In 1994, Lou Montulli invented the cookie. The then 23-year-old engineer at Netscape had found a way for websites to remember user information and the digital advertising landscape that we know today was born. But now, that’s all changing.
Amidst mounting user privacy concerns and mistrust over Big Tech’s handling of personal data, third party cookies are being phased out. In 2022, Firefox rolled out total cookie protection by default to all its users worldwide. Apple’s Safari now uses intelligent tracking prevention (ITP) to block cross-site tracking with third party cookies on its web browser and new app installs. And Google has announced that it will be phasing out third party cookies in Chrome by 2024.
We’re entering a period of cookieless experimentation. And that means digital advertising has to make some readjustments. In this blog, we’ll discuss what the so-called “cookiepocolypse’’ means for digital advertisers and delve into four of the most promising emerging alternatives to third party cookies: contextual advertising, first party data, zero party data, and seller defined audiences.
Third party cookies are data collecting files created by a web server for the purpose of identifying user preferences and personalizing browsing experiences. They enable web pages to track a user’s digital activity, allowing digital advertisers to display targeted ads, and digital publishers and site owners to identify and authenticate website visitors.
And whilst the cookie isn’t innately ‘bad’, there have been increased instances of individuals alleging that their data rights have been breached by businesses.
Growing data breach concerns led to a tightening of the leash around third party cookies. The development of privacy regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), put in place strict regulatory frameworks around the collection and use of personal data.
In a survey of 24,000 consumers, 91% reported feeling concerned about the amount of data companies can collect on them. As personal data protection becomes increasingly important to the public, existing data collection practices will need to be redressed. This will invariably involve a degree of realignment for the digital advertising industry, which has traditionally relied heavily on third party cookies for audience insights, cross-site targeting, and marketing attribution.
Adjusting to a world without third party cookies will pose challenges. Without an alternative mechanism in place, disabling third party cookies could result in upwards of 50% revenue losses for publishers, so advertisers and publishers will need to find new ways to track users, sell and serve targeted ads, and monetize web pages.
That said, Ben Rycroft, the co-CEO of advertising technology company Snigel, holds a positive outlook. He comments that “the adtech industry is in the midst of a transition that will improve user privacy…[by] working with partners to focus on cohorts over individuals''. The company is now implementing a range of third-party cookie alternatives including alternative IDs, contextual targeting, and using first party data.
It just goes to show that there might be more to going cookieless than mere inconvenience. Frederico D’Uva, Marketing Lead at Rawnet, sees the shift as an opportunity to reassess how, and why, we exchange data. So, whilst harnessing consensual data might come with some initial hurdles (making it harder to track users’ web activity and serve targeted ads) there’s no reason why programmatic advertising should cease reaching large audiences via cookieless means.
Cutting out cookies need not involve reinventing the wheel. Just because third party cookies are out, doesn’t mean data gathering is a thing of the past. There are other options available to organizations in the ad ecosystem. Alternatives like contextual advertising, first and zero party data, and seller-defined audiences.
Let’s take a look at each of them in more detail.
Contextual advertising is a type of online advertising that targets content rather than individual consumers. That could mean visual ads served on a webpage or social media platform, audio ads served on a streaming platform, or contextual in-game advertising. By extension, visitors to that platform are met with ads which are relevant to their needs and interests - without having to share any personal data in the process.
For example, TikTok’s new contextual advertising tool, TikTok Pulse, allows brands to reach targeted audiences by placing ads on relevant content. As Tamara Littleton, founder and CEO of The Social Element, explains, this is an appealing concept for brands since it allows them to “reach the right audiences without disrespecting the need for privacy by assessing content and placing ads accordingly”.
The logic behind contextual advertising is simple. By serving an ad for, say, cycling helmets on existing content about cycling, you’re meeting your target consumers where they’re at. And whilst contextual advertising rests on some degree of assumption (assuming that someone on a cycling website wants to buy helmets), the prognosis looks positive.
In an aptly named op-ed in the New York Times, What if We All Just Sold Non-Creepy Advertising?, founder and CEO of the privacy-first search engine DuckDuckGo speaks with confidence about the shift, stating that a return to contextual advertising “need not reduce profitability” and that “companies are quickly realizing that good privacy practices are a boon for business”.
