The loss of third-party cookies has been a topic of discussion for some time, but it's back in the spotlight due to Google’s plan to expand its privacy sandbox globally and eliminate third-party cookies by the end of the year.
COOKIELESS
The loss of third-party cookies is not a distant possibility; it's an imminent reality that will reshape how businesses advertise by the end of 2024. If you, as a business owner or Marketing Manager, haven't yet grasped the full implications of what this change will mean for your business and online advertising, now is the time to think through and prepare for the changees that will come throughout this year.
The loss of third-party cookies has been a topic of discussion for some time, but it's back in the spotlight due to Google’s plan to expand its privacy sandbox globally and eliminate third-party cookies by the end of the year.
A quick catch-up on the cookie saga
The phasing out of third-party cookies has been flagged since 2018 when the EU’s General Data Protection Regulation (GDPR) was announced. This regulation imposed stringent privacy and security laws on organisations that collected data and has become a powerful model for privacy laws worldwide. The “Brussels effect,” as it is known in the industry, has had a powerful effect on tech giants.
Many companies, such as Safari and Firefox, have already eliminated third-party cookies. Google was the last company to announce that it was ending support for them. Apple announced its privacy protection, the App Tracking Transparency Framework, in 2021, enabling consumers to opt out of sharing third-party identifiers on iOS devices.
What are third-party cookies?
Third-party cookies are text files with small pieces of data used to identify a person’s computer and track behaviour across websites. First-party cookies are placed by the website a user is visiting, while third-party cookies are placed and used by other sites the user isn’t on. The changes brought in by the GDPR only affect third-party cookies.
Third-party cookies allow organisations to track and retarget consumers based on their browsing history and online behaviour. This ability to track consumers' online behaviour without their knowledge or permission gave rise to increasing concerns about privacy, which helped drive the laws and regulations outlined in the GDPR.
While eliminating third-party cookies represents a victory for consumer privacy, there is emerging evidence of the impact on companies' bottom lines. A recent paper looking at the impact of the GDPR on the online travel industry found a 12.5 per cent drop in the total amount of ‘observed data’ companies could rely on, which led to a corresponding loss of advertising revenue for online travel platforms. Without third-party cookies, online travel companies have found it more difficult to target consumers and track the effectiveness of their ads.
What is Google’s Privacy Sandbox?
Part of the reason Google has delayed eliminating third-party cookies is that it has been developing its Privacy Sandbox to provide businesses with ways to mitigate advertising losses arising from the elimination of third-party cookies.
While Google’s development of the Privacy Sandbox attempts to avert difficulties for the online ad industry, it is not entirely altruistic. Google dominates this industry and makes all its money from it; hence, it has been in Google’s interest to delay phasing out third-party cookies until it has technology in place that provides a workaround that meets the privacy requirements and allows some level of data collection for businesses.
The Privacy Sandbox has two main objectives:
1. Phase out support for third-party cookies when new solutions are in place and
2. Reduce cross-site and cross-app tracking while helping to keep online content and services accessible.
Essentially, it is a set of technologies designed to protect users’ privacy online while giving companies and developers what they need to build successful digital businesses.
In 2024, Google will roll out the Sandbox on Google Chrome globally to phase out third-party cookies in the second half of the year. This means third-party cookies, including ad cookies that aren’t Google’s and Facebook’s, will stop working in Google Chrome once this is implemented. It will significantly impact advertisers, publishers, and smaller ad networks.
The Privacy Sandbox is a set of technologies designed to protect users’ privacy online while giving companies and developers what they need to build successful digital businesses.
Preparing your business for the cookie-less future
There are certain things companies can do to prepare for the cookie-less future.
Enhance conversion for web
Enhanced conversion is a Google feature that improves the accuracy of a business's conversion measurement. For example, when a customer converts on a business website, the business receives first-party data like the person’s name, address, phone number, and email address. This data is sent to Google in a hashed form that ensures privacy and can be used to improve the measurement of online conversions from paid ads.
Engage in contextual advertising
Contextual advertising involves targeting ad space based on website topics, keywords, or similar parameters.
Although contextual advertising and behavioural targeting are similar, they aren’t the same. Behavioural advertising, because it targets the consumer based on actions they have taken on other websites, involves cross-site tracking, which requires third-party cookies. Hence, behavioural targeting will no longer be available once third-party cookies are phased out.
Contextual advertising allows businesses to choose where to place ads based on the consumer’s browsing environment rather than the consumer's browsing activity. In other words, ads are placed based on the webpage and its content.
While contextual advertising isn’t as precise as behavioural targeting, it doesn’t require third-party cookies, making it a viable replacement.
Shifting to Cohorts and FLoCs rather than individual customers
While businesses will no longer be able to use third-party cookies to target specific customers, first-party data can still be used to target audience segments.
To use audience segments, businesses must first create cohorts, which are a set of users who have grouped based on a shared attribute or identifier. For example, a cohort could be customers who have purchased the same product over the past month. Once a business has created a cohort, it can target that cohort with marketing content and measure the effectiveness of the ads.
So, what is an FLoC?
Floc stands for Federated Learning of Cohorts and is the technology by which Chrome will create cohorts.
Chrome browsers will use algorithms - Federated Learning to create large cohorts of people who share certain qualities and interests. Chrome will not assign a user to a small cohort, as that would potentially allow the individual to be identified. Hence, Google has advised that it will wait until there are thousands in a cohort before advising businesses that a person from a particular cohort has visited their website. Cohorts will also be numbered rather than named, so it will be up to businesses to know, for example, what cohort 256984 represents.
The proposed roll-out of Google’s Privacy Sandbox and Google finally phasing out third-party cookies in the second half of 2024 will potentially significantly impact the online ad industry. However, companies can minimise any negative impact by thinking through their online advertising strategy and preparing for the change by:
· Using Google’s tools to enhance web conversions.
· Beginning to advertise contextually rather than relying on third-party cookies, and
· Thinking about what cohorts are helpful for their industry.
