Hackernoon logoWhat Will Happen to The Marketing Industry After Third-Party Cookies Are Eliminated? by@vladzh

What Will Happen to The Marketing Industry After Third-Party Cookies Are Eliminated?

Vlad Zhovtenko Hacker Noon profile picture

@vladzhVlad Zhovtenko

CEO at RedTrack.io - helping media-buyers turn insights into actions.

By 2022, Google plans to entirely eliminate third-party cookie tracking in Chrome browser. ‘We will place more and more restrictions on the use of third-party cookies, which are the most common mechanism for cross-site tracking today‘, writes Google team in The Privacy Sandbox, ‘and aggressively combat the current techniques for non-cookie based cross-site tracking, such as fingerprinting, cache inspection, link decoration, network tracking, and Personally-Identifying Information joins‘.

Today, 3rd-party cookies and cross-site tracking technologies aid to collect information about the audiences, monitor and attribute conversions, retarget, and more. In fact, new rules will block the most massive way for advertisers to target and interact with visitors.

Let's take a deeper perspective into how these changes will affect online advertising technologies, user acquisition costs, and media trading system participants.

What does the term “third-party cookies” stand for?

A cookie is a small data file placed on a user's computer by a website that the user visits. This file contains valuable information, such as site name, a unique ID, preferences, and revisited pages for each user. Digital marketers use this information to target ads, tailor page content, and analyze user's web-surfing behavior.

Cookies are called first-party if accessed directly on the website by its owner with the same domain. In contrast, cookies are called third-party, if accessed by external websites with a different domain.

For example, you browse the sneaker brand store searching for sneakers. After a couple of days, you notice ads for sneakers on other sites. This is the result of third-party cookie usage; the sneaker brand store website has an embedded code that stores a file with information on your computer. This file indicates which pages you viewed with your unique ID and allows advertising networks to place personalized sneaker ads for you on other sites.

Here you can see cookies used by sneaker's brand website to serve personalized online display advertisements to consumers who have previously visited the website:

By contrast, the sneaker brand will get a first-party cookie from you if you willingly sign up and give your information directly to the sneaker brand website:

How third-party cookies are used in the media trading system?

The use of third-party cookies is the core interaction element within the system of media trading participants. In this system, according to the LUMA graph, there are multiple intermediaries between the buyer (green side) and the seller (blue side) of the digital ad space:

Intermediaries between buyer and seller include advertising networks, tools for analytics, media planning, retargeting, and beyond.

Mostly, these services use third-party cookies or other cross-site tracking technologies targeted by Google Privacy Sandbox to perform these tasks.

Any advertising network acts as an intermediary between ad buyers and sellers. It has a wide network of affiliate websites with space for ads on the one side, and willing-to-buy marketers on the other side. The use of third-party cookies enables targeting based on visitors' interests and their browsing habits.

For instance, a car service wants to run ads for winter tires. The advertising network won't just offer automobiles-related websites for ad placement. Instead, the ad network will show all the sites from the affiliate network that are visited by users with an interest in cars, and offer the best highly targeted placement.

Due to the third-party cookies, the ad network knows car owners' preferences and web-surfing fingerprints. Services put their code on affiliate websites and collect third-party cookies with aggregated data about visitors.

Each user who visits the website with an ad network code gets his or her own third-party cookie. This third-party cookie of a particular user can be read by the advertising network at any other site where the network's code is present.

From that point on, ad networks can track the movement of a particular cookie and create virtual profiles of millions of users. Ad networks should do this without getting identifiable information, such as name or address, and transmit all data aggregated.

At the moment of trading the advertising slot, the ad network correlates the data about users with the data about customers from the ad buyer. This gives the power to deliver ads in the most targeted way.

Aside from the ad network example, the Facebook Pixel placement case applies here too. All third-party cookies are strong linking data sets. All participants in the system used to handle and exchange this data, but the new privacy rules will impact the process.

