Understand the impact of third-party cookie depreciation by capability area
Third-party cookies have been a mainstay of digital advertising for years, but as concerns about privacy grow and rules get stricter, advertisers are being forced to find other ways to target and track users.
We will talk about the problems with third-party cookies and how they affect the digital advertising business in this piece.
What Are Third-Party Cookies?
A cookie is a small piece of data that is sent from a web server to a browser or from a browser to a server whenever a person visits a website. It saves this information as a text file in temporary memory or on the user's hard drive. It gets the file and sends the info back to the server every time you visit that site again.
For example, people who visit one clothing website may see ads for the same clothing brand on another website. This is most likely because of third-party cookies, which let advertisers see what websites people visit and show them related ads.
User Profiling
Another problem with third-party cookies is that they depend on tracking users. These cookies keep track of a user's browsing history and use that data to show them ads that are more relevant to them. Users can stop this tracking in a number of ways, such as by using ad blockers or clearing their cookies.
Profiling users can also lead to bad targeting. Just because someone has viewed a website does not mean they are interested in that product or service. This can mean that users see ads that are not relevant to them, which can be annoying and make the user experience bad.
User Tracking
Another problem with third-party cookies is that they depend on tracking users. As we already said, these cookies keep track of a user's browsing history and use that data to show them ads that are more relevant to them. Users can stop this tracking in a number of ways, such as by using ad blockers or clearing their cookies.
This means that advertisers might not have a full picture of a user's browsing history, which makes it harder to target them with ads that are more relevant to them. As more users learn that third-party cookies can track them, they may take steps to limit or block them, which will make them even less useful for advertisers.
Privacy Concerns and Regulations
Worries about internet privacy and the use of personal data for targeted ads have grown over the past few years. This has led to stricter rules, like the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the US.
These rules aim to protect user privacy by putting limits on the collection and use of personal data, including data gathered by third-party cookies. As a result, advertisers can not track and target users as easily as they used to, so they have to find other ways to reach their intended audience.
By the third quarter of 2024, if everything goes as planned, all major browsers will limit or block the use of third-party cookies. This is one of the biggest technical changes to the Internet in years, and almost every type of business will need to make changes to how they will work in this new world before the end of the year.
It is important to keep in mind that these changes can take a very long time to make. Many of the steps in a cookie deprecation roadmap can take six months or longer to finish. Since the phase-out has already started, many businesses are already "late" in starting the work that this document describes. As the number of users who disable third-party cookies rises, so will the need for this kind of work throughout the year. Businesses are already starting to notice this in their reporting and running costs.
Third-Party Cookie Deprecation Impact on Analytics
The problems with third-party cookies also have a big effect on analytics in the digital advertising business. Analytics tools need third-party cookies to keep track of user behavior and collect data for analysis. Without these cookies, advertisers might not be able to accurately figure out how well their ads are working and how engaged users are.
Data Analysis Platforms
Highlights for major platforms are below:
Adobe
The demdex cookie will be taken away from Adobe. Without this cookie, things like segmentation, modeling, and reporting for advertising use cases may not work as well.
Also, Adobe Analytics relies on a third-party cookie for visitor identification by default. By the time the phase-out is over, any client who has not switched to a first-party integration may have reporting problems.
Google uses third-party cookies to identify users through Google Signals. At the moment, this is the second most important way for Google Analytics to identify visitors after User ID. It is likely that Google will change this integration before the phase-out, which could have an effect on any client using Google Signals for reporting.
Other Platforms
Other methods, like email, SMS, and similar campaigns, might send a link to a landing page that then reroutes to the client's website. These pages may set third-party cookies. If a vendor tracks in this way, the quality of their analysis will change as they switch to other methods of identification.
Technical Analysis
Predominantly impacts of the phase-out occur in three areas:
Tagging
Adding certain pieces of code, called tags, to a website or webpage is called tagging. These tags collect information about how people use and interact with the site. Tags can keep track of actions like page views, clicks, form submissions, and purchases. This information can then be used to make user profiles and show users ads that are more appropriate to them based on how they use the site.
Tags that use third-party cookies will no longer work. As a result, vendors will push their clients to change their tags to use first-party cookies. Depending on how many advertising vendors the client uses, this could mean a lot of work.
Data Enrichment
By combining first-party data with third-party data from outside sources, data enrichment adds more information to existing data to get a better understanding of user behavior and preferences. Advertisers can make more accurate user profiles and target users more precisely by enriching their data. For example, by combining demographic data with browsing behavior, advertisers can make segments based on age, gender, and interests.
Remarketing will be badly affected by the phase-out. To make up for this loss of signal, many vendors are asking for more data to be sent to improve the data set and enable them to do visitor stitching. Google's push to get clients to enable Enhanced Conversions is one example.
Replacement Technologies
You can track and target users without using third-party cookies with replacement technologies - such as Google’s Privacy Sandbox. These technologies try to give advertisers the same power as third-party cookies while protecting user privacy. First-party cookies are an example of a replacement technology. They are made by the website the user is visiting and are not limited in the same way that third-party cookies are.
Hashed email addresses are another alternative technology. Advertisers can get users' email addresses and then hash them to make a unique identifier. This identifier can then be used to target users without giving away their real email address.
Clients may need to make significant changes to their technical infrastructure to adopt these technologies.
Third-Party Cookie Deprecation Impact on Marketing
Digital Marketing is likely the most impacted practice in the grand scheme of the third-party cookie phase-out. Third-party cookies were the foundation of how ‘modern’ advertising was conducted. As a result, the advertising industry has to learn an entirely new way of operating after nearly two decades of operating with the current methodology.
