August 11, 2021

Cookies Are Crumbling: The Demise Of The Third-party Cookie And What’s Next

Everything You Need To Know About Alternative Targeting Solutions And The End Of Cookies

Increased sensitivity to data privacy and protection amongst consumers and legislators has brands, marketers, and tech companies turning to cookieless solutions while also re-evaluating how they reach their customers.

Having relied on third-party cookie tracking for years, the ad tech industry is now adapting quickly and testing alternative cookieless tracking solutions. The pressure is on to deliver outstanding, personalized customer experiences with cookieless targeting alternatives.

In this article, we will discuss the updates happening with tracking technology, the "why" and "when" of cookie deprecation, privacy regulation and how it's adapting the digital landscape, along with alternative tracking solutions including the push towards contextual targeting.

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Table of Contents

  • Introduction
  • Third-Party Cookies are Out
  • The Transition to Cookieless Targeting: Why Now?
  • Safe, Effective Cookieless Solutions
  • 1st Approach: Substitute Third Party Cookies With Alternative Tracking Technology
  • Demand Side Examples
  • Supply Side Examples
  • 2nd Approach: Contextual Targeting - Skip Personal Data Altogether for 100% Privacy-friendly, Legal Targeting
  • 5 Advantages of Contextual Targeting
  • How Does Contextual Targeting Work?
  • Bottom Line
  • Targeting Video Ads with ShowHeroes
  • Summary

Introduction

Privacy regulation and consumer data protection are topics that have been front and center this past year with cookies being the much-talked-about focus. Specifically, third-party cookies are in the hot seat. Browsers like Firefox and Safari have already abolished third-party cookie tracking along with Apple’s iOS update in 2020, while Google has announced it will deprecate cookies by 2023.

Third-party cookies have been the principal tracking technology used by advertisers and brands to deliver targeted, relevant messages to consumers. They are also the thorn in a consumer’s side when it comes to privacy protection. 

Cookies will still be used for various functional services, for example in analytics or e-commerce checkout processes; however, for targeting and personalization purposes various alternatives are already being adopted to create personalized web experiences. 

We will take a deeper look into how cookieless tracking technology is evolving and transforming today’s digital landscape.


Third-party Cookies Are Out

Let’s face it, cookies are Out and privacy-safe tracking is In.

Third-party cooking tracking has always boasted that through granular targeting based on browser history, consumers will be exposed to relevant messages and brands will be reaching the right consumers for their products.

However, pulling back the curtain, cookie tracking has never been very user-friendly and actually does not efficiently reach all possible, in-target consumers.

Here’s a quick breakdown of the cookie-tracking process:

  • Third-party cookies, or small data files, are stored in a user’s browser while visiting a website
  • Marketers and brands associated with these domains use this information to build marketing profiles and target ads based on user behavior
  • User identification requires synchronization across hundreds of ad serving platforms and tech vendors in order to identify a single user across all networks. Yikes! That’s a lot of friction.

After all that, cookie-based targeting only captures a fraction of users, meaning the majority of total traffic and advertising potential is left untapped. Let that sink in for a minute.

Lack of standardization makes it difficult to respect the latest privacy regulations. Meanwhile, individual user privacy gets thrown out the window. It’s time for new solutions.


The Transition To Cookieless Targeting: Why Now?

The kick in the pants to third-party cookie targeting has been consumers’ increased concern over privacy and therefore updated legislation and regulations.

Here are the latest global legislation initiatives aimed to protect consumer privacy and regulate how user data is processed, collected, and used:

  • Europe: GDPR - General Data Protection Regulation
  • United States: CCPA -California Consumer Privacy Act;  CDPA - Virginia Consumer Data Protection Act
  • Brazil: LGPD - Lei Geral de Proteção de Dados Pessoais
  • South Africa: POPI – South Africa Protection of personal information

These laws, and many more that are this close to being approved, are putting consumers’ privacy and data protection front and center on a global level while continuing to raise the bar for compliance.

The European Union’s ePrivacy Directive, requires user consent for “non-essential storing of information”. Consequently, users have become accustomed to the ubiquitous consent banners popping up while browsing the web.

Consent will be integrated even more closely and seamlessly with future alternative tracking technologies and will remain the main focus for worldwide data protection laws like GDPR, LGPD and CCPA / CDPA, and POPI.

Big Tech Says “Buh-bye” To Cookies

Mozilla (Firefox) and Apple (Safari) have already eliminated the ability to perform cross-site tracking with their respective browsers. Google announced that its Chrome browser cookie deprecation will be phasing out support for third-party cookies in stages over the next two years, abolishing cookie tracking by 2023.

As a market leader with the largest share in user installations across platforms, Google’s move to do away with all third cookie tracking can be considered “the last straw” and manifests the often quoted “death of the third-party cookie” or “cookiepocalypse”. 

