What Does the End of Third-party Cookies Mean for Advertisers?

What Does the End of Third-party Cookies Mean for Advertisers? Image credit: Editorial credit: Primakov

Marketers have long relied on cookies to provide customer data that help them optimize the user experience (and also conversion rates). A growing interest in consumer privacy and a desire for greater consumer control online has led some browser developers to take the decision to phase out their support for cookies.

Advertisers and publishers will no longer be able to rely on cookies for web tracking data. It’s also likely to impact the user experience – although web visitors distrust cookies they also demand a personalized experience. How can advertisers and publishers work around the loss of an important data stream, and how can they hope to maintain the personalized experience audiences expect?

Audiences reject cookies

Since the 2018 GDPR legislation pretty much-obliged publishers to implement obstructive cookie banners, data gathering has been severely curtailed. One study found that only 11% of site visitors accepted cookies, whilst an astonishing 76% of visitors ignored the cookies banner – even though it was obstructive to their experience.

A 2021 Statista study in the US found less than 32% of people surveyed said they always consented to cookies, with young adults more likely to accept cookies compared to older ones.

A 2020 study by Deloitte found surprising variation in cookies policy within the EU. Although GDPR applies across the EU, there’s significant variation in how different nations interpret the rules and on local legislation and guidelines.

The most common approach is to not allow users to decline cookies. Websites from Belgium were the ones most likely to allow users to customize their cookie preferences – and showed the highest rates of opt-in. This is probably not a coincidence; giving users more control makes them feel more trusting.

Across the EU, an average of 5% of users decline cookies, with Italy showing the lowest rate of decline at 2%. By contrast in the UK (which shadows GDPR legislation) the rates of refusal are around 7%.

The UK is also notably bad at giving users the option to change the cookies settings in the banner, and the UK tends to use a shorter average text length compared to nations that have higher rates of opt-in. It could be this lack of information and lack of control could be making users more hostile to cookies.

Web visitors in European countries tend to be more willing to interact with the cookies banner compared to non-EU countries. Italy and Switzerland see engagement rates of up to 40%, whilst only around 15% of Brazilians and 20% of those in the USA bother to engage with cookie banners.

European web users are those most likely to accept cookies, perhaps a sign of confidence in robust web privacy (or they are just used to cookies banners and have an established routine to make them disappear).

Perhaps it’s no wonder that users can be reluctant to accept cookies. Browser cookies are poorly understood by most people and many myths persist about them. Many people believe they can share your personal information with other sites, or that they are viruses or spyware. Whether you’re concerned about privacy or not, most web users agree that cookie banners are annoying!

Browsers respond to Editorial credit: Primakov

In response to audience concerns, Safari, Firefox, and Brave have already stopped tracking users via third-party cookies. Google has also stated that it plans to stop tracking third-party cookies in its Chrome browser.

This decision is perhaps the most significant one because Chrome has by far the biggest market share. The company has delayed its decision to stop enabling third-party cookie tracking in its market-leading Chrome browser but this now looks set to go ahead this year.

The decision to scrap third-party cookies is damaging to Google in particular because it owns a substantial ad platform as well as the web browser with the largest market share. It’s also worrying for marketers relying on third-party data for targeted audience tracking strategies.

But it’s not all bad news. You’ll still be able to use first-party data cookies to remember things such as user passwords, their language of choice, and basic analytics data. This means you’ll still be able to help users log in quickly and see what they do on your own site. The only thing you can’t do is see information about the user’s behavior on other sites that aren’t in your control.

In the future, the ethos will be for cookies to support user activity online without sharing information about user behavior around the web.

Is retargeting dead?

Although it’s considered controversial, even creepy, by audiences, retargeting is proven to be highly effective. Web users may be a little freaked out by seeing display ads around the web that reflect products they’ve previously shown interest in – but the click-through rates can be up to 10 times higher compared to regular display ads. Some studies have shown it can boost conversion by up to 70%, and ad engagement by up to 400%.

Retargeting works, but it’s a blunt tool, and users are highly aware of it. Only 30% of users have a positive view of retargeting, which is why the practice is often cited as an example of why brands are overstepping in terms of the way they track customers and use that data.

Although retargeting is effective, it’s often considered one of the most controversial forms of internet marketing.

