What are Third-Party Cookies?

Cookies are files that are generated automatically and stored on your computer when you visit a website. These cookies improve the user experience by remembering your basic information, sign-up data, passwords, and user preferences. First-party cookies allow websites to track user preferences and data while visiting their sites; however, they cannot see what the user did across other websites.

Third-party cookies are pieces of code that exist on the website a user visits. These codes store user browsing data, settings, history, and other user information. Third-party cookies carry over the information to another site (which is different from the initial site) – often an advertising site. As such, advertisers use third-party cookies to collect user information and make more targeted advertising. For instance, if you are looking for dresses, you will find different dress advertisements if the site is collecting third-party information.

Third-party cookies help advertisers learn about customer behavior, interests, purchases, and patterns across different websites. Initially, third-party cookies were enabled automatically by default, and users had to disable them manually. However, websites are now required to ask for consent to collect data through third-party cookies. 

If you are an advertiser tracking your customer’s data while they are on your website, this new phase-out by Google will not impact you that much. But if you are an advertiser that relies heavily on third-party data for online advertising and a more targeted audience engagement strategy, you might have to consider alternative first-party cookies. 

The Use of Third-Party Cookies in Advertising

Third-party cookies bring many benefits to advertisers. They help advertisers understand their customers better by collecting user data across a range of different websites. Third-party advertisers can display more individualized and personalized ads. This may enhance the overall user experience. Users see more relevant ads based on their preferences and click on them, which creates revenue for advertisers. Third-party cookies often collect more information than first-party cookies. However, with increasing awareness about data security and privacy concerns, third-party cookies have been heavily criticized by experts and academics.

The end of third-party cookies for advertisers could have serious implications on their revenue. There are many alternatives that advertisers can use for data collection. These include universal identifiers (UIDs) – similar to cookies but more privacy-centric, seller-defined audiences, making cohorts of audiences, and contextual targeting. A combination of these different techniques can allow advertisers to effectively understand their customers and personalize advertisements.

Waning Support for Third Party Cookies

The dramatic wane of third-party cookies is not a surprise to many. Many governments across the world have been initiating a crackdown on data security and privacy issues. For instance, the European High Court ruled that EU users have to consent to all cookies and analytics if they are logging into a website. If they do not consent, the website cannot collect any data or analytics from the user’s browser. 

As mentioned above, Google is not the first browser to remove third-party cookies. Mozilla Firefox and Safari automatically block third-party cookies. With the new change, Google Chrome will block third-party cookies by default by the end of 2023.

Google’s Continued Delay on Third-Party Cookie Removal

Originally, Google announced that it would phase out third-party cookies at the beginning of 2022, and that was delayed to the end of 2022. Now the date for the death of third-party cookies has been postponed until the end of 2023. Currently, Google is in a very difficult situation – a kind of double-sided sword. If it cuts third-party advertising to address the regulators’ and users’ concerns relating to privacy, it will find itself the only company that dominates the advertising tech ecosystem. Google will dominate advertising, search engines, and browsers. The more Google cuts third-party advertising, the more it increases its dominance in the ad space. And if it does not cut third-party cookies, it will come under greater scrutiny from the government and regulators. 

It is not clear how Google plans to approach the issue. There is uncertainty regarding whether they want to completely remove third-party cookies or give customers more autonomy, control, and transparency while maintaining third-party cookies. Irrespective of the steps Google takes to address the issue, advertisers have alternatives to reach customers and collect information (even if not through third-party cookies).

Earlier in August, Google announced that it is creating something like a “Privacy Sandbox” – a secure environment for personalization that protects user data and privacy. Under the Privacy Sandbox, all the user data can be stored and processed securely into a Chrome browser. The data remains on the user’s device and is compliant with data storage regulations. However, the current Privacy Sandbox schedule falls short of details of how data will be stored and processed.

Final Words

With Google’s efforts to phase out third-party cookies, advertisers that heavily rely on third-party cookies for their advertising should seriously consider alternative methods. Data privacy and security concerns are not trivial issues. The key to success is implementing a privacy-first approach to data collection and advertising. Looking for alternatives is highly relevant at a time when users use more and more devices to make purchases and browse products. Collecting data across the web does not give a comprehensive picture of user preferences. Therefore, even if Google decides not to block third-party cookies, advertisers should still look into better alternatives that help them get a more holistic view of customer information. As such, the current delay by Google provides a window of opportunities to advertisers to seek and implement various alternatives and test what works best for them. 

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Since third-party cookies are the primary way the ad industry has tracked users and measured the effectiveness of online advertising, this phase-out of cookies could have detrimental effects on the industry. Google, which derives a lion’s share of its revenue from ads obviously has a vested interest in ensuring the ad ecosystem stays healthy. So it has come up with various proposals that would safeguard privacy while enabling the ad industry to flourish. 

