Navigating the Future: The Phasing Out of Third-Party Cookies in Digital Advertising

Prepare to embrace the future! We're set to navigate the seismic shift that is the phasing out of third-party cookies in digital advertising! Tech giants Google and Facebook have been riding the third-party cookie wave for years. But what happens when that wave crashes? We'll examine the implications for all involved - advertisers, agencies, retailers, brands, and consumers. And don't worry, it's not all doom and gloom. We'll also be ushering you into the new world that's emerging, one focused on privacy, the role of first-party data, and the alternatives to third-party cookies.

Get ready to strategize, as we discuss how advertisers are adapting to the third-party cookie phase-out. We'll dissect the tools at their disposal, from identity solutions and publisher-provided identifiers to contextual advertising. We're also taking a deep dive into Google's Privacy Sandbox initiative, explaining how it's setting new standards for privacy on the web. We'll touch on cross-site tracking, browser fingerprinting, and how you can shield yourself with ad-blockers and VPNs. And just when you thought we were done, we'll also explore the unique roles Google and Facebook play in the advertising supply chain, and how regulations like GDPR, CCPA, and ePrivacy are shaking up the digital advertising landscape. So, buckle up, it's sure to be a thrilling ride!

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Transcript

Tony Hines: 0:11

Imagine a world where your every online move is not tracked by unseen eyes, a world where your privacy is respected and your data belongs to you. This is not a dream. It's the future of digital advertising. Tech giants like Google are phasing out third party cookies. The landscape of digital advertising is set for a seismic shift. In this episode, I'm going to explore what this means for advertisers, agencies, publishers, retailers and brands, as well as for consumers, and discover the alternatives that are paving the way for a more privacy-focused future in digital marketing.

Tony Hines: 0:56

Google and Facebook have relied heavily on third party cookies to track and profile users, and they do this so that they can advertise products to them. It's important to note that the extent of this reliance on third party cookies is not publicly disclosed. It's estimated that about half the advertising spend in the United Kingdom is with Facebook and a further 10% is with Google, and these platforms for digital advertising rely heavily on these third party cookies. But both Google and Facebook are making changes, and this is because of increasing privacy concerns and, of course, government interest and regulatory pressures. Google has said it plans to phase out third party cookies in its Chrome browser by 2024, and it will introduce a group of profiling systems as part of a Privacy Sandbox initiative, which we'll talk about a little later. It's worth noting that, although third party cookies are being phased out, first party data information that's, the data collected directly from users when they enter a website will remain a valuable resource for these tech giants. Both Google and Facebook have vast amounts of first party data, and that's because they have large user bases and a diverse suite of products and services. It gives them access to that first party data. In the United States, google and Facebook and Amazon are the top three digital platforms. Together, they capture around 70% of all digital dollars spent. More specifically, google have a 29% share of that market in 2020, and Facebook was about 25.2%. That's according to eMarketer. Amazon's share of the US digital market was more than 10% for the first time in 2020, and these platforms place substantial reliance on third party cookies. So what's going to happen when these third party cookies disappear? Well, we'll come to that too.

Tony Hines: 3:03

Let's define third party cookies Well. They're small files, they're created by websites other than the one you're currently visiting and they're primarily used for tracking and advertising purposes. So when you visit the website, the server usually generates a first party cookie which stores all the necessary settings and details that the user provides on entry to the site. These third party cookies are stored under a different domain than you currently are visiting and they track your visit to various sites as well as your browsing activity on the pages that you look at. For example, a retailer might use these third party cookies to remember which product you looked at and when you return. The retailer will show you a photograph of the items you've looked at and perhaps present offers to you to entice you to purchase the product. Third party cookies collect personal data age, gender, location, if readable, and the visited website where the cookie was generated. Sub pages you visited on that website and the time you spent browsing is all collected as part of the third party cookie.

