Advertising

The Impact of Third-Party Cookie Depreciation on Advertising

Kanita Čopra

Paid Media Lead

The Impact of Third-Party Cookie Depreciation on Advertising

For years, third-party cookies have been the foundation of digital advertising, allowing marketers to track users around the web, target them with personalised ads, and assess the performance of their campaigns. No wonder then, that in the broad digital realm, the approaching depreciation of third-party cookies represents a seismic disruption in advertising.

The impending change, due for years now, has been inspired by growing concerns about privacy and data protection. Following regulatory change and broadening consumer awareness, online browsers such as Google Chrome, Safari, and Firefox have announced plans to phase out support for third-party cookies. This decision caused waves throughout the advertising business, requiring advertisers, publishers, and ad tech companies to adjust to a new reality.

Understanding Third-Party Cookies

Before discussing the impact of depreciation, it's important first to understand the definition and functionality of cookies. Third-party cookies are text files containing small snippets of information frequently used for cross-site monitoring, which enables third-party services to track visitors across various websites for targeted advertising and analytics purposes. This tracking method has accelerated the rise of online advertising and simplified the distribution of targeted content to users. Essentially, third-party cookies make it possible for advertisers to know that you might be on the market for a new car and they are why you’ll get millions of indie paint company ads on your Instagram after visiting Sherwin & Williams.

The Privacy Paradox

Third-party cookies have helped drive targeted advertising, some of which is actively helpful for the consumer thanks to relevance, but they also pose privacy issues. Critics claim that third-party tracking violates users' privacy rights by gathering and distributing personal information without their explicit agreement. Furthermore, the development of ad trackers has resulted in difficulties such as ad fatigue, privacy violations, and concerns about data security.

In response to these issues, governments have introduced stronger privacy legislation, such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States, aimed at giving users more control over their data.

The Impending Shift:

Major online browsers' decision to remove support for third-party cookies marks a significant shift in the advertising industry. Apple's Safari browser began blocking third-party cookies by default in 2020, while Mozilla's Firefox browser has blocked third-party cookies by default since 2019 via its Enhanced Tracking Protection (ETP) feature.

Google, which owns the majority of the browser industry through Chrome, said it would abolish third-party cookies by the end of 2024. Although Google has already begun removing third-party cookies for 1% of Chrome users in Q1 2024 to facilitate testing, it has once again postponed the removal of third-party cookies in its browser, delaying the date to 2025. The delay is made in response to continuing issues and complaints from many parties, including the UK's Competition and Markets Authority (CMA). More time is needed for assessing data and outcomes from industry tests.

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Impact on Advertisers

The devaluation of third-party cookies presents advertisers with issues and opportunities at the same time. On the one hand, it challenges existing techniques of targeting and tracking consumers, making it more difficult to offer targeted adverts and analyse their effectiveness. Advertisers will need to shift to alternate targeting tactics, such as contextual advertising, which is based on the content of the web page rather than user data. (This will be more than familiar to those practising digital advertising since its advent or even offline media buyers picking ad placement based on TV schedules.) Furthermore, first-party data obtained directly from users via consent-driven interactions, and skilfully stewarded, will become increasingly crucial in a cookie-free environment.

Impact on Publishers

Publishers are concerned about the impact of third-party cookie depreciation on their advertising revenue. With less data available for targeting, marketers may be less likely to pay a premium for ad inventory, thereby reducing ad income. To avoid this risk, publishers are looking at new monetization models, such as subscription-based content or partnerships with advertising to use first-party data. Publishers are also investing in technologies like Universal ID solutions, which promise to give a privacy-compliant alternative to third-party cookies by utilising hashed email addresses or other persistent identifiers.

Impact on Advertising Technology Companies

The depreciation of third-party cookies has enormous implications for the ad tech sector, which is highly reliant on data-driven targeting and measurement. To adapt to the changing scenario, ad tech companies specialising in third-party data management, ad serving, and attribution will have to restructure their business models. This could entail transitioning to solutions that prioritise user privacy and permission, such as identity resolution platforms that enable deterministic targeting based on verified user data. Identity resolution platforms are advanced technologies used to accurately identify and unify data related to individual users across various touchpoints and data sources. Here are some platforms: LiveRamp, Neustar, Acxiom.

