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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