search for some smartphone on Amazon, and later in the day, when you visit another site, you see an Amazon advertisement for the same product. If you are not on an Amazon-owned site, chances are third-party cookie data triggered this advertisement.
We have been using cookies forever, but what these cookies do and how much information they share are surprisingly different from their original intent. Third-party cookies are not placed by the domain or the website. Advertisers instead place them to market and retarget users with personalized messaging based on the user's online behavior. In general, third-party cookies are used to show those creepy ads that follow you around the internet. Due to recent data privacy scandals with companies misusing and abusing data from consumers, third-party cookies are set to crumble.
A recent Pew report found that 79% of Americans are concerned about how companies use their data. 41% of U.S. consumers regularly delete cookies, and thirty percent have installed an adblocker. (source: Harvard Business Review)
The backlash has consequently led to regulations and laws like GDPR. It requires websites to show a pop-up once users log in or visit the website and share their data usage online. Another law introduced was CCPA called California Consumer Protection Act. It allows you as a consumer to benefit from three things. One, you can ask companies what data they have about you. Secondly, you can ask them not to sell your data. Lastly, you can even ask them to delete your data.
These changes in the regulatory environment have signaled to the internet companies that they need to update their outdated cookie-based technology system and find a balance between privacy and user identification. It paves the way for the future where there will be more transparency on how companies use consumer data to profitability.
However, despite EU privacy laws stating that consent for cookies must be informed, specific, and freely given, the research suggests that only 11.8% of the sites met the minimal requirements of GDPR law. (source: BBC)
At the center of all the privacy conversation is Google - as they recently announced that they would be phasing out third-party cookies over the next couple of years. It is such a big deal because Google Chrome owns about 64% of the market share of web browsers. The decision to remove third-party tracking will have a sizable impact on billions of web searchers and the ad-tech landscape altogether.
We have finally hit a wall with third-party cookies. At the very beginning of 2020, news broke of the looming apocalypse of the marketing industry, "the cookie-apocalypse," which was the planned removal of the third-party cookies from Chrome.
Why is cookie blocking such a big deal for marketers?
The deprecation of third-party cookies, which were the identifiers forming the basis for the execution of digital marketing to both target audiences and measure the impact of advertising, has marketers concerned. What will happen when these identifiers are no longer in the picture? Is it time to think about marketing more holistically? Notably, the strategy was always based on identity and integrations that allowed effective delivery and was not directly cookie-based.
In the world of ad-tech, just as not all data is equal, so is everyone in the ecosystem not impacted equally. Creating a robust centralized plan can help provide transparency to consumers; second, abide by the regulations; and third, support the needs of the advertisers and publishers.
It comes down to how marketers unify their customer data strategy to better leverage the first-party data they have access to in a respectful way of consumer privacy. The data that companies own will have to be at scale, differentiated, and fully consented so that they can rely on the ad tech platform without the third-party data as well. There will be challenges when it comes to measurement and attribution at scale.
What will replace third-party cookies?
In a world without third-party cookies, marketers will need to find a new way to identify people online to continue to personalize messages, optimize campaigns, and measure performance. Some alternatives are already in the mix to ensure advertising agencies can continue a smooth journey. Currently, this is how third-party cookies are thought to be replaced in the industry and continue to provide effective campaign marketing and a more personalized experience for users.
Google's Browser-Based model
Rather than collecting individual data, this model collects data from users and groups them into similar interest segments that online adverts can later leverage to target with ads.
First-party data tacking
If you are an advertiser company, then any information collected on customer use is owned and can be used, including segmenting audiences, offering them as targets, and ad placements on the site. This information includes content viewed, exciting topics, responses from surveys about demographics and interests.
Like a cookies-based system, a unique identifier for a user will be assessed via login or other forms of id. Access to information such as browsing history, ad views, and interaction can help evaluate in similar lines of third-party cookie tracking.
Without personal identifiers, it collects details about the user such as browser type, content browser, and operating system. It then assesses to look for the same information trends to follow users across the web.
What will happen when Google ends its support for third-party cookies?
First-party data is unlikely ever to go away. It is a direct relationship with your website visitors and will quickly become the most valuable data point you have to understand your customers. At the same time, there are many different ways that this shift will impact marketing analytics, the significant changes like lower ROI, mini walled gardens, and data retention.
Marketing departments and agencies that rely heavily on targets fueled by third-party data should brace themselves to see some volatility with their key performance metrics, especially ROI. Why? Simply put, it will be harder to target the right kind of customer as specifically as third-party cookies do today. If you market to irrelevant customers, your revenue will drop.
It was evident in 2019 when Google ran an experiment with a small group of its ads manager customers. They turned off cookies for them and ad revenue strikingly dropped down by fifty-two percent. Expect to see those numbers shift if you consistently get a five to one or three to one return.
Mini Walled Gardens
Walled Gardens are platforms that have a lot of proprietary data to power advertising structures. Predictions are that more of the industry will continue to create mini walled gardens across publishers and vendors. It is anticipated that they will rely on their logged-in user data to develop their deterministic id models for their platforms. It will make cross-platform attribution more of a minefield than it already is. Retail marketers should be cautious here because there will be many tools with even more technicalities, which will be the talk of the town. Do not use this as a time to invest in more marketing tools. Instead, work with the analytics team to look at the data and validate the tools already used, like ad platforms, email marketing tools, and more.
Another impact to watch out for is the change in data retention. It is not only because of the death of third-party cookies but because public sentiment has come to value privacy more and more. For instance, in the new google analytics, retention of user-level data is fixed, including conversion data. Similar changes down the line will be seen in other major advertising platforms where retention will be limited. It will be hard to use predictive analytics to determine seasonal budgets and performance without historical marketing data.
With a strategic mindset shift, the right tools, and an emphasis on first-party data as the cornerstone of their customer-centric strategies, companies can mitigate the effects of third-party deprecation and set themselves up for long-term success.(source: Forbes)
How can a marketing observability platform be helpful for such changes?
While the end of 3rd party cookies and related impact on retargeting will cause significant impact on ROAS, what can help marketers mitigate the impact is a mind shift away from just acquisition towards better funnel optimization and retention.
Investing in advanced analytics technology like marketing observability, can help marketers realize better returns on their ad spend. There are several use-cases which can be focused and optimized for rather than a narrow focus on ever-increasing retargeting spends.
Can machine learning be used to improve website conversion? For instance, can we use advanced techniques like anomaly detection to identify sudden spikes in abandoned carts or payment gateway failures, or broken marketing campaigns to improve the conversion and ROAS? Can we monitor 1000s of Ad campaigns real-time and be more precise in identifying under-spending & over-spending across Ad groups to be more effective in our targeting and conversion?
Diverting tiny fractions of their large retargeting campaigns on better analytics can have outsized gains for performance marketing. It’s not the lack of data on users, but the smarter and efficient use of data for actionable insights, that will separate the winners from the losers. The demise of 3rd party cookies is a wake up call for marketers to invest in advanced analytics and build a more holistic marketing stack as opposed to a narrow acquisition based one.