Paid media fears third-party cookies going away, but the move to first-party cookies could save them.

With third-party cookies going away in Google Chrome, the web’s most used browser is set to hit the digital marketing industry in 2023.

Google Chrome Browser ending its support of third-party cookies and its forecasted devastation to the paid media industry.

Why does this cookie type matter? Because it is essential for tracking activity, ad targeting, and attributing conversions. However, there could be some unlikely winners and opportunities at the end of third-party cookies and move to first-party cookies.

So what is the “browser cookie” you talk of?

Tracking cookies are tiny pieces of code that allow websites to identify and track users. 

Cookies are frequently quite beneficial. First Party Cookies, for example, are the reason you don’t have to log in to a website or create a new online shopping basket every time. The site’s publisher or owner controls the first-party cookie, and data are collected for personal use.

First (Party Data) things first

What are first-party cookies?

First-party cookies are created by the site you visit. A first-party cookie is stored on the web server and CMS in your web browser on your computer’s hard drive when a user visits a website.

The domain of the website web server appears in the cookie’s “domain” attribute.

For example, when you visit “example.com”, a first-party cookie named “first_party_cookie” is stored on your computer. The contents of this cookie may be:

{ “name”: “first_party_cookie”,

“domain”: “.example.com”, //notice how the domain starts with a dot

“value”: 1234 }

First-party cookies are created by the site you visit and can be used to store information about your preferences. For example, a first-party cookie could keep your user ID on a website so that you don’t have to enter it every time you visit the site.

What is a Third Party cookie?

A third-party cookie is a small piece of data stored on a user’s web browser by a website other than the one they are currently visiting. These cookies allow advertisers and publishers to track user activity across different websites and serve targeted ads.

Cookies from third-party sources are not created by the web servers you’re on but by something else, usually a social media or advertising company. They then monitor your travels across the internet, gathering information about your hobbies, location, age, and habits. Unsurprisingly, they’ve become a frequent target of privacy advocates.

Third Party Cookies and Advertising

Cookies from third-party sources have been crucial to the paid media industry since they collect analytics data that allows for accurate monitoring and attribution of conversions.

Cookies from third-party sites aren’t generated by the website you’re on but rather by something else – typically a social media or advertising company. These ad platforms collect data on every website you visit that is part of their advertising network. So they follow a user across the websites they visit, gathering data about your interests, location, age, behavior, and transactional data.

Third-Party Cookies Going Away – A Privacy Win?

However, owing to some obvious privacy issues of tracking user activity where ever they are on the web or social media, they have come under fire in recent years.

A serious issue is the lack of transparency in the industry, the wide range of data partnerships of each ad network, and to whom that data file goes.

Third-party cookies are no longer able to be utilized in many cases. As a result, major browsers such as Apple Safari and Firefox have started by default blocking third-party cookies. Google Chrome plans to join this group in 2023 with its own third-party cookie-blocking technology.

But isn’t Online Advertising based on third-party server’s code?

Third-party cookies are placed on a user’s computer when they visit any publisher’s web servers.

We all know the “cookie consent” pop-ups we are forever closing (reading first and agreeing to, obviously!). This action allows the third-party cookies to be placed on the browser and to be shared with any other site in the advertising network.

This code identifies the user, tracks user behavior and delivers targeted ads. It also allows for cross-device tracking, so if you’ve been checking out shoes on your phone and then switching to your laptop, you might see an ad for those same shoes following you around the internet.

Cross-site tracking and ad delivery are how most of the online advertising industry makes its money. Third-party cookies are placed on your browser by someone other than the website you visit. These cookies allow for cross-site tracking and targeted advertising based on all the third-party data collected across all the publisher’s websites a user visits. This cross-site tracking is used to show acquisitional targeted ads to track users who fit the advertiser’s audience. The use of cross-site tracking allows for remarketing ads to users who’s user’s activity shows they have been to the advertiser’s website and added to a Facebook or Google remarketing audience.

The problem with this system is that it’s based on trust. So we’re trusting these third-party servers with our data, even though we don’t really know who they are or what they’re doing with our information.

This lack of transparency has led to a lot of criticism of the paid media industry, and it’s one of the main reasons why browsers are moving to block third-party cookies.

So, What Does This Signify For The Future Of Paid Media?

If third-party cookies are no longer an option, this will significantly impact how advertising works.

Publishers will need to find new ways to monetize their traffic, as traditional display advertising will become less effective.

Third-party cookies are going away for various reasons, but it needs to be considered an accelerator in a trend toward more significant innovation and aligning data privacy with profitability.