Difficulty Targeting
It is harder for advertisers to reach the people they want to reach now that third-party cookies do not work as well as they used to. User profiling and tracking were important parts of targeting with third-party cookies, and now advertisers have to find other ways to reach their target audience.
You could focus on first-party data, which is data that comes directly from users when they interact with a brand. This data is more accurate and reliable because it comes from the source, but it can be harder to get and might not give you as much information as third-party cookies.
Remarketing
Third-party cookies are used for remarketing to find people who have interacted with the brand before and show them ads on other websites. If third-party cookies are taken away, this marketing strategy will not work as it does now.
If clients want to do retargeting, they will have to use other tools, like Google's Enhanced Conversions or the soon-to-be-released Protected Audience API, which is part of the Privacy Sandbox. These new technologies will help lessen the effects of not being able to use cookies for anonymous retargeting, but it will likely make it harder to measure and lessen the reach of ads.
It is important for clients who use remarketing a lot to think about how the loss of third-party cookies will affect their goals and get everyone ready for differences between what they expected and what they got as the phase-out progresses.
Decreased Ad Effectiveness
Targeted ads are not working as well because more people are learning about how third-party cookies can track them and taking steps to limit or block them. This means advertisers may not get as much money back from their ads because they are not reaching the right people.
To fight this, advertisers need to come up with new ways to reach and interact with their ideal customers. One way is to use different targeting methods, like contextual advertising, which targets users based on the content they are viewing instead of their browsing past.
Campaign Performance Tracking
There are many vendors whose campaigns depend on third-party cookies for everything from the first visit to the conversion rate. For the past few years, more forward-thinking platforms have been pushing clients to switch to first-party measurement, but many clients have been hesitant to change how they do things. If a client relies heavily on vendors who use third-party cookies, they will need to make a plan to shift their approach to solutions like Media Mix Modeling (MMM).
Also, any marketing plan that depends on vendors that use third-party cookies needs to be reevaluated. As the phase-out continues, more users will be affected, which is expected to lower Return on Investment costs and make the "Direct" or "Referral" sales channels look better than they are actually doing.
Third-Party Cookie Deprecation Impact on Affiliate Marketing
When you use affiliate marketing, you put an ad on another website that "drives" traffic to yours. If that traffic turns into a conversion, like a sale, you get paid a commission. Affiliate marketing vendors have been quicker to adopt other measurement methods because they do not get paid unless commission can be measured.
In recent years, vendors like Commission Junction have forced their clients to switch to a first-party strategy for measurement.
Third-Party Cookie Deprecation Impact on Optimization
Most A/B testing systems depend on first-party storage to keep segmentation, so optimization as a practice is probably less affected by the phase-out of third-party cookies. Instead, they are heavily affected by problems with first-party storage.
Personalization vendors are mostly to blame for the risk, which can range from having no effect at all to the whole solution not working at all, based on how the personalization is done and how the user is "remembered" for personalization.
Integration with Digital Marketing and Analytics systems to allow qualified targeting for A/B testing segmentation is one example of a technical change that could happen. As these systems adapt to the new world, some information may not be available anymore, such as demographic information that affects how an A/B can be targeted for delivery.
Third-Party Cookie Deprecation Impact on Data Science
Data Science often uses data from other sources for modeling and analysis. If third-party cookies are lost, vendors may not be able to do visitor stitching as well, which could mean that the data that can be looked at is more fragmented. Also, models may need to be changed because they may need to use different keys for activation, which could mean that we need to see more or different data than before to make a decision.
Shift Towards Privacy-Friendly Advertising
The problems with third-party cookies have also caused a shift toward more privacy-friendly advertising. Companies want to reach their target audience without tracking and profiling users.
Contextual Advertising
Contextual advertising places ads on web pages based on their content, ensuring ads align with the information a user is consuming. This approach captures users' attention when they are already interested in or considering similar products, making it effective for reaching users at the right time in their customer journey.
Additionally, contextual advertising does not rely on cross-site tracking and will retain its effectiveness in the privacy-focused online advertising landscape. It should be combined with behavioral advertising for optimal marketing strategies.
People-Based Advertising
People-based advertising enables targeting individuals with personalized ads by leveraging CRM data to define specific segments in an ad platform. This approach aims to achieve efficient returns by reaching valuable segments with customized advertising within large categories.
People-based marketing utilizes people-based identifiers and identity resolution technology to identify opted-in users across the open web, overcoming the limitations of third-party cookies. This approach involves collecting and storing data in a brand's CRM to understand customer behavior across devices. People-based identifiers can be obtained through directly collected data or from data onboarding providers who convert offline data into online profiles.
Persona Advertising
Persona advertising allows businesses to reach segmented audiences without relying on third-party cookies. By combining known contacts with components such as job level, job function, or persona, businesses can expand their reach to individuals not yet in their CRM, even if they lack the first-party data required for people-based advertising.
To achieve successful, high-reach results, businesses should identify critical customer segments for sales, growth, or market conquest. These segments become targetable personas, and bid optimization with custom messaging can be used to reach them. However, people-based advertising is a more effective method for reaching target audiences.
Conclusion
There will be long-lasting effects on how businesses are run because third-party cookies are being phased out. Companies should start planning how to adapt to these changes as soon as possible in 2024 to lessen the effects of losing features, which will get worse as the phase-out goes on until it is over in Q3 2024.
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