First party data (or 1P data) refers to the data a company collects directly from its customers. It can be used to generate a single customer view of a user’s preferences, characteristics, and activities. Since companies have full ownership over these data assets, first party data lends itself well to highly granular, cross channel targeting.
VP of Digital at NOVUS, Paul DeJarnatt, writes that first party data is “still incredibly valuable and should be viewed as a strategic advantage - not just for targeting and personalization, but as fertile ground to discover insights to drive incremental business”. But the quality and depth of that data will dictate the success of each campaign. For best results, companies should be looking to derive rich data sets with distinct criteria points that can be used to get ads in front of the right customers.
Jeff Truong, Partner at VMG Catalyst, agrees. “The power of first party data has never been more important to marketers. First party data is your most valuable source of customer insights. It’s the only data you have direct access to, and it’s also the most reliable because it comes from customers themselves”. According to Truong, first party data centered around user preferences, behaviors, and motivations is one of the best tools for driving growth, improving product design, and optimizing marketing campaigns through personalized messaging.
The message is being heard loud and clear. In 2021, Trusted Media Brands (TMB) launched T1360, a first party data platform that allows buyers to create custom audiences, port data, and conduct cohort analyses. The tool is already being used in 94% of direct-sold campaigns and TMB is working on incorporating additional commerce data for use within its affiliate and ecommerce business.
VOX media is another example of a media brand embracing first party data. In 2022 following its acquisition, VOX integrated Group Nine’s performance marketing solution for direct-to-consumer brands into its first party data platform. In so doing, it allowed brands to serve sponsored posts across VOX Media’s social media portfolio.
Zero party data is data that customers proactively share with a business. Unlike first party data which comes from customer web activity, zero party data is derived through methods such as customer surveys, sign-ups, site customizations, polls, and online forms. The different data points that can be collected are therefore vast, from purchase intentions to preferences to contact information. And in terms of mitigating privacy concerns, zero party data assets are arguably the most transparent of all. Since it’s entirely customer-led, zero party data does not require any kind of tracking.
As Forbes puts it, “zero party data is the new oil”. And when we consider the lengths to which zero party data goes towards alleviating public concern over data misuse, the statement seems wholly justified. Zero party data’s irrefutable levels of accuracy and specificity have the potential to serve as a real asset for brands and advertisers.
That said, there are some potential drawbacks to relying on zero party data, namely scalability. There’s a limit to the amount of data that a single company can acquire directly, so it’s imperative that brands consider zero party data as part of an omnichannel strategy in combination with first party data, for example. In such cases, transparency remains key, and brands will need to communicate the data-exchange explicitly with customers.
In February 2022, the IAB Tech Lab released a new, first-of-its-kind, addressability specification called Seller Defined Audiences (SDA). The specification allows publishers to monetize their audiences without revealing the users’ identities to advertisers.
Using SDA, publishers instead monetize first party data by generating audience cohorts which are subsequently shared with demand side platform (DSP) partners. And since the SDA specification has been designed to work in conjunction with existing media buying processes, the cohort information can be shared across existing media-buying processes such as real-time bidding protocol, OpenRTB, and open source header bidding wrapper, Prebid. Once a publisher creates an audience segment, the SDA ID gets passed to the relevant DSPs via OpenRTB. The DSP then examines the segment ID and decides whether to bid on the impression.
Seller defined audiences are a privacy-first alternative to third party-cookie-based advertising. Instead of publishers sharing person-specific data, data is organized into groups based on categories (interests, purchase intent, demographics). Advertisers then gain access to the group information, as opposed to individual personal identifiers.
It’s not a complete solution yet. If SDAs are to be a success, publishers will need better classification systems to work with. At present, the classification process remains time consuming and labor intensive. But by adopting machine learning-based classifiers into the process to eliminate human error and achieve real-time optimization, SDAs could soon become a viable and sustainable solution
By 2024, the third-party cookie will be no more. And whilst this is a little anxiety inducing, it’s also an opportunity. An opportunity to serve ads with transparency in a way that users can get behind. Cookie depreciation will come with some challenges, but in many ways it’s the positive push we needed to start engaging with consumers in a way that adds value.
Whether zero party data is to become the “new oil” or not, advertisers and publishers need to start making steps towards transitioning to a cookieless future.
If you’re interested to learn more about the infrastructure needed to support a cookieless future, visit our industry page.
