3rd-Party Cookie Marketing Strategy Brief

The Crumbling Cookie

Third-party cookies have fueled online advertising for decades. Firms have heavily relied on them to advertise their products to relevant consumers. With Google preparing to disable them, firms must start adapting their marketing strategy to the changing ecosystem. Whether a company is buying or selling advertisements on Google, this change is certain to impact them.

Third-party cookies are code left by the websites users visit and belong to an organization that is not the owner of the website. Data like a user’s device ID, name, browsing behavior, and addresses can be collected through third-party cookies. These cookies allow for cross-site ad tracking and personalization of content on sites.1

Figure 1: How Third-Party Cookies Work2

Google's decision to phase out third-party cookies in Chrome by Q3 2024, citing user privacy concerns, marks a significant change in the advertising landscape.3 Both California and the EU have become more critical of how companies collect and use user data. Legislation like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) aim to increase transparency and control for individuals regarding how businesses collect and use personal data.4

Firms have utilized third-party cookies despite privacy concerns due to their ability to target and personalize online experiences for users. Advertisers can ensure that the content displayed on a user’s screens is relevant and engaging for that specific user.

With reduced targeting accuracy and increased difficulty in measuring ad effectiveness expected as third-party cookies are phased out, leaders in the advertising space are preparing for the coming disruption by analyzing alternatives. Preemptive action taken now will ease the transition when the time comes and ensure resources are not wasted recovering advertising efforts.

Exploring Other Strategies

The Privacy Sandbox initiative is Google’s alternative to third-party cookies. It allows advertisers to personalize ads while reducing cross-site tracking. Privacy Sandbox’s Topics API allows advertisers to show relevant content and advertisements without third-party cookies.5 This technology is still being built and its performance has not been made publicly available. The Privacy Sandbox will likely be refined over time after release if it does not initially perform as well as the method it replaces.

46% of consumers cite Ad repetition as the most impactful reason behind purchasing with 41% citing deals as the second most impactful factor.6 This type of strategy would be most beneficial to firms in the growth stage of a product that is meant to be a repeated purchase. Although implementing either of these strategies would cut into profits. Increasing ad frequency and discounting products reduces margin. If properly executed in the right setting it would increase trial and result in later revenue.

Contextual targeting uses the context of the site rather than data on the user to choose what ads are displayed. Google PPC ads are assigned to sites based on relevant keywords or categories. This strategy respects users' privacy while allowing advertisers to provide a personalized and relevant online experience. This type of advertising is similar to how companies used to advertise in older media like print. Firms advertise on platforms/sites that are relevant to the firm. Finding categories relevant to the ad's target market or product is crucial for this element to work as 76% of consumers get frustrated when advertisements are irrelevant to the content they are viewing.7

Figure 2: Contextual Targeting Visualized8

First-party data includes first-party cookies and all other data collected on a user by a company that a user visits. First-party cookies are not being decommissioned by Google and allow website owners to collect analytical data and remember user preferences to give them personalized experiences. First-party data favors bigger firms that have the resources to manage and activate their data. Smaller firms with a limited online advertising budget will not likely be able to implement this strategy in the relatively near future due to a lack of infrastructure or available resources to build the infrastructure.

Dark patterns are user interface designs meant to mislead users and trick them into disclosing information, clicking on advertisements, or performing any other behavior that is not desired by a user.9 Disguising links to advertisements in what look like buttons, having pop-ups appear over clickable elements, and switching confirm and deny button placements are all examples of dark patterns. While they can cause a temporary increase in engagement, they are not advised. In addition to being considered ethically wrong, they drive down interactions over the long term as users learn to avoid websites that use them.10

Figure 3: Dark Pattern Example11

What needs to be done now?

Before making any changes, a firm must identify how third-party cookies are being used in their advertising process. Knowing how cross-site trafficking and data aggregation are being utilized as well as the KPIs that are being tracked is the first step to prepare. This information will reveal what needs to be changed and how effective those changes are compared to third-party cookies.

Advertising managers should keep a close eye on Google’s Privacy Sandbox development as the third-party cookies' expiration date approaches. Being up to date on the system mitigates the chance of ineffective advertising after the change. Firms should be prepared to adopt the Privacy Sandbox and work without it if it proves ineffective.