What will replace the Third Party Cookie Ad model?

For a start, Contextual advertising, which is not linked to recognizing individual readers, could flourish as a result of privacy concerns.

Premium publishers may benefit from the end of third-party cookies. Context has long been essential, but in recent years, it’s been somewhat overlooked in the business. The return of individuals thinking about the context’s quality is excellent news for the advertising sector.

Because third-party cookies may be removed, publishers with a subscription model will benefit considerably. They can use their first-party data since they have a subscription business model. The ones that have recently converted to an advertising approach, on the other hand, have many anonymous visitors and will need to reconsider their marketing strategy and plan. They will undoubtedly need to focus on the quality of their content to persuade people to register.

The demise of third-party cookies could be good for publishers willing to adapt and innovate. There will be new opportunities for those who are able to take advantage of them.

So there will be a drive to User registrations and First party data

Yes, there will likely be a shift to first-party cookies as publishers look to capitalize on their existing relationships with readers. First-party cookies are placed on a user’s browser when they visit a website that is part of the same advertising network as the site they’re visiting. This allows for more accurate tracking and attribution of user behavior, as well as more personalized advertising.

The advantage of enabling User registration is that the anonymized data collected from that first visit can then be added to a User activity account. The registration process creates this account with personally identifiable information like name, email, and even location and phone number.

The move to first-party cookies could also help to address some of the concerns around data privacy, as users will be able to see exactly which sites are collecting their information. However, it’s important to note that first-party cookies can still be used for cross-device tracking, so users must be aware of this if they’re concerned about their privacy.

Which Publishers are likely to win the shift to first-party data?

Big Tech Wins again!

The Big Tech companies have built their entire business on getting your account registration.

• Facebook gives you next to no content from friends and brands without an account.
• You can’t shop on Amazon without an account
• Google forces an account on all of its YouTube and Android users

Amazon (NASDAQ: AMZN), Meta (NASDAQ:META), and Alphabet (NASDAQ:GOOGL) could become increasingly powerful over time as they collect more data on individuals without having to share it, thus building higher walls on their “walled gardens”.

Since GDPR came into Europe in 2018, Big Tech has been struggling with how to keep their business model of data collection and monetization without running foul of the law. The end of third-party cookies will give them a way to get around this, as they’ll be able to collect data on users directly from their own sites.

This could have a significant impact on the digital marketing landscape, as Big Tech companies will have an even more considerable advantage over smaller publishers regarding targeted advertising. They’ll also be able to offer more personalized experiences to users, which could further entrench their position in the market.

The user gives information that each company collects directly from its customers and owns itself.

This is directly opposite to third-party data bought in from external sources, often where the user has no knowledge or understanding (back to those cookie policies never being read).

Big tech brands already hold a level of trust with users and a huge amount of first-party data on their users, so they have an immediate advantage over smaller ad players.

Is this the end of smaller advertising-based publishers?

Contextual advertising may resurface due to privacy concerns, which are not reliant on individual identification.

A UK-based example of this type of publisher is Future (LON: FUTR). The media group owns many specialist magazine titles covering everything from gaming and sport to women’s lifestyle and photography.

Given that each of Future’s publications has a relative niche readership, a significant portion of its revenues is generated from ‘direct’ advertising, which involves companies going directly to magazines to agree on marketing campaigns.

Future’s proportion of direct advertising could increase as the end of third-party cookies hits. A direct approach is often more attractive as it offers higher yields than programmatic advertising, which uses automation to buy advertising space.

They have invested in a 1st Party data solutions platform, Aperture, which claims the following (from their website):

• RICH DATA CAPABILITIES – Access and engage audiences across our properties and beyond with our full stack solution.
• DIVERSE AUCTION OPTIONS – media and audience through an open auction, private auction deals, and guaranteed inventory.
• SCALABILITY – scale specialist audiences further with off-site targeting and creative content-led campaigns — directed by an in-house design team.

Traditional Publishers need to move from unknown third-party data to known first-party data

If we compare this company’s position to that of another Publisher, this time.

Reach (LON:RCH). This is a traditional publisher who owns a major UK newspaper, The Mirror. They are moving from print to digital media gives more to worry about. Currently, its digital strategy largely relies on third-party data, as opposed to user accounts and structured first-party cookie-driven data and resulting consumer insights.

To show it is catching up, it launched a ‘one tap’ registration process in October 2021, but seriously this is about 10 years+ too late.

