WHAT THE MOVEMENT AWAY FROM THIRD-PARTY COOKIES MEANS FOR THE PROGRAMMATIC ADTECH
Over the past decade, consumers have become increasingly aware and sensitive about how companies use and manage their personal data. 72% of Americans worry about their online activity being tracked and more than 50% of consumers have chosen not to use a product of service because they worry about personal data collection1. Consumers have become increasingly vocal about their discomfort with ad tracking and regulatory changes have pushed the $336B2 digital advertising industry to an inflection point as companies weather the new normal of privacy on the web. The first phase started when ad blockers (browser plugins) were introduced in the mid-2000s. More recently, the decline of third-party cookies has been accelerated by privacy laws (i.e., GDPR) and shifting privacy settings in web browsers. For example, Safari and Firefox blocked third-party cookies by default and recently, Google announced that they will take the next few years to phase out all third-party cookies within their web browser.
While the third-party cookie has been on the decline, it is important to understand why this change is relevant to advertisers and how these privacy changes will heavily impact the landscape. Since inception, advertisers have been dependent on third-party data as a key enabler of commercial and digital targeting efforts. In their simplest form, third-party cookies provide information that AdTech companies can place on a user’s device and then access over time across various websites, providing insights on consumer interest, demographic, and geographic location. The massive growth in online ad revenues over the past 20 years is due, in large part, to the third-party cookie targeting. For digital advertising, they have helped achieve unprecedented audience segmentation and attribution, helping to engage consumers in ways that were virtually impossible in more traditional forms of media.
Now, this privacy shift upheaves the traditional form of data collection for most advertisers, brands, and publishers. In a cookie-less world, AdTech companies will no longer be able to measure campaign performance or offer personalized content in the same fashion as before and the advertiser landscape will see a shift towards innovative ways of collecting meaningful data.
THE CURRENT FIRST-PARTY COOKIE LANDSCAPE
To understand how this privacy shift has impacted the broader AdTech landscape, it is important to understand the changes made to industry policies in the past few years.
Timeline of web browser and cookie changes
- 2017: Safari’s New Intelligent Tracking Protection (ITP): Intelligent Tracking Protection was first introduced in 2017, and Safari purged most first-party cookies and fully blocked all third-party cookies during its 2019 update. In the last three years, Apple has made several changes to its ITP and has continued war against online tracking.
- 2019: Mozilla’s Enhanced Tracking Prevention (ETP): Shortly after ITP, Mozilla announced that it would start blocking cookies and storage access from third-party trackers by default. Today, Firefox blocks all third-party cookies.
- 2020: Microsoft’s Tracking Prevention (MTP): Like Apple’s ITP and Mozilla’s ETP, Microsoft released Microsoft Tracking Prevention for its Edge browser at the beginning of 2020. The MTP promises to save the usage of users’ data and blocks third-party cookies from tracking users.
- 2022: Google banning cookies from Chrome: In early 2020, Google announced Chrome would become the last of the major web browsers to block third-party cookies, with the intention of fully moving away from cookies by 2022. This was a major last step as 46% of internet users access the internet through Chrome.
Third-party cookies are the backbone of digital advertising and Google’s announcement in early 2020 was the final nail in the coffin.
THE IMPACT ON PROGRAMMATIC ADTECH
Third-party cookies are the backbone of digital advertising and Google’s announcement in early 2020 was the final nail in the coffin. Specifically, it will impact and, in some cases inhibit, the traditional targeting efforts of programmatic advertisers. This includes behavioral and audience targeting, ad retargeting, and view-through attribution. It is also important to understand how this shift will impact all players in the advertising space:
- Publishers:SSP and Ad Exchange will have to adjust their identification tactics for users without the use of third-party cookies.
- AdTech Platforms: Without cookie sync, AdTech Platforms will be challenged with mapping relevant users to display ads on the browsers. They will have to handle conversion tracking, ad targeting, and frequency capping with a different method.
- Advertisers:With the removal of third-party cookies, advertisers will not be able to reach relevant users in the traditional ways they are used to. They will likely have to build first party audience data and form a partnership with a relevant publisher as a workaround.
POTENTIAL WINNERS AND SOLUTIONS
It’s the right time to focus on alternative strategies to target relevant users. Below are some of the potential opportunities that will help advertisers maintain success in a cookie-less environment.
- First-party data: Though third-party cookies are going to disappear, advertisers can still use first-party data from the site, CRM tools, foot-traffic, ad in-app data. This will have more relevant user data given it will provide insights on who has shown interest on the product/service, which can have a meaningful impact on conversion rate. Many companies are rolling out first-party data solutions to help publishers gather data by incentivizing audience authentication.
Businesses to Watch: Audigent, Mediavine
- Contextual Advertising: Advertisers can place ads on web pages based on the content provided. Like first-party data, this helps in conversion opportunities given the audience engaged in the content will come across relevant advertised brands.
Business to Watch: GumGum, Connatix
- Other digital advertising mediums and channels: Connected TV (CTV), OTT, and Digital Out-Of-Home (DOOH) are a few of the many digital channel and mediums that advertisers will have to consider. With the rise of streaming services in the past few years, OTT presents a growing opportunity for advertisers and is an effective new way to directly market to consumers digitally.
Businesses to Watch: AdQuick (OHH)
- Universal ID solutions: DMPs that collect and use non-cookie IDs, such as email addresses and device IDs, are in a good position. There are several startups in the space that are utilizing new ID solutions that are still privacy safe.
Businesses to Watch: ID5, Britepool
- Zero-Party Data: Zero-party data, or data that a consumer intentionally and proactively shares with a brand (e.g. product preferences, purchase intentions), is becoming more important to personalized targeting. There are many emerging platforms and technologies that enable brands to collect and act upon zero-party data.
Businesses to Watch: Wyng, Woobox
With the era of third-party cookies coming to an end, its impact will be experienced far and wide in the programmatic and display advertising world. Thankfully, there are AdTech companies that have positioned themselves well within the space to capitalize on the massive shift. Companies that can help provide consumer insights, while at the same time protect personal information, will be key market leaders coming out of this substantial industry change. Tracking of user data will continue to be a part of the internet, but with these changes, the industry will become more transparent to consumers. And consumers, in turn, will be better equipped to make decisions about when to trade their data.
1. Pew Research; 2. Forbes; 3. Statista
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