Overall, this development has been accelerated by the ever-increasing adoption of mobile devices over the last few years. Mobile has historically offered even stronger limitations of third-party cookie usage than desktop devices. 

Apple’s most recent IOS 14.5 update has changed its opt-in policymaking Apple products literally cookieless. Now developers must ask permission before tracking iOS users for ad targeting. “This opt-in requirement marks a big shift for smartphone users’ privacy because it makes developers responsible for addressing privacy, not users. It’s estimated that iOS users granting permissions to developers will experience a massive drop, from 70% to 10%.”

Needless to say, there is a sense of urgency to get ready for the cookieless shift.


Safe, Effective Cookieless Solutions

While third-party cookies for targeting audiences will be phased out, free internet needs efficient alternatives in order to sustain ad-based business models and secure independent, quality journalism.

By and large, two major solutions can be identified to reach this goal:

  1. Substitute third-party cookies with alternative tracking technology to ensure continued individual-user and behavioral ad targeting
  1. Contextual targeting: Skip personal data altogether for 100% privacy-friendly, legal targeting

Let’s take a closer look at both options.


1st Approach: Alternative Tracking Technology for Individual-User and Behavioral Ad Targeting

Due to the growing legislation outlined above, user consent for storage and processing of personal data is (and will remain) a permanent requirement when formulating alternative cookieless solutions.

Whichever technology is implemented to replace third-party cookies, it must respect individual user consent in compliance with ePrivacy, and state or national legislation, via the likes of privacy data centers and consumer-unique IDs that ensure transparency and control over each users’ data across the entire (advertising) value chain.

Depending on the perspective on the industry, such technologies and approaches can take on many different forms.

Types of data that will replace third-party cookies
Source: Statista - Survey of marketers and publishers from the United States as of 4th quarter 2020

Demand Side Examples

Login-based brand experiences such as loyalty programs, platforms and magazines or similar offerings

This option requires a lot of resources to build, distribute and promote but it comes with many advantages. 

First off, collecting first-party data with a sign-in process can potentially help with tracking and analysis of Point of Sale (PoS) traffic and offline purchase data. Login data is considered the highest standard of consumer data as it implies consent and accuracy, and it can be used as granular input for targeting and personalization.

Secondly, the level of insight can be vast due to the depth of data that can be sourced. Collecting and segmenting this data has the potential to give advertisers a high degree of understanding of their audience and target groups.

Proprietary Universal ID solutions

Universal ID, or shared ID, solutions attempt to map 1:1 what was previously done with cookies by using first-party data and offline data to create a user identifier (user ID). 

Key players in the global programmatic landscape are offering their own Universal ID solutions. The Trade Desk, for example, has its own proprietary “Unified ID 2.0” technology which can be used by any SSP, DSP, or DMP.  Its solution offers potential for very high market penetration and net reach. 

There are other, similar offerings from the Advertising ID Consortium, DigiTrust, and ID5. You can check out a full list of the top Universal ID companies here

Many of these IDs are leveraging first-party cookie technologies and are available through prebid.org’s header bidding stack.

Cohorts and Data Clean Rooms

Data clean rooms are places where walled gardens like Google, Facebook and Amazon share aggregated rather than customer-level data with advertisers, while still exerting strict controls. 

First-party data from the advertiser is added to the same space in order to compare how it matches with aggregated data from other platforms. With this process, one can evaluate how different data sets match up, and then determine whether the right ads are reaching the same audiences and how many times.

Data clean rooms can deliver ad impression data at massive scale; however, they are expensive to build, and working with large corporations like Google, Facebook and Amazon can be time-consuming and complex. Discover more information on Cohorts and Data Clean rooms in our article “Cookieless Targeting Solutions.” 


Supply Side Examples

Unified Logins and First-party data

Just as advertisers strive to create closed, controlled ecosystems to help identify users permanently, publishers can use login IDs or single sign-on technologies to track users across devices and over time.

Email addresses, in particular, will become the main focus for publishers. It’s even more valuable when consumers validate this data; for example, when a user signs up to receive emails or text messages in return for a discount or other benefit. 

They can be a suitable alternative for long term, reliable user identification, albeit with some drawbacks. For first-party targeting to be effective and accurate, one needs a lot of data to gain enough insightful information combined with AI and machine learning. 

One solution is joining a consortium or finding a first-party data partner to stay profitable. In many regions, publishers and media houses join forces to expand the reach of such systems across their combined inventory, for example, NetID in the German market.

Publisher consortiums

In a similar, yet technologically different approach, publishers are joining forces, looking to deploy consent and first-party cookie-based concepts in an attempt to be able to track users across their digital offerings. This is how it works: consortiums provide a  framework to include people-based identifiers in programmatic transactions and provide an open and standardized pool of cookie IDs and device IDs.

An example from the German market would be Ad Alliance. Another well-known company is the Advertising ID Consortium.

