The (third-party) cookie has crumbled

Third-party cookies have been advertisers’ primary strategy for collecting user data and tracking behavior for many years. 

However, concerns about user privacy and data security have been growing in recent years. One by one, major web browsers have announced the phasing out of third-party cookie support. This includes Google Chrome, who plan to do so by the end of 2024. 

The shift away from cookies presents challenges and opportunities for the digital advertising industry. To gather user data and deliver personalized experiences, advertisers will need to realign their approach. 

The death of third-party cookies has largely been driven by growing public concern over internet privacy, which only increased after incidents such as the Facebook-Cambridge Analytica scandal. 

While this is good news for the average citizen, it is bittersweet news for advertisers and media sales vendors. For the better part of two decades, they have benefitted from third-party cookies’ ability to provide deep consumer insights. 

Different strategies are required today, which raises questions of what is going to replace third-party cookies, and how companies will adjust in this new landscape.

First-party cookies

Taking control of first-party data is essential if a company seeks to monetize their audience and deepen their engagement with consumers without violating any privacy concerns. Advertisers need to look at obtaining first-party data as a value exchange that requires transparency. 

Audiences don’t just want something in return for the information they share; they also want to know the reasons behind the need for their data. Value exchanges like these are increasingly common, with publishers offering newsletters or access to premium content in exchange for user emails, phone numbers and purchase history. 

By leveraging this rich first-party data, advertisers can build unique audiences to target. This gives them the license to reach audiences and achieve marketing goals without compromising user privacy.

Second-party cookies

First-party data is a great foundation for advertisers, but they cannot facilitate a brand's reach aspirations on their own. Publishers also need to lean on second-party data, if they want an edge over competitors. 

Rather than being collected first hand, second-party data leverages information obtained directly from another party. Publishers can obtain valuable demographic, behavioral and purchase history data, by partnering with a related online entity. 

This provides additional insights into another organization’s audience or customer base, allowing for better targeting and more personalized experiences.

Since they allow businesses to reach prospective customers more effectively, without concerns about data quality, 49% of businesses consider them a high priority. 

Second-party data allows marketers to obtain information they otherwise would be unable to, gaining a holistic view of customers across devices and channels. Over 75% of marketers that reported highest returns on their data-related investments are currently leveraging second-party data. 

Contextual Advertising 

Contextual ad targeting lets publishers deliver impressions based on web page content rather than individual user data, allowing brands to display ads that are highly relevant to the consumer’s interests. For example, an ad for a golf club reseller on an article about golf, or a sports brand ad in your favorite sports video game. 

Contextual advertising not only targets the right people with the right message, but builds higher engagement and increases ad interactions. Here are a couple of examples of how companies can utilize this approach:

• Google AdSense 
  • Enables companies to target customers based on the content they’re viewing on a particular web page
• In-game and in-video advertising 
  • Often woven into the online gaming experience
  • In-video advertising allows advertisers to reach customers when they are watching particularly relevant material; YouTube has been utilizing in-video ads for a number of years

Given the forthcoming changes to cookie usage, publishers need to offer contextual advertising to remain ahead of the competition.

Federated Learning - a peek into the future 

The industry is also exploring technologies like Federated Learning to balance personalized advertising with user privacy. Introduced by Google, Federated Learning of Cohorts (FLoC) trains models on user data without the need for that data to leave the user's device, thus preserving privacy. 

This innovative machine learning (ML) approach allows collaborative model training across decentralized data sources, while keeping the data itself localized and secure (Medium). Federated learning combines the benefits of distributed data, privacy preservation and collaborative learning, making it a promising approach in the field of ML and user privacy. A definite ‘watch this space’ moment for advertisers as Google accelerates trialing throughout 2024. 

The gradual death of third-party cookies signifies a shift towards a more privacy-conscious digital advertising ecosystem. It encourages the industry to find innovative solutions that respect user privacy while still delivering relevant and engaging experiences. 

The cookie may have crumbled, but it’s a great opportunity for publishers to experiment with viable alternatives, and gain early competitive advantage for when third-party cookies finally disappear for good.