Google to scrap third-party cookies: Will it crumble parts of the digital ad world?

In two years, Google plans to make third-party cookies obsolete on Chrome as part of its open source initiative, Privacy Sandbox, which was first announced in August last year. This comes as users are demanding greater privacy - including transparency, choice and control over how their data is used .

"It’s clear the web ecosystem needs to evolve to meet these increasing demands," Justin Schuh, director, Chrome engineering, said in a blog post. So, come February, Chrome will limit insecure cross-site tracking.

Google is also developing techniques to detect and mitigate covert tracking and workarounds by launching new anti-fingerprinting measures to discourage these kinds of deceptive and intrusive techniques. Chrome intends to launch these measures later in 2020.

In a previous blog post, Schuh explained that fingerprinting allows developers to use bits of information that vary between users, such as what device they have to generate a unique identifier which can then be used to match a user across websites. Unlike cookies, users cannot clear their fingerprint, and therefore cannot control how their information is collected.

Since the announcement, multiple media outlets including Reuters reported that adtech companies such as Criteo and Trade Desk Inc have been impacted, with their shares dipping 8% and 1.4% respectively. Nonetheless, industry players say it is a step in the right direction for Google.

Laura Quigley, managing director, SEA at Integral Ad Science, told Marketing that as the issues of privacy and transparency have become the talk of the town, it was inevitable that the digital advertising industry was going to change. She added,

Given digital is heavily led by cookies, that was the first thing that was going to give.

Going back to basics, Quigley explained that cookies are small pieces of code that websites deliver to a visitor’s browser, and stick around as the person visits other sites. Third-party cookies are often added by advertisers and ad networks, in addition to the site the user is actually visiting and can be used to track users across multiple sites and to target ads and see how they perform.

While tougher stances on cookie tracking will impact the whole digital advertising industry, Quigley said some stand to lose more than others, particularly companies that trade on audience data or retargeting companies whose business is wholly reliant on cookies.

Ad tech providers would also lose access to data they gathered through third-party cookies when they get phased out.

"One potential outcome of the cookie clampdown could see advertisers turn their attention back to content marketing and contextual targeting based on first-party audience insights, putting the power with media owners," she explained. Quigley added that the industry is highly reliant on tracking cookies to power brand and performance-based marketing, with the latter in particular generally focused on trying to get the audience to as many clicks as possible. So if advertisers turned their attention back to content instead of cookies, they would "definitely get better outcomes and clean up the ecosystem at the same time".

"While this could trigger a reduction in clickbait content designed to drive clicks, it will ultimately drive fewer but more quality impressions with higher CPMs which is just what the marketers and the industry needs and keeping in tune will help with the bounce back," Quigley added.

Agreeing with Quigley is Justin Chen, SearchGuru's manager, performance marketing team, who said that other browsers have taken a hard stance on third-party cookies and if Google does not follow suit, it would lose out. He added that Privacy Sandbox was also an attempt on Google's part to retain its users.

"It makes sense for Google to make third-party cookies obsolete and it’s good for the users. But in the long run, I’m not sure how the businesses will react to that. It will most likely give them a hard time," Chen said.

Like Quigley, he also said that an agency's business model would be "in trouble" if it is built on remarketing to audience. However as of now, most agencies try to provide a more integrated marketing strategy instead and those that do so will remain unaffected.

For those that focus on retargeting using Facebook or Google only platforms to reach their users, they will soon be in trouble.

When asked how SearchGuru is preparing itself for the change, Chen said it aims to ensure its team will encourage clients to store as many first-party data as possible to ensure it does not have to rely on Facebook and Google moving forward.

"When you have your first-party data, you can integrate that with the platforms' targeting tools to consolidate the data as part of your marketing strategy. That would be the first move. The next one is to encourage the entire team to think upwards," Chen said. He explained that rather than focusing on targeting and remarketing to audiences, the team will be encouraged to concentrate on ways to help businesses solve their problems by adopting high level or big picture strategy thinking.

Also weighing in on the issue is The Media Shop's managing partner and head of digital, Lee Chee Wee, who said the move forces brands and agencies to rethink their approach in connecting with customers. Rather than relying heavily on cookies for behavioural targeting and retargeting, the industry needs to move forward and transition to a people-based approach towards marketing.

"We need to invest in technology that allows us to accurately identify and target consumers across multiple devices. Brands will need to effectively capture and activate customer data accordingly to personalise messaging and targeting. There is also a need to leverage on market automation to bring all these together and manage campaigns across all marketing channels to drive greater business results," he added.

Ian Cheow, CEO and co-founder of OOm added that the move is one which was expected given there are already software that blocks third-party cookies on browsers. "From what we have gathered so far from Google’s released information, they will develop a more secure way of tracking advertisements via Privacy
Sandbox instead of removing all support for advertisers. Advertisers will still be able to personalise advertisements without users divulging too much of their personal data or browser history," he added.

Is 2020 the year of contextual targeting?

Despite the buzz, the move by Google is not a new one. In 2017, Apple released the Intelligent Tracking Prevention for its Safari browser preventing third parties from tracking users for over 24 hours after visiting their websites. Last year, Firefox also announced that it is blocking third-party tracking cookies. That said, Google Chrome still has a larger market share of about 64%, according to web traffic analysis company Statcounter.

In this case, IAS' Quigley said Chrome's cookie restrictions have the potential to upend the digital advertising model. Cookies are the foundation stone upon which the programmatic process sits, remove them and the whole edifice collapses - like a house of cards.

"In the face of cookies crumbling, contextual targeting will increasingly become a proxy for the audience. So, rather than tracking people around the internet we can now instead track the content they consume, rank in terms of engagement and ultimately conduct an auction so that advertisers can bid to gain adjacency to the top engaging content, relevant to their brand," she explained.

While cookies are a good indicator of past behaviour, they are not so good at telling you what is important right now. For that you need context.

Quigley explained that the deeper a company's contextual understanding of its audience and what they are engaging with right now, the more relevant it can be. What is more, cookies have become a big problem and this could mean fundamental changes lie ahead.

"Marketers will be well advised to think in terms of contextual targeting, sooner than later, to deliver more relevant and suitable digital experiences for the consumers. The companies that won’t be able to change their business models will stop to exist. The writing’s on the wall," she added.

Besides announcing the removal of third-party cookies, Google also said it is working actively across the ecosystem so that browsers, publishers, developers, and advertisers have the opportunity to experiment with these new mechanisms, test whether they work well in various situations, and develop supporting implementations, including ad selection and measurement, denial of service prevention, anti-spam/fraud, and federated authentication.

CMO of data solutions company Lotame, Adam Solomon, said the real question is whether Google's actions will speak louder than its words, namely all good actors being given equal opportunity to leverage this tech similarly without undue advantage given to Google in the process. He added that as long as Google is committed to open collaboration, it is more than happy to participate and help its marketer, brand, and agency clients navigate this path.