Tony Hines: 4:20

There are two main kinds of cookie first party and third party cookies and the main difference is that the first party cookies live on the website you're visiting currently, whereas the third party cookies don't. They're hosted somewhere else. You can block these cookies, of course, the third party cookies in Chrome. You just simply open Chrome, the three dots at the right, click on more settings and, under the privacy and security, click cookies and other site data and select block third party cookies. You can do the same in Microsoft Edge click on the settings icon, click internet options, and on the drop down list click privacy, and you can set it to medium high, which will block third party cookies. If you block third party cookies, of course it might stop some websites from functioning properly, and that's because it might be employing links and data to other websites. So, for example, you might be able to view streaming videos on the website. I've been on to a number of websites where I look at products and sometimes I opt out of the additional cookies, which is the third party cookies were there located and it prevents me from watching streaming videos about the product on that website. But you can always probably get to those videos anyway by going directly to where they're hosted on the other website, and then you'll be giving first party data to the other website, as opposed to third party data on the website where it's streamed via.

Tony Hines: 5:56

Of course, the phase out of these third party cookies will cause problems for advertisers, but they're working frantically to resolve that issue and there are a number of strategies being employed. I'm going to talk about eight of them right now. Firstly, identity solutions, and these are methods that identify users across different websites without using third party cookies, there's Google's privacy sandbox, which is a set of open standards to enhance privacy on the web. But it does provide Google with data. First party data is the big one for most organizations because this data is collected directly from your customer when they visit your website. So when you hit a landing page, forms, surveys, emails, sms, a CRM like HubSpot and more, they will gather first party data and that's legitimate.

Tony Hines: 6:55

Publisher provided identifiers is another PPIDs. These are unique identifiers provided by publishers to help advertisers target their ads. Number five contextual advertising. This is advertising that targets users based on the content of the website they're visiting. It doesn't look at their behavior across multiple sites, but it does track behavior on the website they are visiting. Then there are publisher provided signals PPSs. These are signals provided by publishers about the users that can be used for ad targeting. Then there are data pools and data clean rooms. These are secure environments where the advertiser can analyze and aggregate data from multiple sources, and they can do that without accessing any raw data.

Tony Hines: 7:50

The eighth strategy user identity graphs. These are databases that link an individual user's identity across different devices and platforms. Then there's digital fingerprinting. This is a method of tracking users by collecting various data points from their device and their browser. So this is how, if you gather any statistics about services that you provide, this is how they are able to tell you whether it was an Android phone, whether you were using Google Chrome as the browser, and so on. And then there's something called Sniggle's Ad Engine. It's a solution implemented by Sniggle that serves ads without user consent or cookies. Doesn't sound very private that one does it. Of course, the alternative that you decide to use to overcome the problem of third-party cookies will depend on your particular aim.

Tony Hines: 8:47

Let's say a little bit more about the Privacy Sandbox. This is an initiative that was led by Google to create web standards for websites without compromising privacy, and the main aim of this is to facilitate online advertising without using those third-party cookies. The Privacy Sandbox is designed to protect people's privacy online but, at the same time, give companies and developers tools to build thriving digital businesses. That's what it says on the Google website about this topic. It has two core aims Phase out the third-party cookies when new solutions are in place and secondly, reduce cross-site and cross-app tracking, helping to keep online content and services free for all. So the Privacy Sandbox APIs require web browsers to take on a new role. Rather than working with limited tools and protections. These APIs allow a user's browser to act on the user's behalf locally on the device to protect the user identity as they navigate the web, and this is a complete shift in the direction of the way browsers have worked in the past. Google have been trying a number of solutions, which, again, I'll talk about a little later.

Tony Hines: 10:08

Cross-site tracking is the process, of course. That happens when you go onto one website to look at pages and during the browsing session some trackers will follow and keep a record of what you looked at, including your most visited websites, products and pages, and those trackers save the data to serve up targeted adverts at a later time. Cross-site tracking generally tracks people across the web, where you've been, what you've done, and this is why it's a good idea to clear out cookies on your browser from time to time so that this tracking stops if you haven't blocked it. But people increasingly use ad blockers and tracker blockers and they use virtual private networks from their security systems to prevent any trackers from following them. For example, social share buttons, which are embedded on many websites, send data back to the social platforms. So if you've got a Twitter, facebook, google, instagram, whatever on your website and somebody clicks on them, it sends data back about who they were, who they are, identifies them across the multiple journeys through the web, and this cross-site tracking can be problematic. It doesn't give you any control as an individual about what these advertisers know about you, and it's a bit disconcerting. It's like having an ever-present stalker in the background, and this is why people have become more concerned about what's happening. You can stop all this, of course, on the various browsers, like we said previously, I just got an update about Microsoft Edge. Open the Microsoft Edge, click on the three dots in the top right corner of the menu, click settings, click on Privacy, search and Services and, under tracking prevention, choose between basic, balance and strict, and if you want to remove it, usually click on strict, but most people tend to click on balance because they still want their services to work.

