The End of Third-Party Cookies: The Potential Impact on the World of Advertising

For years, online entrepreneurs have been using cookies to track their users’ and customers’ habits. The data they gathered was used to improve the user experience on the website, but also to learn about customers’ behavior and improve their marketing strategies, conversions, and sales.

In 2022, however, things are changing: the browser Chrome and all other Chromium-based browsers will stop supporting third-party cookies starting from this year. This isn’t something that only involves the Google Browser that we all know: as we’ve just mentioned, Chromium-based browsers will encounter the same fate, and — as you probably already know — many of the most utilized browsers are Chromium-based: Opera, Brave (which is popular among crypto traders) and Edge, the official Microsoft browser installed on every Windows computer!

In other terms — as Chrome and Chromium-based browsers are the ones utilized by more than 70% of users worldwide — this is a big change in the web, online marketing, and advertising industry. Furthermore, Chrome isn’t the first and only browser to disable third-party cookies: Safari and Firefox have already stopped tracking users this way. This means that tracking users with third-party cookies is becoming impossible and it’s worthwhile to question ourselves about what consequences this factor can have on the advertising industry.

In this article, we’d like to explore what is the impact of the death of third-party cookies on the world of advertising.

What are third-party cookies?

As you know, cookies are utilized to collect and “remember” data about visitors’ behavior on one website: what pages they visit, how long they stay on each page, what kind of products they select or put in their chart, and more…

This information is utilized to (1) improve the visitor’s experience on the website (if she has added some products in her chart, she’ll find those products already added in the chart next time she visits the online store) — and (2) for marketing purposes: if you browse to pair of jeans on one marketplace, those jeans will start being recommended on that marketplaces, and maybe even others and other websites too!

When the cookies are put there by the same website you are visiting, they are first-party cooking. But there are also third-party cookies: they are put there and the collected data is utilized by other websites, companies, agencies… This is why you can see ads for the pair of jeans you took a look at yesterday from an eCommerce you have never visited!

This way third-party cookies are identifiers of a specific user’s ID on the web that follows them all over the Internet collecting data about what he or she does online.

Why are third-party cookies being blocked?

The block on third-party cookies initiated by Google is an answer to the users’ will. The growing awareness of the presence of cookies and how they work caused discontent and distrust among internet users.

Internet users are becoming more concerned about where and how their information and identifiable data are used; they demand greater privacy and clear control over how their data are collected and used.

In March 2021 Google claimed that, because of the users’ demands, “the web ecosystem needs to evolve to meet those increasing demands”.

However, this isn’t only Google’s will to meet its users’ needs and demands. The ending of third-party cookies is also a consequence of the update of data protection regulations running in Europe (the GDPR) and California (CCPA).

What about first-party cookies?

Cookies that are created and used by the publisher and not transferred to third parties will continue being used on any browser. The reason behind it is that first-party cookies can improve and facilitate the experience of a user on a website.

How will the ending of third-party cookies affect advertisers?

The block on third-party cookies will certainly have important consequences: tracking the audience cross-site is becoming impossible and this factor is already having some consequences:

1. We are seeing more non-personalized ads on the Internet. As a consequence, online advertising campaigns are and will be becoming less and less effective (when you can personalize ads, of course, your advertising campaign is more effective! But this is becoming more and more difficult!).
2. As first-party cookies can be used, we will see an increase in their use. Advertising campaigns will become based on this data, that is, on the data each brand gathers on their websites and platforms.

The economic impact of the end of third-party cookies

The greatest economic impact of the death of third-party cookies will affect publishers and companies that offer the service of displaying ads on a digital space.

These companies not only show your ads on websites and webpages, but they are also, and more importantly, used to offer customization features. One of the main reasons why online advertising campaigns were so effective was that they could customize a lot of parameters and target the ads to a specific segment of audience (identified by age range, home town, job, interests, habits, and more…).

With the ending of third-party cookies, publishers will have less access to the data that allows identifying and targeting those segments: with a poorer service to offer, publishers’ revenue will decrease.

A recent report by IAB showed that, because their ad personalization options will shrink, publishers could lose up to $10 billion in ad revenue. Publisher companies need to reconfigure their approach to data and ad management.

Why will publishers’ revenue decrease?

1. Because third-party cookies can’t be utilized but first-party ones can, for brands it becomes more convenient to advertise on sites and platforms that have their authorization systems (YouTube, FaceBook, Amazon…). This way, they’ll be able to keep customizing ads according to the data collected which makes advertising campaigns far more effective.
2. It will become more convenient for businesses to purchase CPC (cost-per-click) and CPA (cost-per-action) models, but these are less profitable for publishers.
3. While iOS has already restricted user tracking, this is still a work in progress in Android: a lot of brands’ budgets for advertising will be redirected to Android mobile advertising.

Do online companies have other alternatives?

The fact that using third-party cookies is becoming almost impossible doesn’t mean that online businesses and brands have to renounce targeted advertising. But It does mean, that they need to change their approach.

Third-party cookies aren’t the only tool at brands’ disposal to gather the information that can be used for marketing purposes. There are alternatives, and these alternatives are just becoming more and more important.

The most important alternatives to third-party cookies can be reduced to three categories:

1. Solutions without personal IDs

Some solutions can work without targeting specific user IDs. The most advanced solution of this kind comes from Google and it’s called FLoC (Federated Learning of Cohorts). Instead of using identifiers based on users’ personal data, this system focuses on cohort analysis for ad targeting. In particular, the FLoC algorithm tracks the websites that users visit, and combines data into cohorts of interest. Cohorts identified this way can be targeted with ads.

2. Universal ID solutions

These are the solutions that are based on data that users provide with consent. Consent is obtained when the user agrees to sign up for a web resource (for example, when they subscribe to a newsletter).

There are tons of solutions of this kind available and ID5 is used among British publishers. This ID solution works like a link between publishers’ and advertisers’ first-party cookies so that you can compare (and track) specific IDs from different channels.

3. Contextual targeting

This solution allows showing ads to users who visit specific websites or sections of a website without binding users’ data. For example, Forbes USA grouped its website into very specific categories (sports, finance, cars…). This allows them to portion the audience and target specific segments without the use of user identifiers.