Cookies, long a source of critical information for Web site managers, are going away. That will likely have profound impacts on marketing and publishing.

Cookies are small pieces of text sent by Web sites to browsers. They help Web sites remember information about visitors that makes it easier for sites to engage with visitors when the site is visited again. Cookies can be used to remember login information, location settings, and what’s in your cart. Since they memorise where you’ve been, marketers can use the information to target content to specific audiences.

But some Internet cookies appear poised to go the way of clip art, dial-up connections, and Internet cafes. Third-party cookies have been turned off by Firefox and Safari, and Google announced it will ban third-party cookies beginning in 2022.

What does cookies going away mean for the advertising industry, and how can marketers prepare?

Search engines blocking third-party cookies

In 2019, Firefox announced that, by default, it would block third-party tracking cookies and crypto miners as part of an effort to empower and protect users. According to Mozilla, cookies track your browsing behaviour often without your knowledge or consent, and that information can be sold or used in ways users never understand or want.

Safari followed suit in 2020, blocking third-party cookies by default.

That leaves Google as the major search engine still using cookies. Google announced in 2019 that it was moving in the direction of a cookie-less future, and some Chrome tools are already shipped with support for third-party cookie blocking. However, a full-scale ban has been slowed by vigorous complaints from advertisers, which note that without those cookies, advertising will get a whole lot harder.

What are the two types of cookies?

There are two types of cookies:

• First-party cookies are created, published, and controlled by Web sites and help remember your shopping cart, what you viewed, and your preferences.
• Third-party cookies are set by a third-party server using code placed on the Web domain by the domain’s owner. They allow advertisers to track users across the Internet and target advertising wherever that user goes.

Google’s answer to the cookie: privacy-preserving APIs

Google understands fully what its actions mean, but says the drive to protect user privacy is in line with emerging industry and societal norms.

“We realise this means other providers may offer a level of user identity for ad tracking across the Web that we will not — like PII graphs based on people’s e-mail addresses,” the company wrote in a blog post. “We don’t believe these solutions will meet rising consumer expectations for privacy, nor will they stand up to rapidly evolving regulatory restrictions, and therefore aren’t a sustainable long-term investment. Instead, our Web products will be powered by privacy-preserving APIs, which prevent individual tracking while still delivering results for advertisers and publishers.”

As Google sees it, advertisers can find ways to track information, but not individuals.

“Advances in aggregation, anonymisation, on-device processing, and other privacy-preserving technologies offer a clear path to replacing individual identifiers,” Google wrote. “In fact, our latest tests of FLoC (Federated Learning of Cohorts) show one way to effectively take third-party cookies out of the advertising equation and instead hide individuals within large crowds of people with common interests.”

Cookie alternatives: new tools for advertisers

The cookie-less future is leading to a slew of new tools that advertisers and publishers can use to glean information about Web site visitor behaviour and target customers based on that.

• FLoC: As mentioned above, FLoC analyses online activity within a Chrome browser to collect user information. FLoC is part of Google’s 2019-launched Privacy Sandbox. Chrome uses FLoC to assign users to cohorts or groups of people with similar interests and preferences.
• Universal ID: Unified ID 2.0 (UID 2.0) is a framework that promotes the establishment of a unique user ID for everyone on the Internet. It is seen as a solution that preserves an advertiser’s ability to provide relevant, target advertising but with more controls available to the user. It uses a single sign-on to collect a user’s e-mail address and consent when they visit a UID 2.0-supported Web site or app.
• Contextual advertising: This ad strategy places ads based on the page content through keyword and topic-based targeting as opposed to behaviour tracking.
• Better data collection: Using first-party data to design a target user experience by leveraging data advertisers already have on hand and going back to basics such as content creation and e-mail marketing.

How publishers will be affected

McKinsey released a report stating that the loss of third-party cookies will be a reckoning for the advertising industry and publishers who rely heavily on advertising revenue.

Publishers rely on third-party cookies for ad addressability, where a major part of their revenue comes from programmatic advertising. Programmatic advertising has become an increasingly more important part of the publishing industry in terms of market share. As shown in the figure below, spending on programmatic advertising has grown significantly as a share of the U.S. advertising market.

Cory Munchbach, chief operating officer at pure-play customer data platform (CDP) BlueConic, states that “anything programmatic is essentially third party. In fact, nearly 85% of the top 1,000 sites have cookies set by a third party, which highlights its prevalence.”

It’s striking that nearly half (49%) of U.S. digital media professionals polled by Integral Ad Science in October 2020 cited third-party cookie deprecation as one of their top three challenges for the industry in the following 12 months.

How can publishers prepare

The cookie-less future will see publishers leveraging more of their own first-party data.

We’re already witnessing this with an increase in authenticated users, improved contextual and behavioural data collection, and exploring data collaborations with advertisers or brands.

Publishers now have an opportunity to improve their data solutions, depending on how ready they are to take on this challenge.

The right path for each stakeholder will be different, but the cornerstone effort should be to create and sustain consumer relationships that produce a value exchange. This refers to content from or access to publishers and platforms in exchange for personal data that is based on trust.

A study from McKinsey suggests “the publishing industry will have to replace up to US$10 billion in ad revenue with a combination of first-party data gathered through a combination of paywalls and required registrations, and updated contextual targeting and probabilistic audience modeling (analytics that incorporate an array of unknown elements).”

The demise of cookies will upset many long-established advertising tools, but in doing so, it opens another door for innovation in advertising and for skilled and adaptable brands.

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