Tony Hines: 12:07

Browser Fingerprinting was a method of tracking used online, collecting various data points from device browsers, and it's incredibly accurate. It's a method of identifying the unique browser that tracking online activity where you visit, what you do, if you buy something and so on, and you'll know, as a user, from your own experiences that if you go on to sites, they remember you, they remember who you are, and it's sometimes very helpful, of course, because they fill in all the details for you and you think that's great, and you can make a purchase using the data that's stored already in the system, and so on. It's a recognition point, and Browser Fingerprinting is a stealth technology. It's what they call a stealth technology and that's because it's got lots of appeal for the tracking companies, because it's very difficult to block. You can use a VPN to turn off cookies or use private browsing, and that will do that 100% of the time. You can also stop Browser Fingerprinting by using common systems, software and settings. The more your browser blends in with the crowd, the less unique your Browser Fingerprint becomes, so they can't really get to the granular level of detail that they want. You can disable JavaScript and Flash, because they're often collecting fingerprint data, and you can switch between multiple browsers. You can use Mozilla Firefox, safari and, of course, google Chrome and Microsoft Edge, and if you use all those different browsers at different times, it's much harder to track you personally. A VPN masks your IP address and that's a significant component of any browser fingerprint. That's the first thing they take, and you can use Browser Privacy Mode, the incognito mode, in private, and that eliminates other elements that go into the fingerprint, but it can, of course, reduce the effectiveness of the browser itself.

Tony Hines: 14:06

Now let's come to the main reasons for phasing out these third party cookies. It's the changing nature of the privacy landscape that's key in programmatic advertising User privacy concerns. Major tech companies like Apple, google and Mozilla have already phased out third party cookies in the web browsers, and it'll have a profound impact on the digital advertising ecosystem. Google plans to do it by 2024. They're basically weighing up which way to go at present with the alternative solutions that they're setting up to still get hold of data. Google's web products will be powered by privacy preserving APIs which prevent individual tracking while still delivering results for advertisers and publishers. So they're still hopeful that they'll be able to provide those services and, of course, preserve their income stream by attracting more advertisers, perhaps, and more publishers to use the Google products. But it's been criticized by some that these big tech platforms have a very unfair advantage as it forces the sellers to go directly to Google for the information. So many people are unhappy that this gives Google and some of the big platforms even more control of data, and so, as these third party cookies are phased out, they've got strategies in place to go down the first party route. They want first party cookies so that they own the data and not the platforms. Google's Privacy Sandbox is designed to protect user privacy, allowing publishers to advertise and supply targeted ads on the basis of interests, demographics and locations. It aims to both protect people's privacy online but give companies and developers tools to build thriving digital businesses. That's what it says on the website, and Google Chrome will phase out by the end of 2024. It's talking about mid to end 2024, phasing out the third party cookies, but, of course, firefox, safari and Apple have already dropped third party cookies.

Tony Hines: 16:16

Another strategy that's going to be employed, of course, is contextual advertising, and that works by placing ads on relevant websites designed to target the chosen audience, and it uses information or data based on the web page, the location and what you look at the most relevant content that users choose and then they decide to aggregate that data and correlate it so that they can target you with adverts. So, for example, if you go on a new reading an article about new cars, the user might see an ad for new cars pop up, and this type of advertising relies heavily on the context of the web page rather than the user's past behaviour, so it takes the data from the now and target you In contextual advertising users. Artificial intelligence and deep learning algorithms to analyse content like text, speech, imagery and geo locations in real time. Predictive advertising tools also analyse all the data and do a similar thing. By using this contextual advertising, they can see what you're interested in in real time and place the ads in front of you at a time when you're interested in them in the product, which might give them a better opportunity to turn that advertising into a sale. This type of advertising contextual advertising is expected to reach about $376 billion by 2027, according to IBM.