In terms of advertising industry impact, the loss of re-targeting as a feasible ad approach is likely to be significant. We’re likely to see a resurgence of in-session marketing (advertising that’s displayed to a user based on their immediate behavior on a website) as a result. There’s likely to be a real shift of focus and energies within the ad industry, and significant disruption in terms of people, skills and spending.

New solutions

Advertisers and publishers are still scrambling to find new ways to replace that useful third-party cookie information stream that’s about to be severely curtailed. Google is creating something it’s calling the Privacy Sandbox as a way to allow advertisers to target advertising without compromising user privacy. Essentially this browser-based model of data gathering will add a user to a cohort of several thousand people with interests similar to theirs, and serve ads based on their cohort behavior.

There’s some suspicion that this is a land grab by Google, which will take a lot of ownership of web advertising through this move, and it’s likely to benefit the company financially. There will inevitably be significant disruption as the industry reorganizes its entire way of working to reflect new ways of gathering and using data.

As third-party cookies are phased out, publishers that rely on ads from third-party data are likely to lose a key revenue scheme. Larger operators may be able to create offerings based on first-party data but smaller ones are likely to find it hard to compete.

Ad prices are likely to be adjusted as publishers try to compensate for the changing revenue stream. Ad tech vendors are also at a disadvantage and they’ll be scrambling to find new ways to compete. Contextual targeting is going to become increasingly significant, so we’re likely to see that emerge as a key trend for advertisers and publishers to jump into.

World impact

Although the curtailment of third-party cookies is significant, rising mobile use has meant third-party cookies have been of diminishing importance for quite some time now. Third-party cookies can still gather data from mobile browsers but they are less effective when users are on mobile apps.

The share of mobile traffic relative to desktop has meant that third-party cookies are increasingly ineffective as a real guide to user behavior online.

Some countries are more mobile-reliant than others, particularly some emerging markets where users tend to be ‘mobile-first’. The share of mobile traffic is also high in Asia. It’s possible to argue that the proposal to end third-party cookies is a very Western-centric concern. It’s certainly true that the impact may be felt more in markets with a lower share of traffic from mobile devices.

How industry responds

The death of (third-party) cookies is likely to favor larger players with a wider array of owned web media because they will be able to follow users around their own web properties.

The biggest winners are likely to be those with the biggest “walled gardens”, those with huge media properties that users are incentivized to stay within for a long period of time, and which own a great deal of user data. This includes Google, Facebook, and Amazon.

There’s an even greater incentive for web owners to find ways to keep visitors within their own portfolio of domains. Google is a good example of this – by cutting off third-party cookies the brand is consolidating its own dominance online.

Web properties with the biggest “walled gardens”, such as Amazon, will fare better in the response to cookie use.

Perhaps the key learning from all of this debacle is that most consumers don’t like aggressive marketing and they are uncomfortable with brands that seem to know too much about them. Brands also need to learn the lesson that aggressive marketing is a turn-off for many customers and there will probably be consequences for the relationship.

It’s important to continue to maximise the information that you’re getting from first-party cookies. This means making the best use of information gathered about visitors within your own online properties, really digging into your site analytics and optimising based on this information.

It’s also important to make sure your cookie banner serves you well. This should be designed to maximize visitor confidence in your information gathering and hopefully, encourage them to accept your cookies.

There’s plenty of research and best practice on how to optimize your cookies banner and data policy statement so you encourage as many users as possible to accept your first-party cookies. When first-party cookies are all you have to go on, this is going to become increasingly important.

Although the loss of third-party data is likely to be a real blow to data streams, there’s some reason to be optimistic. It’s likely that this is going to be a whole new era for advertising innovation. There’s still room for adaptable and creative advertisers to make a mark.

If you’re struggling to see how to prepare for the post-cookies world, the important thing is to stay on top of developments. New approaches and technologies are likely to emerge from this change and you need to keep an eye on things as they unfold.

It may be time to dust off your contextual advertising strategy and rethink how your PPC ads are reaching customers who have expressed an interest in your keywords.

Review any software you use to make sure it’s still going to be usable once cookies are retired, and see whether you can find software that helps you make the most from the first-party data available to you. Don’t be caught out being too reliant on technology that’s becoming obsolete.

It’s also a good time to adjust to the new reality of a world where customers are increasingly protective of their data. It’s likely that further data privacy rules could emerge in the future and your brand needs to be ready for them. As is always the case in digital marketing, the only constant is constant change!

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