Larger firms need to figure out how to use first-party data more effectively. This can be done by investing in a Data Management Platform (DMP) to centralize and manage third-party data. DMPs allow marketers to design highly personalized interactions on websites as well as better track their effectiveness.12 First-party website analytics will become more valuable as companies learn to better leverage the data they have direct control over. This includes gaining insights by understanding user behavior on owned sites.

The impact that the deprecation of third-party cookies has on revenue generation is uncertain. However, there is some change to be expected. Management should prepare for a decrease in advertising-related revenue on Google. Communicating realistic expectations with stakeholders will prevent unrest at a most likely temporary decrease in revenue after the change. Diversifying revenue streams will help make up for short-term losses if a firm is unable to deal with even a slight decrease in revenue. Alternative income sources like subscriptions, memberships, or premium content on sites that host advertisements are ways to make up for losses on effective advertising.

It is the responsibility of advertising managers to be proactive when it comes to emerging technologies. Vigilant monitoring of the landscape is necessary to overcome disruptions in the market. Historically, when a successful model of doing something is prohibited, new methods eventually emerge to fill the gap. If Privacy Sandbox proves not to be an effective replacement for third-party cookies, another technology will likely appear.

Revising a firm's advertising strategy is a necessary step before the change happens. Testing online methods like contextual advertising, increased presence, and deals will reveal insights into how the market might look after third-party cookies are no longer being used. Ultimately the method(s) a firm employs to adapt to the upcoming change will depend on its business model. Most likely, a combination of methods will be necessary to achieve the best outcome. Trial and error might be necessary, but being informed about the options and understanding each one's strengths will allow advertising managers to make the best decisions possible.

Who’s ahead of the curve?

Nothing is preventing a firm from stopping the use of third-party cookies right now besides their inability to maintain their current performance without them. Not wanting to be caught off guard by the change, some firms have gotten ahead of the curve and have formulated or even started implementing plans to phase out dependence on third-party cookies.

A Belgian gaming company proactively sought out the services of Deloitte in anticipation of the vanishing third-party cookie practice. Tasked with accelerating readiness for the cookie-less era, Deloitte employed a dual-phase strategy. First, a comprehensive 'As Is' assessment scrutinized existing ad practices, identifying risks. Subsequently, the 'To Be' phase crafted a future roadmap blending technological, legal, and collaborative insights. Deloitte's deliverables included a bespoke mitigation plan and a strategic roadmap, offering the client a foundation for navigating the cookie-less future.13 No other identifying information has been released about the firm and it is uncertain how it will perform once third-party cookies are completely phased out, but it shows one way firms can be proactive even if they do not have the required competencies to handle the change.

In a proactive response to the challenges posed by the vanishing third-party cookies, The New York Times strategically positioned itself in the evolving advertising landscape three years before Google is set to remove third-party cookies. The New York Times launched its first-party audience data platform in September 2021 after two years of development. Emphasizing privacy, the platform utilizes subscriber data and employs the previously mentioned contextual advertising method. Machine learning is used to score articles in real-time to about 20 emotions, seven motivations, and over 100 topics.14 Note that what gave the New York Times the ability to successfully implement this strategy so soon was the fact that they had been collecting user data to aid in the training of their model for a considerable amount of time before they changed strategies. Firms that do have the capital to adopt a similar solution may not have the resources prepared to do it as effectively as the New York Times. Data collection is also a factor that made third-party cookies so controversial. While this method does not allow for cross-site trafficking, transparency on what is being collected, how that data is used, and users' options relating to their data should be communicated clearly to respect users’ privacy.

The Washington Post has several proprietary formats for advertising meant to make advertisements on the site more impactful. In addition to using first-party data similarly to the New York Times, an approach around user experience has been implemented to help brands give users a better advertising experience. An example of this would be homepage takeovers. Brands can put their branding on The Washington Post homepage, so it is prominently displayed for all users who visit the site.15 Going above and beyond personalization and making sure that users enjoy the experience of the personalized ads.