Tony Hines: 17:50

So the demise of third party cookies will have significant implications for advertisers, agencies, publishers, retailers and brands. And let's look at each of these briefly. For advertisers and agencies, the loss of third party data will leave marketers and ad agencies in the dark about the behavioural and demographic insights that they can currently acquire from the third party cookies. Advertisers will have to build new data strategies and they'll have to rely more on first party data, or they'll have to cooperate with walled gardens. And I'll say a little bit more about the walled garden in a short while. The deprecation of third party cookies will impact the way campaigns are implemented and managed by the brands. For publishers, they'll now need to depend more on their own first party data or on the walled garden, contextual targeting and greater support from the data platforms, the Googles and the Facebooks of the world, and they'll have to replace about $10 billion worth of ad revenue as a consequence of the demise of third party cookies. And the way to do that would be to move to first party data gathered through a combination of paywalls, subscription models and registrations and, of course, updated contextual targeting and probabilistic audience modelling. For retailers and brands, the death of third party cookies gives them a chance to redefine the future of advertising. They'll have to engage more with consumers directly and build transparent and effective strategies. Through that engagement, brands will find that the value of direct engagement with consumers will have to increase. To create consumer connections, advertisers and publishers should create experiences that consumers value. So it's about transparency, maintaining privacy, having focused relationships with customers all important.

Tony Hines: 19:57

Now, one of the most complex supply chains would have to be the advertising supply chain, and that's what I want to talk about today. The advertising supply chain is a complex, interconnected network of various organizations that work together to deliver advertising to consumers, and in a simple conceptualization of that, we have advertisers. These are the companies or individuals you want to promote the products and services, and they might create ads and decide on the target audience, or the advertisers might go along to an agency to do that for them, or to a content creator, or they might do it directly with big platforms such as Google or Facebook. And the second part of the supply chain are, of course, the demand side platforms, the DSPs, and these are the platforms that allow advertisers and media buyers to purchase and manage ad inventory. And most DSPs are owned by advertising agencies, technology companies acting as intermediaries for the brands looking to promote their product through the digital channels. Then there are the ad exchanges these are the digital marketplaces.

Tony Hines: 21:06

Advertisers and publishers buy and sell advertising space, often through real time auctions. Then there are, of course, the supply side platforms. These are the platforms that let publishers and digital media owners manage and sell ad inventory. In the mobile space, ssps commonly let publishers monetize free to download apps with advertising creative. And then there are the publishers these are the websites, apps or other platforms where the ads will be displayed. They provide the space for the ads and that's where they reach the target audience from. Then there, of course, are the data management platforms. These are platforms that collect, analyze and manage data from different sources, and they provide valuable analytical insights for targeting ads. And finally, of course, the consumers, and they're the end users of the advert and they interact with the ads directly.

Tony Hines: 22:02

It's important to note that this is a simplification of this complex area and it's continuously evolving. It's a milieu that's changing, and the power relationships that exist between publishers, advertisers, networks and exchanges, the MMPs, the mobile measurement partners and other tech companies is continuously changing. Finding the right partners and resources is the key to any successful advertising campaign. If we take a look at Google and Facebook, both of them are key players in this supply chain, but they adopt slightly different roles. Google operates at multiple levels in the supply chain. As a demand side platform, google ads allows advertisers to buy ads across various channels. Google also owns one of the largest ad exchanges, google Ad Exchange, where publishers and advertisers buy and sell ad space. Additionally, google operates its own supply side platform, google Ad Manager, which lets publishers manage their ad inventory. Furthermore, google collects vast amounts of data, which is first party data, through its various services like search, youtube and Gmail, and it uses that to target ads, so it's an end to end service in a way that Google supply.

