Will The End of Third Party Cookies Affect Advertisers?

By 2022, all Chrome browsers will stop supporting third-party cookies. You probably don’t even know what this means but trust me, it will have a huge impact on how the advertising industry works.

Most digital advertising models work using third-party cookies, so if you’re an advertiser or an online publisher, you could be losing out on significant opportunities.

To get a better understanding of what this means, let’s first look at the definition of cookies and how they work in relation to an online ad request. Also, what you need to do now so that these changes won’t affect your business and ad revenue.

What are third-party cookies? 

You have been there. Your search for a product, find the best price, and then click on ‘buy now and you are taken to PayPal. But oftentimes you are left wondering how does the site knows I want to buy this product? There was no sharing or like button pressed. The simple answer is that the site uses cookies.

Cookies store information about a user’s browsing patterns and can be placed on their device by third-party platforms or technology providers.

How is it advantageous to advertisers?

User tracking on the web has become one of the main tactics for advertisers to learn about users’ interests. 

As technology has evolved, so too has the way advertisers are able to track users’ browsing activities across all sites.

Many people feel that this is an invasion of their privacy as well as an inconvenience to those users who wish to visit websites in private in order to avoid becoming targets of third-party marketing or interest-based ads.

Google and other big tech companies have long collected user data to personalize online experiences. But concerns about the misuse of that data are growing, and it’s not just users who are calling for change. 

Governments around the world increasingly want to know how data is being used — and European privacy regulators like GDPR  and CCPA in California’s main purpose is to inform users about what data is being used.

Statistics of Google Market share in Africa

Though, not all types of cookies will be disabled in early 2022.

First-party cookies, which are created by the publisher or advertiser and are not transferred to third parties, will stay in place. Their purpose is to facilitate interaction with the user: remember passwords, search preferences, purchase history, recommendations, items saved in the cart, etc.

How will the changes affect advertisers? 

All major browsers have announced that they will soon stop supporting third-party cookies by default. This means that if you want to target users with ads based on their behavior, you must rely on first-party cookies only.

In a worst-case scenario, non-personalized ads will flood the Internet, ruining the user experience and decreasing online revenue for businesses.

Lastly, considering how many third parties are involved in most online transactions, it’s quite ironic that the brands themselves turned out to be the least prepared to disable third-party cookies. Therefore, advertisers have taken a wait-and-see approach, hoping that someone will come up with an alternative solution for them.

On the other hand, smart brands have sought to use first-party data from CRM and CDP platforms within their retargeting campaigns. This has allowed them to target existing brand loyalists and drive up subsequent purchases.

The easiest way to collect and segment user data would be to use a data management platform (DMP) that can track user interactions across devices, and an attribution modeling platform to provide more detailed insights about the impact of each campaign on the bottom line, rather than relying on ad networks’ proprietary tools.

What will happen to online publishers? 

The Internet Advertising Bureau (IAB) recently conducted a study that revealed that publishers can lose up to $10 billion in ad revenue when third-party cookies are disabled. 

Think about the impact that could have on the broader digital publishing landscape. According to Google, most publishers could lose 50-70% of their revenue if they don’t review their approach to ad and data management by 2022.

Decrease in online revenue

• Brands will redirect advertising budgets to sites, which use their own acquired user data. This is why it is very important that the new GDPR regulations are adhered to in order to make the most of any budget invested in online advertising.

• The advertising landscape is set to undergo significant change. The popularity of cost-per-click (CPC) and cost-per-action (CPA) models will start growing from now on, as they provide substantial flexibility for online advertisers. Nevertheless, publishers will be less inclined to work with advertisers using such models as it’s less profitable for them.

• Apple is making it harder for marketers to target consumers based on their online activities, closing off a key avenue that advertisers relied on to boost revenue from the web. Apple has restricted user tracking on iOS14 by making certain restrictions to protect user’s information and privacy to the best of their ability.

Is there any solution or alternative for marketers?

Google’s announcement that it intends to phase out third-party cookies has everyone in the advertising industry worried. But don’t worry, despite your fears of Google building a wall between you and your current advertising strategies, there are solutions…

1. Solutions without personal IDs

Google announced on March 03, 2021, that its products will no longer use identifiers based on users’ personal data. Instead, Google will focus on cohort analysis for ad targeting.

The FLoC (Federated Learning of Cohorts) algorithm is the most common one. First, it selects partial cohorts based on the user’s browsing activities. It does so by grouping the visits to websites according to common interests and thus creating partial cohorts.

Basing the creation of cohort groups only on browsing behavior makes it possible to identify more accurate and comprehensive groups of interests.

Then, in accordance with these groups’ interests, FLoC sends the user ads immediately after he or she has left one website or while they are using another website. This is because users can receive information within a few seconds.

2.  Universal ID solutions

Universal IDs are used to identify users on various platforms and devices — for example, when they’re switching from a browser to a mobile application and vice versa. The power of these IDs is that they can be easily implemented across platforms, making it easier to keep track of your users.

3. Alternative Solutions

Contextual targeting allows showing ads to users who view sections on specific topics or visit specific web pages without binding user data.

The contextual targeting technology by Google Ads is pretty neat. You can direct your ad to a user who visits a specific page and has certain interests. For example, if you’re promoting your new vegetarian shoes, you can target a user who visits the Vegetarian Society website. This way, you don’t waste your money on non-vegetarians but still, capture the audience that is actually interested in such products.

Although there are only a few months until the European Union’s General Data Protection Regulation (GDPR) enters into force, the 3rd-party cookie deadline isn’t something that you should be panicking about or missing as you did with Google’s mobile-friendly update. Postponing this issue will not prevent important changes to your digital advertising – it will only defer them. In short, you can still make the best of this time to solve the problem, estimate its scale and scope, and find solutions that will help you maintain high-quality advertising after 2021.

Author: Avinesh | Digital Marketing Specialist