Whether it’s hosting advertisements or buying ad space, there is little information on firms that have documentation on making these changes. Because of their effectiveness, companies are slow to phase out third-party cookies on Google until necessary. As the deadline gets closer, and push comes to shove, information on best practices and the firm's pioneering change will only become more accessible. The firms that perform best are going to be the ones that are knowledgeable about the evolving digital advertising ecosystem and the legislation surrounding it and use that knowledge to create plans for the change.

Notes

1. How the cookie crumbled: Marketing in a cookie-less world, 2020, https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consultancy/deloitte-uk-cookie-less-marketing.pdf, 1.

2. photograph, 3rd-Party Cookie Age Is (Almost) Over: What Advertisers and Marketers Are Doing (expressanalytics, 2021), https://www.hushly.com/blog/retargeting-marketing/, 1.

3. Paul Verna, “Identity Resolution H2 2023,” Insider Intelligence, October 16, 2023, https://content-na1.emarketer.com/identity-resolution-h2-2023?_gl=1%2A1skwdac%2A_ga%2AMTgzOTQ2NTE3OS4xNzA5MTc5NTc3%2A_ga_XXYLHB9SXG%2AMTcwOTE3OTU3Ny4xLjEuMTcwOTE3OTU5My40NC4wLjA.%2A_gcl_au%2ANzE5NjgyODExLjE3MDkxNzk1NzcuMTAxMTM0ODM5Mi4xNzA5MTc5NTkxLjE3MDkxNzk1OTE, 1.

4. “CCPA vs GDPR. What’s the Difference? [With Infographic],” CookieYes, February 9, 2024, https://www.cookieyes.com/blog/ccpa-vs-gdpr/, 1.

5. “What Is the Privacy Sandbox?  |  Google for Developers,” Google, December 2023, https://developers.google.com/privacy-sandbox/overview, 1.

6. Jenni Nelson, “Digital Advertising - US - 2023,” Mintel, 2023, https://reports-mintel-com.srv-proxy1.library.tamu.edu/display/1157235/?fromSearch=%3Ffreetext%3DDigital%2520Advertising%2520%26resultPosition%3D1, 1.

7. Rebecca Riserbato, “What Is Contextual Targeting, in the Context of Ads?,” HubSpot Blog, January 19, 2024, https://blog.hubspot.com/marketing/contextual-targeting, 2.

8. photograph, What Is First Party Data? (https://onaudience.com/what-is-first-party-data), accessed 2024, what-is-first-party-data, 2.

9. Staff in the Office of Technology and The Division of Privacy and Identity Protection, “FTC Report Shows Rise in Sophisticated Dark Patterns Designed to Trick and Trap Consumers,” Federal Trade Commission, September 15, 2022, https://www.ftc.gov/news-events/news/press-releases/2022/09/ftc-report-shows-rise-sophisticated-dark-patterns-designed-trick-trap-consumers, 2.

10. Evelyn Mitchell-Wolf, Max Willens, and Paul Verna, “FAQ on Third-Party Cookie Deprecation and ID Resolution,” Insider Intelligence, January 23, 2024, https://content-na1.emarketer.com/faq-on-third-party-cookie-deprecation-id-resolution, 2.

11. photograph, What Hides in the Shadows: Deceptive Design of Dark Patterns (Congressional Research Service, 2022),

https://www.everycrsreport.com/reports/IF12246.html, 2.

12. “What Is a Data Management Platform (DMP)?,” What Is a Data Management Platform (DMP)? | Oracle Data Cloud, accessed February 2024, https://www.oracle.com/cx/marketing/data-management-platform/what-is-dmp/#why-you-need-a-dmp, 2.

13. Kathleen Peeters, Niels Van Schoorisse, and Silvia Butean, 3rd Party Cookies Phase Out, January 2023, https://www2.deloitte.com/content/dam/Deloitte/be/Documents/Operations/be_deloitte_3rd_party_cookies_offering_2023.pdf, 3.

14. Elizabeth Shilpa, “How the New York Times Prepared Itself for a Cookieless World,” WAN, April 27, 2022, https://wan-ifra.org/2021/09/how-the-new-york-times-prepared-itself-for-a-cookieless-world/, 3.

15. Washington Post Media Kit, accessed February 2024, https://www.washingtonpost.com/solutions/capabilities/digital/, 4.