2nd Approach: Contextual Targeting - Skip Personal Data Altogether for 100% Privacy-Friendly and Legal Targeting

About a decade ago, when new concepts, then collectively dubbed as “web 2.0” paved the way for user-generated content, scalable SaaS offerings, and flexible data management (“folksonomy”), topics like contextual data and contextual targeting were en vogue. However, the adoption of contextual data sources for targeting online ads never became the definite choice – until now.

Contextual targeting today uses semantics, natural language processing of on-page text, the URL, and meta information, combined with artificial intelligence and data processing in real-time.

As cookies vanish from the scene, contextual targeting concepts are quickly becoming an interesting and even superior targeting alternative. The digital sector is focusing on quality editorial environments and this is where contextual technologies really get to shine as they respect data privacy legislation and help sustain independent editorial models.


5 Advantages Of Contextual Targeting

1. Content is the vehicle that creates the right environment for user awareness and engagement.

2. Consequently, placing content and advertising messages in the “right moment” maximizes brand awareness and campaign performance.

3. Brands can easily learn which content drives awareness and engagement and invest accordingly, in turn, increasing ad efficiency.

4. Machine learning algorithms read, process, expand and capitalize on the ever-changing contextual moments. In other words, artificial intelligence is a brand’s best friend, helping to sift through the maze of available data points.

5. Contextual targeting removes the need to profile and track individual users.


How Does Contextual Targeting Work?

Let’s underline the last point in the list of advantages:

Contextual targeting removes the need to profile and track individual users

Cookieless targeting does not work with users but with user groups.

User groups are identified by the particular content of the website they are visiting at a given moment, in combination with additional properties that are not connected to the user as such, e.g. device type, OS, browser, referrer (URL), etc.

This means that users change the group they belong to depending on the website they are surfing. On the one hand, implementing frequency capping is impossible. But on the other hand, it’s not even necessary. The advertisement that will be delivered is determined by the user group that is predicted (calculated) for the given website. When a particular user switches to another website, he/she changes user group and, along with it, the campaign that is being targeted for that user group.

Looking at the user’s referrer opens up a rich set of possibilities. Having information on the website a user has browsed before visiting the current page, provides an opportunity to analyze that very page as well, which does not lead to one, but two different user groups as pieces of information about the current user. And these are even in chronological order, which can be interpreted as a priority against one another.

In practice, it is very unlikely for an individual user to perform the exact same user journey over and over, which means that, despite the absence of a frequency capping mechanism in the traditional sense, it is very unlikely that a user will be flooded with ads of the same kind. While navigating the web, users jump from group to group and from moment to moment. In other words: from context to context, while being served related ads along the way. As a moment passes, it is unlikely for it to return in the exact same form - just like in real life.


Bottom Line

It turns out that without cookies, brands are actually able to present more interesting, relevant ads to users. Cookieless user tracking forces solution providers and marketers to think deeper about their target audiences’ needs and related user journeys.

Targeting Video Ads with ShowHeroes

Following the path of context-based ad distribution, Showheroes Group offers rich performance gains over traditional targeting strategies while respecting privacy and personal data protection.

Our core business has focused on sustainable solutions with contextual targeting technology instead of identity resolution methods as a means to deliver precise audience profiling.

As part of its video advertising solution, ShowHeroes has developed a yield optimization system that takes into account the current website and the content video played within an individual ad based on historical data. Combining these two factors, the ShowHeroes AdHero predicts which available campaigns and programmatic deals are eligible for a specific placement at a given moment, and are also likely to convert into an impression, gaining high view through rates for the advertiser.

It works entirely without cookies and draws knowledge from aggregated performance data that cannot be connected to any real user.

For the sake of illustration, here’s an analogy seen in e-commerce solutions to cross-sell products regarding a well known behavioral targeting approach:

  • People who bought “X” were also interested in “Y”.
  • Webpages on which ad campaign “X” performed well, are also likely to deliver good results for campaign “Y”. 

This collaborative filtering approach generates a lot of data to be used for campaign-based delivery optimization, while simultaneously preserving user anonymity and privacy.


Summary

The market is vast and heterogeneous as it keeps evolving and becoming more complex despite the fact that

Google, Facebook, and Amazon occupy “just under 70% of all digital ad dollars spent” according to eMarketer.

Following suit, the cookie is literally crumbling under the weight of ever-increasing technological requirements and privacy legislation As it continues to fall short of these, plenty of alternatives are available to bridge that gap and ultimately improve on what once has been the de facto standard for an entire industry.

While user tracking will still be available through a multitude of different technological approaches and in varying degrees of scope, reliability, and effectiveness, all signals seem to be pointing in the direction of contextual targeting as the leader of the pack for future targeting technologies. The fact that it does not rely on any personal user data whatsoever, gives it a huge advantage in terms of adoption.

With contextual targeting, there is virtually no risk involved with existing and future global data privacy legislation. Instead, it offers a wealth of benefits in terms of delivering online messages, including ads, to users in a way that respects and protects their privacy and personal data.

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