Tony Hines: 23:21

Facebook is, on the other hand, primarily a publisher in the advertising supply chain. It offers its own advertising space to advertisers through Facebook ads Manager. Like Google, facebook collects a large amount of data, which is first party, once again, from its users directly and it uses that to target these ads. But Facebook also operates somewhat like a walled garden, meaning it restricts what data advertisers can access and doesn't readily share its user data with third parties. Now, we often hear this term the walled garden in advertising, and it refers to closed ecosystems where advertisers are limited in terms of reach and audience segmentation. These are created when digital platforms offer their own advertising inventory instead of allowing advertisers to access third party data sources, and walled gardens exist, such as Google or Amazon, where they've created a very convenient one-stop shop for marketers and advertisers that offer access to vast collections of data inventory and centralized audience management. However, these platforms do not allow their most precious asset, and that's the customer data, outside of the walled garden, their own digital ecosystem. And so, in this regulated world where we've got rid of the third party cookies, these walled gardens become far more significant and it hands power directly to those walled garden organizations such as Google and Amazon.

Tony Hines: 24:55

So there might be unintended consequences that happen as a result of that. So why did this happen? Well, it all happened because of general data protection, the GDPR that was enacted in the European Union. They could potentially be fined up to 4% of the global annual turnover if they misused the personal data provided by consumers, by individuals. So they began to think of ways to eliminate the risk or mitigate the risk, and one way, of course, to do that is to dismantle the third party cookie, because that places them at risk. Those third party cookies that track people from site to site across the web are really the problem, and Google set about changing the system, designing its own system, which he claims would better maintain privacy but still allows for the capture of marketing insights. Their proposals are already under investigation in the UK by the Competition and Markets Authority. These regulatory authorities want less intrusive targeted advertising technologies.

Tony Hines: 26:04

There are several regulatory frameworks that have actually influenced and hastened the demise of these third party cookies General data protection regulation in the European Union is one of those, and it was very concerned about the transfer of personal data outside of the European Union, so, for example, data stored on servers in foreign parts foreign to the EU, that is, the European economic area. Then there's the California Consumer Privacy Act, the CCPA, and that's a state statute intended to enhance privacy rights and consumer protection for residents in California, in the USA, major technology companies require explicit permissions of the users to share and use the data generated from digital interactions. And then there's ePrivacy regulation, and this is a proposed regulation concerning the respect for private life, on the protection of personal data in electronic communication, and these discussions are being raised everywhere. Now More places around the world are looking at the privacy of data. It's making it harder, of course, for companies to collect and use personal data. Of course, if it constrained the big tech companies too much, then would the internet move from a free model to a paid for model? Now, that's a question, because at the moment, advertising has paid the way for many individuals all over the world to have free use of some fantastic resources provided by the big tech companies, and they could do that free because it was supported by advertising, in other words, a trade off of some data from people using the internet to fund the free use of it.

Tony Hines: 27:51

But now we're in a world of informed consent and that's a process of communication between the consumer and the provider. The provider has to ask permission to use cookies, we know, and personal data protection has to be taken seriously, because consumers don't like it. They don't like that the bombarded by these adverts which come from all sorts of places rather than the particular websites that they visited, and they also don't like the fact because it's evidenced by the number of ad blockers and tracker blockers that they install on their computing systems to stop these organizations from tracking them. So the process of informed consent is that it's voluntary, the person giving the permission is informed and has the capacity to make the decision. That's all accepted in the arrangement of informed consent. So as one door closes, another opens, as they say, and what I mean by this is that, as the third party cookie is confined to history, there'll be new ways to gather the data, and it's important that everybody involved in the advertising ecosystem understands how this new market for data will work and to look for opportunities, building strengths, minimizing weaknesses and formulating strategies to optimize revenue from advertising.

Tony Hines: 29:22

Well, that's it for this week. I hope you've enjoyed this episode on the digital marketing supply chain. I'm particularly focused on advertising and the demise of the third party cookie. I'm Tony Hines, I'm signing off and I'll see you next time. Bye, for now, you've been listening to the Chain Reaction podcast, written, presented and produced by Tony Hines.