People who aren’t familiar with how digital marketing and advertising work behind the scenes may not know it yet, but a big change is on the horizon as third-party cookies are phased out. Third-party cookies have been the internet’s bread and butter for years, passing along data that gives advertisers a way to target (and retarget) potential customers and supporting publishers who provide free content.
Third-party cookies store data and behavioral information, including information on age, gender, and location, to help advertisers target internet users with more relevant ads. But the industry didn’t do a great job of communicating how third-party cookies enabled the expansion of access to free content from publishers and kept browsers and internet access free of charge for users.
As a result, third-party cookies are a casualty of mounting consumer concern about privacy and new regulations to protect consumer data online, and there will be significant fallout for the average person’s online experience. The change will also have a major impact on publishers of all sizes and also for brands that rely on digital marketing and advertising to generate leads. Everyone should be preparing now.
Implications of the Third-Party Cookie Phase-Out
The third-party cookie phase-out is already well underway. Safari and Firefox no longer use them, and Google — the 900-pound gorilla of the browser world with 67% of the desktop browser market— says it will phase them out altogether next year. This will have a huge revenue impact for publishers, especially small and medium-size sites that rely on ad content to generate revenue. Many of those publishers will fade away along with the cookies.
The consumer experience will likely deteriorate, at least in the short term, because online ads aren’t going away. Consumers will see more ads that are less relevant instead. When the industry made a pitch to deliver more relevant ads, it wasn’t exclusively about improving the user experience — it was mostly about selling more products and services by reaching the right people. But the byproduct was a more relevant online experience for consumers.
What Brands Can Do to Target Consumers
So, what should brands be doing now to prepare for a third-party cookie-less future? Contextual advertising will be one key to successful outreach. So, if you’re selling hiking boots, you’ll want to use branded and unbranded keywords to place your ad on a site that is relevant to the great outdoors, ideally on a page that will be visited by people who are planning a hiking trip.
Contextual advertising isn’t new, of course — plenty of brands use it to target potential customers, and placing an ad in context is a more effective way of reaching people who are ready to make a buying decision anyway. People are complicated and multifaceted. A hiker might also be an HR executive, and if she sees a hiking gear ad on an HR technology publisher’s site, she may be in her HR boss mindset and not thinking about trekking through the woods at that moment. So, context matters.
Another step brands can take now is to bolster their first-party data, which they’re already collecting (with consumer consent) via their site, app, and through both online and offline encounters. Brands that haven’t done much to collect and use first-party data don’t have any time to lose; the value of that information will only grow after third-party cookies are phased out.
Silver Linings in a Time of Transition
The elimination of third-party cookies underscores the importance of consumer privacy, as do regulations like GDPR, which give consumers more control over how businesses store and use consumer data. It’s also important to keep in mind that not all digital advertising is affected by the elimination of third-party cookies; streaming TV ads are already tied to an IP address, for example.
There’s a lot that’s still up in the air during this transitional phase. The Trade Desk is working with partners in a consortium to iron out the details of Unified ID 2.0 based on hashed and encrypted email addresses. The idea behind this collaboration is to create an open source and interoperable ID framework with greater transparency and better privacy controls.
As third-party cookies are phased out, brands will have to stay nimble to weather the transition successfully. It’s a good idea to shift focus to contextual marketing and build up first-party data now. Keep an eye on better alternatives like Unified ID 2.0, and watch how agencies are adapting. That way, you’ll be ready when the cookie crumbles.
Steve Robbins is Senior Director of Digital Media at Hawthorne Advertising.