What will happen when the 3rd party cookies accessing stops?

The market is shaking up, but there is no total annihilation of the industry. Nevertheless, certain consequences are inevitable. The market already witnesses impending impacts:

1) Tools using cross-site tracking technologies will adapt or disappear

Installing ad network code to collect user data on a third-party website will no longer be possible. Collecting data from another domain will no longer be accessible to any external player. But these implications don't stop digital marketing completely. Facebook actively implements and improves server-side tracking to mitigate the loss of ability to track conversions with Facebook pixel code. Likewise, all the market players will have to make the effort to adapt, switch to alternative methods of data acquisition and continue to deliver results.

2) Techniques to match sets of first-party data will be the lifesavers

The entire system of media trading participants will need to move away from the common use of third-party cookies, cookie-matching, and third-party tracking pixels to the first-party data. The key to survival is to obtain independently collected first-party data of different systems and learn how to match and synchronize it.  

3) The power of publishers will increase

When the changes come into effect, only the domain owners will possess their visitor's data. The power of publishers will greatly change in comparison with the weight and influence of advertising networks. With great power comes great responsibility, so websites will have to implement tools to gather information about visitors on their own. This could include authorization requirements, registrations, subscriptions, and so on.

If you want a deeper understanding of market changes and relationships between its players, we'll further discuss:

  • When should we expect changes?
  • What alternatives do Google and Facebook offer to replace 3rd party tracking cookies with existing mobile traffic attribution mechanisms?
  • What should advertisers and publishers do to adapt to this change?
  • Will the cost of attracting a user through advertising channels change?
  • What will happen next in the mobile advertising and ad traffic attribution market?
  • What should ad buyers do to avoid risks in the post-cookies world?

When should we expect changes?

The Privacy Sandbox is constantly changing and dates are kept being rescheduled.

As announced on the Google Blog, some of Sandbox's Privacy features are going into beta testing with its next release already in March 2021, and Google Ads advertisers are invited to join public testing.

Back in late 2020, the last date was announced in February 2021, but now it has been shifted again to September 2021. All over the world, marketers are expecting all restrictions to fully take effect by 2022.

Timeline changes might be related to one of Google's biggest challenges at the moment: before elimination, it's vital to properly distinguish first-party and third-party cookies on the technical side. Google needs to make sure that when it destroys third-party tracking, it will not affect the first-party data operations.

For the entire media trading system, timely warning and the ability to follow the shaping of a new set of rules gives time to adjust, develop, and test new approaches.

What alternatives do Google and Facebook offer to replace 3rd party tracking cookies with existing mobile traffic attribution mechanisms?

There is no straightforward alternative to Google yet. The Privacy Sandbox, a new set of open-standards, aims to create a balance between user privacy and ad companies' desire to track preferences.  

Now is the time when these policies have been announced and Google, as well as all market players, will create and test new mechanisms of data handling. The tracking that was available before will still be possible, but it will be done under the control and participation of all parties. 

As for Facebook, it won't offer to embed the Pixel code on a website to track conversions anymore. Advertisers will now have to collect their own data, process it, and send it from their servers directly to Facebook, using the tool called Conversions API.

Conversion API is an example of using a different approach to tracking, which is called S2S (server-to-server) postback. The S2S method is very different from the Tracking Pixel method — you can check the detailed pros and cons of both methods here.

With S2S postback, tracking of conversions will not happen with the help of a third-party system or when a user visits a 'thank you' page, unlike in the case of Pixel Tracking. 

With S2S postback, tracking of conversion will happen when the ad buyer collects required information independently and then transfers it from its server to another server according to a set of rules. For example, it will function when the online store will send data about sales from its Shopify server to its advertising account on Facebook

So, conversion tracking is available for Facebook and other market players. The only difference is the approach to collecting and transferring data. 

What should advertisers and publishers do to adapt to this change?