What Are Google’s Alternatives To Third-Party Cookies?

Google proposed a set of alternative measures, including Privacy Sandbox, Cohort-based tracking, and Turtledove to collect information for advertisers while ensuring user’s privacy. The basic aim here is to establish an operating system that ensures healthy web practices, while still being able to serve relevant ads and track their performance. 

Google also stated that it will aggressively block non-cookie-based cross-site tracking practices like fingerprinting, cache inspection, link decoration, network tracking, and other Personally-Identifying Information (PII).

Privacy Sandbox

Google’s Privacy Sandbox proposes to introduce a set of privacy-preserving APIs to operate the open web in the absence of third-party cookies. The privacy sandbox acts as a monitoring authority by not letting the user’s browser track any information related to the user’s personal identity while measuring information on Ad-selection and conversion for publishers and advertisers. 

Privacy Sandbox, in a way, offers a protected ecosystem for the user’s personal information. Under the stated ideal conditions, users would enjoy all the privileges of browsing the web with confidence that browsers are there to take care of their privacy. The proposed system will also allow the user to turn off any personalized advertising without degrading user experience on the web. 

Cohort-based Tracking

Cohort-based tracking allows advertisers to target consumer behavior in aggregate based on the places they visit rather than being able to target users individually. A  number of FLoCs (Federated Learning of Cohorts) are made available on browsers to collect these details without infringing on the privacy of the consumer. Advertisers can decode this data for making decisions based on the ultimate action of the visitor after having browsed the site. This is still at a very formative level and several questions are emerging on how Google would execute this model.

Turtledove Model

Turtledove offers a privacy-first method for retargeting users who have previously interacted with an advertiser or ad network. This model proposes to completely re-architect the current system so that user behaviors are not stored in a remote database but are stored in a browser. The key to how ad auctions run within this new system is found in TURTLEDOVE’s name, which stands for ‘Two Uncorrelated Requests, Then Locally-Executed Decision On Victory’.

TURTLEDOVE isn’t a usable API yet, so it is difficult to specify how and what all would change until it is implemented. But it gives an early indication of how web-based advertising might look in the future.

How Effective Are Google’s Alternative Measures?

Google’s proposed alternative measures will allow Ad-targeting, Measurement, and Fraud Prevention to happen according to the standards set by its Privacy Sandbox and aim to replace cookies with five application programming interfaces. Advertisers will use API to receive aggregated data about issues like conversion (how well their ads performed), and attribution (which entity is credited, say, for a purchase). 

Privacy Sandbox will provide an alternative pathway for the Ad-industry to rely on anonymous signals within a person’s Chrome browser to serve relevant ads. This model, according to Google, allows content creators to operate without any gatekeeping mechanism and while allowing end-users to access information freely. 

These measures have definitely been designed keeping in mind the privacy of the user, and the effectiveness of them can be analyzed once these measures are implemented and the users are introduced to the cookie-less world. 

The Takeaway 

While Google’s proposal seeks to provide alternatives to support the ad ecosystem instead of simply blocking third-party cookies as done by competing browsers, there are still several challenges to overcome.  The main concern is Google’s already near-monopoly domination of third-party advertising. There is widespread fear that the adoption of Google’s solution would further entrench the company’s monopoly and make it hard for competitors to thrive. The other being that the current ad-supported web business model relies heavily on the existence of third-party cookies. Information dissemination on the web as text, images, videos, and graphics in the form of ads, content, and other formats is taking place on the existing model. How Google’s measures will be adopted by the wider ad industry is still unclear.

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Online advertisers were using third party cookies for years as a standard tool used as a third-party tracking technology. However, in the near future, third party cookies will soon be the thing of the past as Google Chrome is going to support this functionality by 2022. Apple’s Safari and Mozilla’s Firefox dropped support for third-party cookies in 2017 and 2019 respectively, leaving Chrome – the most-used browser with a 69% market share – as the man standing.

What Would A Cookie-less World Feel Like?

So when we talk about a cookie-less world, we are really referring to a world in which ad tech vendors, marketers, advertisers, and others can no longer access third-party cookies set on websites.

Several brands including that of marketers, advertisers, publishers, and technology providers are yet to embrace the cookie-less future. Even though many of them believe that such a future may have a serious impact on brand building.

Aroscop and Brand Equity took a poll in their new study with over 450 technology providers, advertisers, and marketers. Out of all of those brands, 22% of the respondents were confident that brand building would have serious consequences without cookies. The study also showed that only 8% of these brands were prepared for the shift and deployed alternate solutions for it. However, 35% of the respondents are actively looking for solutions to adapt to cookie-less marketing.

In the study, advertising agencies also stated that loss of clients, diminishing profits, and inability to acquire new clients would be their top priorities while entering the future without cookies.

What Are The Possible Challenges To Tackle In A Cookie-less World?