Stock Market Analysts have suggested that the demise of third-party cookies might have a near-term impact on its base revenues. 

Ad Tech Ad Serving to be Hit by the end of Third Party Cookies 

As well as publishers, news channels, and social media sites, another type of company will be central to the third-party cookie phase-out.

‘Ad tech’ businesses deal in digital advertising technology, covering the different steps in the advertising ecosystem.

Ad Tech – The Many Moving Parts All Relying on Third Party Cookie Data

A tangled supply chain in Ad Tech, known as ‘programmatic pipes’, connects companies wanting to market their products and publishers wanting to run their ads. In 2020, research by PwC found that 15 percent of advertising spending is lost somewhere along this chain.

Ad tech companies involved in this process are urgently trying to find alternatives to third-party cookies that will still comply with privacy rules.

Large Advertising Networks at risk of death of Third Party Cookies

Several American advertising titans such as The Trade Desk, Nielsen, and Verizon Media are leading the charge on this. 

The Trade Desk and Third Party Cookies

The Trade Desk is one of the world’s largest ad-buying platforms. It uses artificial intelligence (AI) and machine learning to help its clients – which include some of the world’s biggest advertisers such as Coca-Cola, BMW, and Samsung – to target its ads more effectively.

In 2019, The Trade Desk generated revenues of $US648 million (£468 million), a 42 percent year-on-year increase.

The company has been vocal about its preparations for the end of third-party cookies, saying that it is “all in on first-party data”.

Nielsen and Third Party Cookies

Nielsen is another large American media measurement company that the demise of third-party cookies will impact.

Nielsen’s Ad Ratings service helps advertisers measure their digital campaigns’ effectiveness across desktop, mobile, and streaming devices. The company says its service is used by “nearly all” of the world’s top 100 advertisers.

In 2020, Nielsen generated revenues of $US six billion (£ four billion), a two percent year-on-year increase.

Nielsen has also been preparing for the end of third-party cookies, and in 2019 it launched a new product called ‘Nielsen Identity Graph’. This is a people-based marketing solution that uses first-party data to target ads more effectively.

Verizon Media and Third Party Cookies

Verizon Media is the digital media arm of American telecoms giant Verizon. The company owns a number of popular websites and apps, including Yahoo, AOL, TechCrunch, and HuffPost.

In 2020, Verizon Media generated revenues of $US seven billion (£ five billion), a three percent year-on-year increase.

Verizon Media has also been preparing for the end of third-party cookies, and in 2019 it launched a product called “One by AOL: People-Based Marketing”. This is a people-based marketing solution that uses first-party data to target ads more effectively.

Post The End of Third Party Cookies Smaller Player get a look in

Smaller tech companies stand out because they don’t rely on third-party data. UK-based Aim-traded Dianomi (LON:DNM) looks “increasingly well positioned” given its specialism in contextual advertising. 

Full disclosure SLX.marketing has worked with Dianomi as an agency in the past but has no ongoing business relationship.

Dianomi uses contextual targeting, which means matching adverts to the content being read by internet users. This is done without collecting or processing any personal data about individuals.

The company has a range of technology products that it sells to large banks and other financial services companies. It also has a fast-growing direct-to-consumer business, which helps smaller businesses place adverts on its network of websites.

As the end of third-party cookies approaches, Dianomi is possibly well placed to take advantage as its system doesn’t rely on personal data like other Ad Tech businesses do.

It will be interesting to see if third-party cookies’ demise leads to more consolidation in the Ad Tech industry or whether it provides an opportunity for small companies to gain market share.

Time will tell, but one thing is for sure, the end of third-party cookies is set to have a big impact on the digital marketing industry.

Another smaller company positioned in this ad tech space is CentralNic (LON:CNIC), which started out as a seller of domain name subscriptions but now has a fast-growing marketing arm, is also an interesting proposition. Like Dianomi, it is not reliant on third-party data, instead using the traffic that heads to its domain names to match up the buyers and sellers of advertising. Speaking to Investors’ Chronicle earlier this year, CentralNic chief executive Ben Crawford said the sector was in a very good place, regardless of Facebook’s recent earnings “shock”.

The Perfect Ad Tech Storm – Recession, Marketing Spend cuts, and End of Third-party cookies

However, the economic situation has changed significantly since the start of the year, and businesses are looking for ways to cut costs. Rightly or wrongly, marketing spend is usually one of the first things to go. Meanwhile, the end of third-party cookies will make it harder for companies to home in on their audiences, further dampening their appetite for ad spending. Whichever way the cookie crumbles, therefore, the following year looks busy for tech titans and aging publishers alike. 

