The Death Of Third-Party Cookie Advertising
Rapidly evolving consumer expectations and erosion of trust are driving innovation in data privacy. Google is tackling the daunting task of developing a way to please its users as consumers are demanding more privacy with their personal data while still providing effective predictive service for its advertisers.
But the $80-100 billion-plus annual ad revenue stream is what's really at stake for advertising giants Facebook and Google.
What are third-party cookies?
Third-party cookies are the digital footprints you leave as you travel around the internet as you return to familiar sites. They track your activity.
By the end of 2022 Chrome, Firefox and Safari have all agreed they will not support 3rd party cookie-based tracking. This will leave a wide gap in the usability of any data collected by browsers and has forced them into considering new options for advertisers and profit streams.
In March 2021 Google announced its further commitment to the replacement of third party cookies with First-Party data. (source)
In response to this move away from 3rd party cookies, Google is currently developing its Privacy Sandbox. The goal is to:
“Develop a set of open standards to fundamentally enhance privacy on the web” (source)
This will enable the protection of user privacy data while still allowing for advertisers interest and revenue and simultaneously allows the free flow of information and freedom of the internet.
“72% of people feel that almost all of what they do online is being tracked by advertisers, technology firms or other companies, and 81% say that the potential risks they face because of data collection outweigh the benefits” (source)
Google has emphatically stated that they will not be building an alternative once third-party cookies phase out and will not use third-party identifiers to allow tracking across the web or via their products.
What Google’s building in its Privacy Sandbox.
FLEDGE (aka TURLTDOVE)
TUR - Two Uncorrelated Requests (contextual ad request)
TLE - Then Locally Executed Decision on Victory (client-side auctions)
These are protocol experiments currently testing data preservation tools that advertisers are used to using but will now instead be fully privacy-compliant.
This paired with 2 potential solutions: Gnatcher (Global Network Address Translation Combined With Audited and Trusted CDN or HTTP Proxy Eliminating Reidentification (Willfull IP Blindness), which means an IP address can’t be used as an identifier. In addition, the IP would be masked to the application layer and prevent ad serving software from obtaining an IP address and maintaining the user's anonymity.
How it works.
Browsers will hold data that can be used for advertising but will not be combined with any other data collected while serving ads or any interest data about a user.
Instead, and new, behaviorally targeted cohort groups will form the basis of any advertising and retargeting campaigns. Cohorts will be formulated based on traffic to specific websites and interests or actions performed. This data will form the foundation of new custom segmented audiences without the need for third-party cookies and will be used through the use of a browser API and on-device auction.
The FLoC API (Federated Learning of Cohorts) leaves not much further to be desired as a replacement. With this protocol users will be added to the interest and behavioural cohorts and Advertisers will have to access these groups as anonymous data. A browser can notice that a user visits a website or Display Ad and adds a request for ads to target this user group. Each cohort of 1000+ users will have its unique identifier which is presented to each website a cohort member visits.
Early testing is showing that these behavioural cohorts can achieve a 350% improvement in recall and 70% improvement in retargeting while remaining at a very high anonymity level compared to random groups.
But FLoC has been criticised already as simply another form of tracking. Your data is being put into a group based on browsing history and you can continue to be tracked easily. Browsers such as DuckDuckGo, Vivaldi and Mozilla have not signed up, preferring the watch and wait approach. DuckDuckGo has developed its own Chrome FLoC blocker, Github has blocked FLoC, and a major WordPress technical meeting has been debating about how to treat FLoC as a security issue.
Until the digital ad industry changes its approach the onus is on the individual user to take control of their privacy. The overwhelming uptake of privacy browsers such as Brave, Firefox, Safari, Edge, not to mention VPNs, TOR, or P2P networks is proof.
What could this change mean for your business?
If you’re an advertiser - a business using these cookies currently, it means your data will be making a big shift in the next few years and it could massively affect advertisers who have made their bones on third-party cookies.
But the crux is coming and you can pivot and learn, and start prepping now for the eventual phase-out of third-party cookies.
If you recall back about 10 years getting spammed by companies selling your data when you hadn't even opted in, well the GDPR saw that coming and implicit opt-in was ruled out and such will be the 3rd party cookie. And you know what? We survived...no...THRIVED in this circumstance. Governance and privacy regulation is an ever-evolving flywheel that has forced us into better, more relevant communication with our customers and excellent software that have leveraged those relationships, arguably for the better.
Google's decision to block third-party cookies could tighten the chokehold and further disrupt advertisers' competition. The best thing you can do as a business is to take stock of what your current advertising strategies are reliant upon, reevaluate your software solutions, and leverage your first-party browser data.
Because consumers are demanding more privacy with their data, and it's time to carefully consider how we use technology both as a business tool, but also as a humanities tool. It's time to shore up those vulnerable soft spots and look at this as an opportunity to do things differently.
If you have any questions about your advertising model, how you are using Google Ads or your customer flywheel we would be happy to chat with you about solutions.