The system of media trading participants needs to move from using third-party cookies and tracking pixel technologies to using first-party data and synchronizing it across systems. Let's take a look at what will happen to advertisers and publishers separately.

All advertising intermediaries will lose their data — they are neither able to get user's data from websites without request nor own the content or the product. Advertisers will have to negotiate the ways of obtaining first-party data from both:

  • publishers (website owners), who will gather first-party data about their visitors;
  • ad buyers (companies),  who will gather first-party data about their customers.

The challenge for advertising intermediaries is to develop and test the optimum way to link advertisers' data about customers with publishers' data about audiences.

Considering the fact that now the whole ecosystem is built on third-party cookies and fingerprints, those, who won't be able to switch to first-party data handling, will have to go out of business.

All publishers will get the new responsibility to independently collect, process, store, and transmit first-party data from their visitors. If the sites will not collect information about their visitors on the basis of registration and other techniques, no targeting by the audience or remarketing will work.

Now all websites that have traffic and want to sell advertising space need to determine how they will collect information, independently categorize it, assign users to a unique ID, and exchange information with advertising networks and analytical services. In this case, the publisher has control over what happens to the first-party information about the users.

Will the cost of attracting a user through advertising channels change?

Since Google shows all requirements beforehand, most players have enough time to re-market to the new mode of operation. As the major players do so, fundamentally the cost of user's attraction for an ad buyer will not change.

Of course, some players will be forced to leave the ecosystem. If the number of intermediaries decreases (when small companies fail to adapt), then the rest of the players will have more inventory (ad space to sell) and supply will grow.

At some time, ad buyers will seek alternatives to services that stopped working, meaning there will be more demand.

At the moment when there will be more inventory and the demand will not grow right away, the price to attract a user may even decrease in some systems.

Due to the amount of time we all have before changes, all the major companies will have time to adjust, and small companies do not affect the market significantly. 

In general, the digital advertising market is self-balanced and the law of supply and demand works exactly the same way as on any other market.  That's why players don't expect a big change in the cost of a user's attraction.

What will happen next in the mobile advertising and ad traffic attribution market?

Two very powerful existing players, so-called “walled gardens” in AdTech, Google and Facebook, accumulated their own closed ecosystems and made it harder to enter the market for smaller players. In addition, Amazon is aiming to enter this market too. 

Apple has been preparing for new in-market operations for the last few years already, as they removed the third-party cookies from Safari 2 years ago. Apple gathers first-party users' data and continues its policy of protecting it. This shows that Apple is getting ready to become a player in the advertising market, as all first-party data of Apple's users is in fact first-party data of Apple.

Another reason for tech giants to enter the advertising market is that it is a great way to increase profits. The mobile devices market is already saturated and can't grow rapidly, so corporations seek additional ways to grow in profits.

The big players have the ability to collect and process 1st party data, especially across devices when users self-identify. This gives greater power.

New restrictions will drive out all the smaller players, such as advertising networks, tools for analytics, media planning, retargeting, and others if they can't invest in big technologies.

What should ad buyers do to avoid risks in the post-cookies world?

Everyone who not only buys advertising directly from Google and Facebook but also works with affiliate marketing partners needs to worry about the future of business.

The challenge for those who buy ad space is to review which partners will be able to work after the change and prepare for the fact that some of them will not, especially smaller providers.

The second important point is to review how partners track conversions because the commonly used Pixels won't work anymore. Solutions that use first-party data, such as S2S postbacks, should be the key to solving the problem.

Advertising buyers must do a thorough analysis of whether the technology that their partners use will be able to switch from third-party cookies and fingerprinting technology to work with first-party data and Click-Through Conversion Measurement Event-Level API.

And if they're not clearly showcasing what they can do, now's the time to consider who better-adapted can meet your requirements instead.

Vlad Zhovtenko Hacker Noon profile picture
by Vlad Zhovtenko @vladzh. CEO at RedTrack.io - helping media-buyers turn insights into actions. Read my stories

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