Nonetheless, there are a few challenges that brands and marketers would have to tackle while heading towards the cookie-less world. The first challenge would be for the advertisers to deliver personalized content to their users. For quite some time now, the advertisers relied on third-party cookies for personalization. After third party cookies being obsolete, personalization would have a severe impact. Apart from this, frequency capping could change drastically in the post-cookie era. Advertisers could have a tough time while managing the frequency of ads being displayed on the internet to users.

Behavioral targeting is another challenge that is fuelled by third party cookies currently. User behavior helps advertisers collect data to track and target prospects for them. It will be majorly affected without cookies in the future. Customer acquisition will also become more difficult. It is no longer about cold emails and offers anymore. Guiding the buyer through a sales funnel with relevant content across platforms has always been fruitful for the marketers. Cookie-less advertising will change the way brands acquire customers.

Self-reliant Publishers – Is This The Way Forward?

With cookie-less tracking, brands and marketers would have to rely on first-party data that publishers control on websites. Publishers are now building their own walled gardens providing advertisers with accurate data as they are drawing closer to the cookie-less world. Publishers would be in an extraordinary position connecting advertisers with high intent customers considering how rich data will become scarcer.

Furthermore, user privacy has become a real issue in this matter, and focussing only on cookies would not do justice to analyze how things would turn up. Using data to understand the behavior of the user has always been a key part of any brand objective rather than just to drive growth and gain profit from it. Building consumer trust and quality targeting must always go hand-in-hand when it comes to the goal of a brand.

Will Tracking Tools By Companies Successfully Tackle A No Cookie Environment?

Meanwhile, many companies have developed their own tracking tools and procedures while gearing up to perform well without third-party cookies. Google, for instance, has developed “universal IDs” that do not require third-party cookies and would identify users while tracking them across different devices. Although, the idea that in order to target the users many smaller publishers would have to use Google’s universal IDs, does not sit well with many in the industry.

Google is also starting to pitch a Privacy Sandbox as an alternative. The initiative is to help track while continuing to allow ad targeting within the Chrome browser. However, it seems to the advertising industry that the proposal may come with a catch. With Privacy Sandbox, cookies are replaced via five software-programming interfaces. Advertisers can use each API to obtain collective information concerning problems like conversion (which means how properly the ads performed) and attribution (meaning which entity is attributable, for instance, for a purchase). It acts as an alternate pathway that Google has presented to the market relying on anonymized alerts, which are not cookies, inside a user’s Chrome browser to take advantage of his searching habits.

Microsoft is also not far from developing a way to track its users without cookies. It can track users with its Windows software, including tablets and Windows phones, even the users of Xbox gaming systems. The tracking technology of Windows works by assigning a number to the user or a unique identifier. That unique number would track the user across Windows-enabled devices.

Pandora, the online music streaming service, is also hoping to leverage its first-party data to overcome the absence of cookies. Pandora gets the users’ login information including their email, age, location, and gender. The service cross-references the data with the US Census and their listening habits before offering the targeted inventory for advertisers. Because of its predominantly mobile-based audience, it is actually an advantage for Pandora to move to first-party data.

How B2B platforms are gearing up?

Likewise, B2B online targeting and personalization platform, Demandbase, has developed one of the first cookie-less ad targeting solutions. It allows users to identify a group of businesses to advertise to, as the targeting tool is solely helpful for B2B advertisers. The B2B targeting tool is an extension of Demandbase’s Company Targeted Advertising solution. It uses corporate IP addresses of visitors as a source of identification to know from which company the person belongs. With this tool, any time a user visits the Demandbase client’s webpage, it can track the IP address back to their company and potentially gain a new lead.

Skepticism & Forecasting A Cookie-less Future

Many smaller firms fear a takeover of online advertising by Google if cookies cease to be useful. One of such smaller firms is Xasis, an agency ad trading desk. It is proposing a new industry standard called “statistical ID”, rather than developing its own exclusive tool like the other companies discussed above. The idea of statistical ID is to identify users by their devices and other anonymous attributes. Instead of using cookies, the combination of these attributes will be used by the advertisers to target the users.

To sum up, everything that has been stated so far, a private marketplace (PMP) advertising environment could become common among publishers in the near future. It will act as a digital marketplace where advertisers can buy premium inventory for their advertisements. The main idea behind PMP advertising is data quality assurance. It is predicted that such an environment reduces the chances of ad fraud, enhances brand safety, and facilitates more accurate targeting. While this is a challenge for ad tech vendors and marketers, maybe it creates a path to provide more control to publishers and content creators. It will be interesting to observe how brands and marketers would adapt their offerings and services to cater to the new demands of advertising in a cookie-less era.

If you are looking at reading more about Cookies, click here and find out the impact Of 3rd Party cookie blocking on Ad Revenues.

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