Alternatives to First Party cookies and account data

Browser fingerprinting

Device fingerprinting, as it can be called, is an alternative to third-party cookies that have been used for many years in advertising and surveillance technologies. This relies on the fact that every browser has certain unique characteristics or ‘fingerprints’ that can be used to identify a user even if they clear their cookies.

Browser fingerprinting is a powerful method that websites use to collect third-party data about:

• browser type
• browser version
• operating system
• active plugins
• time zone
• language
• screen resolution

The data points may appear generic at first and do not appear to be tailored to one individual. However, there’s a low probability that another person will have identical browser information. Only 1 in 286,777 other browsers share the same fingerprint as another user, according to a piece of research done on a test website Panopticlick, a piece of research from the EFF (Electronic Frontier Foundation).

This research, from 2010, which shows that this technique has been around for many years, shows the likely ability to define individual browsers: “fingerprints changed quite rapidly, but even a simple heuristic was usually able to guess when a fingerprint was an “upgraded” version of a previously observed browser’s fingerprint, with 99.1% of guesses correct and a false positive rate of only 0.86%.“

This technology might sound like a strong promise as a potential replacement for third-party cookies but actually increases the privacy issues due to individuals not having any control over this technology. At least third-party cookies can be cleared from a browser, but browser fingerprinting isn’t easily under the user’s control.

Universal IDs

These are IDs that work across different browsers and devices and are already being trialed by some companies. The IDFA (Identifier for Advertisers) on Apple devices is one example, which the user can reset in their privacy settings.

This type of identifier would need to become an industry standard to work as a replacement for third-party cookies and would need to be built into browsers or devices. It’s not clear whether companies would want to relinquish the control they have over user data by sharing this with other businesses.

Another issue with this technology is that it still relies on tracking individuals across the web, which goes against what many people thought the end of third-party cookies would achieve. In fact, it could lead to even more surveillance of users as companies attempt to find new ways to target ads.

Google Chrome FLOCK, Topics and Privacy Sandbox

In response to the end of third-party cookies, Google has been working on a number of initiatives that they hope will address some of the issues around privacy and advertising. These include FLoC (Federated Learning of Cohorts), Topics, and their Privacy Sandbox initiative.

FLoC works by grouping together users with similar interests into ‘cohorts’ and then sharing this information with advertisers instead of individual data. The idea is that this will still allow ads targeting but without identifying individuals. However, there are concerns that this could lead to even more ‘creepy’ ads and create new opportunities for discrimination.

Google’s Topics initiative is similar to FLoC in that it groups together users with similar interests. However, it does this by using first-party data from Google products like YouTube and Search. This means that users will still be targeted with ads, but they will not be tracked across the web.

The Privacy Sandbox is a set of initiatives that aim to create a more private and secure web by giving users more control over their data. One of the proposals is to replace third-party cookies with ‘trust tokens’, which would allow advertisers to measure whether ads have been seen or clicked on without tracking individuals.

These are just some of the ideas that are being proposed to address the end of third-party cookies. There is still a lot of work to be done in order to find a solution that will work for everyone by the end of 2023

Third Party Cookies and Publishers FAQ

What are third-party cookies for publishers?

Third-party cookies are small pieces of code that are placed on your computer by websites other than the one you are currently visiting. They are used for a variety of purposes, such as targeted advertising, trackers, and affiliate programs.

What is happening to third-party cookies?

In response to privacy and data security concerns, major browsers like Safari, Firefox and Edge have announced plans to phase out support for third-party cookies. Google has also announced plans to do this in a future version of Chrome. This means that from 2023 onwards, most people will not be able to use third-party cookies when browsing the web.

What does this mean for publishers?

The end of third-party cookies could significantly impact publishers, who rely on them for revenue from advertising and trackers. It’s not yet clear what the replacement for third-party cookies will be, but several initiatives are being proposed.

What can publishers do to prepare?

Publishers should consider how they will adapt to the new landscape and what alternatives to third-party cookies they can use. They should also keep an eye on developments in this area and be prepared to experiment with different solutions.

Paid media has long relied on third-party cookies to target ads and measure their effectiveness. However, with the impending demise of these cookies, paid media is facing an uncertain future.

While the end of third-party cookies may seem like bad news for paid media, there is an opportunity to create a more privacy-centric web. The move to first-party cookies could save paid media from the fate many thought would happen, making all advertising data collection illegal.