Collaboration and interoperability will also be important as ad tech businesses attempt to establish industry-wide standards for data sharing and attribution in a post-cookie environment.

Impact on Consumers

Privacy Benefits: The fundamental reason for the phase-out of third-party cookies is the rising customer demand for privacy. Consumers will benefit from greater privacy protections, as their surfing behaviour will no longer be tracked across various websites without their consent.

Changes in Advertising Experience: Consumers may initially see less tailored advertising while the industry adjusts to the loss of third-party cookies.

Enhanced user experience on trusted websites: With a greater emphasis on first-party data, consumers may receive more personalised content and offers on websites with which they have a direct relationship.

^Sources:^{Cookieinformation.com}^{Newormedia.com}^Epsilon.com

What will replace them?

To properly target and measure their efforts, advertisers must implement new methods and technologies. Here are a few major solutions that advertisers can use:

First-Party Data:

Collecting and Using First-Party Data: Advertisers should prioritise acquiring data directly from their users through interactions on their own websites and apps. This may include data gathered from user registrations, purchases, and interactions.
Effective CRM ecosystems: the above being the prominent advice for years now, many organisations have an abundance of data. However, to take it to the next level, data needs to be correctly managed, cleaned and analysed, so it can be used to anticipate customer needs, delight new and old users and generally raise marketing effectiveness.
Customer Data Platforms (CDPs): CDPs enable advertisers to unify and manage first-party data from numerous sources, resulting in comprehensive consumer profiles for better targeting and personalization.

Contextual Advertising:

Content-Based Targeting: Ads are served based on the website's content rather than user behaviour. This approach uses a page's keywords and themes to match adverts to relevant content, ensuring privacy-friendly targeting.
Advanced Contextual Tools: Tools that do complex content analysis on pages can improve the accuracy and efficacy of contextual advertising.

Google's Privacy Sandbox:

Google's Privacy Sandbox: Advertisers can look at Google's Privacy Sandbox projects, such as Topics API and FLEDGE, which offer alternatives to third-party cookies for interest-based advertising and remarketing without jeopardising user privacy.
Unified ID 2.0: Created by The Trade Desk, this programme tracks hashed and encrypted email addresses and provides a privacy-compliant identity for ad targeting.

Data Clean Rooms:

These are protected conditions in which various parties can bring and compare data sets without sharing raw data. Examples are Google Ads Data Hub and Amazon Clean Room. They provide comprehensive data analysis and measurement while ensuring user privacy.

Platforms for Consent Management (CMPs):

User Consent and Preferences: By using CMPs, it is possible to ensure compliance with privacy legislation, establish user trust, and gather and manage consent from users for the collection and use of data.

It is the nature of advertising to change and shift, and this is especially true for the digital variety. With Apple iPhones’ building a USP on privacy while Google is tarrying third-party cookie disablement in Chrome, and billions of people happily giving away terabytes of personal information via different social media platforms, it is hard to say what the real impact on advertising will be at this point. But prudent and creative harnessing of first-party data, thinking open-mindedly about contextual targeting and investigating newly emerging technologies can only support future-proof digital marketing planning.

^Sources:^Epsilon.com^Snigel.com

Sources:

Google, which owns the majority of the browser industry through Chrome, announced the abolishment of third-party cookies by the end of 2024. Although Google has already begun removing third-party cookies for 1% of Chrome users in Q1 2024, it has once again postponed the removal of third-party cookies in its browser, delaying the date to 2025.

For years, third-party cookies have been the foundation of digital advertising, allowing marketers to track users around the web, target them with personalised ads, and assess the performance of their campaigns. No wonder then, that in the broad digital realm, the approaching depreciation of third-party cookies represents a seismic disruption in advertising.