The End of the Third-Party Cookie Is an Opportunity, Not a Crisis

The end of the third-party cookie may be imminent, but marketers need not lose sleep over this significant disruption to the status quo.

In January 2020, Engineering Director on Chrome Security & Privacy Justin Schuh announced Google’s intention to phase out support for third-party cookies in Chrome by 2022. According to Schuh, “[Google is] confident that with continued iteration and feedback, privacy-preserving and open-standard mechanisms like the Privacy Sandbox can sustain a healthy, ad-supported web in a way that will render third-party cookies obsolete.”

For all the hand-wringing this announcement precipitated, Google’s decision was not exactly a surprise. Apple and Mozilla have already taken even more aggressive steps in Safari and Firefox to “render third-party cookies obsolete.” Data privacy laws like GDPR and CCPA have restricted publishers’ and companies’ ability to use third-party cookies in a variety of ways. And, in the wake of high-visibility events like the Facebook-Cambridge Analytica scandal, consumers themselves have become increasingly wary of having their personal information gathered and traded by third parties.

That said, even though the writing has been on the wall for third-party cookies for some time, many marketers will have to make significant adjustments to their approaches in order to settle into a (third-party) cookieless world. Generally speaking, these adjustments will fall into one of three categories: data availability, ad targeting, and performance measurement.

Building Data Platforms for the Cookieless Era

Until quite recently, most marketers were still all-in on using cookie pools purchased from data vendors. IAB estimates that American companies spent $19.2 billion on audience data in 2019, a 17.5 percent uptick from their 2018 spending. However, news of third-party cookies’ impending demise has already started to reshape the marketing landscape: IAB reports that 57.1 percent of American companies have increased their use of first-party data in 2020.

As companies continue to adjust the balance of data types they use for marketing purposes, they will need to make a parallel shift in the types of tools they use to organize and leverage this data. In a landscape dominated by third-party cookies, data management platforms (DMPs) that house primarily third-party data are sufficient. DMPs are well-suited to a highly focused (read: narrow, even single-channel) approach to marketing, as they make it easy for marketers to target specific audiences and adjust engagement tactics mid-campaign.

While the dawn of the cookieless era will not make these marketing activities impossible, it will undoubtedly make them more complicated. A great deal of data vendors’ data aggregation and identity resolution work will now fall to companies themselves — instead of buying a set of cleansed data on an audience that fits a specific profile, marketers will have to create it. This will involve integrating first-, second-, and third-party data into a single customer data platform (CDP). Unifying sales data (from both ecommerce and brick-and-mortar channels), customer service data, CRM data, marketing data, and second-party data in a CDP creates a truly omnichannel data solution that can be used not only by marketers, but by departments across an organization.

Generating usable persistent identifiers within a CDP that contains more robust, more diverse datasets than a standard DMP does may prove to be a challenge for some companies, but in many ways, the recent proliferation of consumer device types has provided the marketing industry at large with a dry run at overcoming this challenge. As consumers have become comfortable going about their daily business on mobile devices of every sort and smart everythings, marketers have had to develop methods for stitching together identifiers across multiple IP addresses. Through a combination of adapting these methods for the cookieless world and utilizing the services of identity resolution vendors, marketers will be able to retain access to the datasets they need to do their jobs just as effectively as — if not more effectively than — before.

Embracing Contextual Ad Targeting

Moving from a DMP-based approach to a CDP-based approach will minimize disruption to companies’ marketing efforts, but that does not mean these efforts will look identical in the third-party cookie and cookieless worlds — not least because CDPs are significantly more expensive and require more effort than DMPs do. Perhaps most notably, contextual targeting — put simply, placing ads in the right spot at the right time — is going to become increasingly prominent as audience buying becomes more difficult.

Traditionally, marketers have been able to buy an audience composed of, for example, men within a certain age range who have a household income of at least a certain amount and have demonstrated an interest in tech gadgets (whether via their digital browsing patterns or an actual purchase). They could then target this audience with ads for, say, the latest smartphone or a cutting-edge drone. While, in theory, it may be possible to build this same audience within a CDP without the use of third-party data, doing so will often be more trouble than it is worth. As an alternative, marketers can fine-tune their targeting by developing a more nuanced understanding of the context in which their ads will appear. In many cases, redirecting attention from demographics to content categories (a major component of “context”) in this way actually ends up being a more effective approach.

On one level, building contextual understanding will entail scaling up the use of second-party data by working directly with publishers to understand the consumers who frequent the publishers’ sites — specifically, whether any of these consumers are among those that a company has targeted with ads in the past. On another level, the disappearance of third-party cookies will create an incentive for marketers to take a bigger-picture view of their target audience’s consumer journeys. To pivot from an exclusively (demographic) profile-based targeting approach to an approach that accounts for both consumer profiles and consumer journeys, marketers must take a holistic view of consumers’ relationships with their brand.

Ultimately, third-party cookies have always only provided marketers with insight into a fraction of the many channels through which consumers engage with a brand. A third-party cookie will never tell a company that a customer called a service representative to complain about a product or that they make the same purchase at the same brick-and-mortar outpost month after month. In short, even though the disappearance of third-party cookies will complicate tracking consumers across multiple websites, if this complication prompts companies to invest in a robust CDP, in the final analysis, it will put them in a better position to speak to consumers in the right place, at the right time — not just the most obvious or accessible place and time.

Reimagining Performance Measurement and Attribution

Irrespective of how companies opt to handle targeting in the cookieless world, they will have to adjust their approaches to ad performance measurement and conversion modeling. Traditional approaches to multi-touch attribution (MTA) rely heavily on log files extracted from third-party data, and thus will need to be replaced — or at least reimagined — moving forward.

Marketers will still be able to track macro metrics related to sales and revenue generation, but cross-channel analyses will have to be performed using unique first-party identifiers like emails. The more sophisticated types of MTA that have come to dominate the marketing industry in recent years will also remain possible, but only within siloed walled gardens.

Tech giants like Amazon, Facebook, and Google have already transformed their proprietary platforms into “data clean rooms” that drop first-party cookies on consumers’ web browsers, and it is only a matter of time before smaller publishers follow suit. Marketers can use these cookies to measure campaign overlap, gauge ideal frequency caps, and conduct traditional MTA, however these measurements will be restricted to consumers’ behavior on a single platform.

Consequently, in the cookieless world, marketers will often have to make trade-offs between the depth and breadth of their measurement. This is an obstacle, to be sure, but as is the case with targeting, its silver lining is that it will compel marketers to adopt a more consumer-centric mindset. This, in turn, will help companies achieve a holistic understanding of how consumers actually interact with their brand.

Laying the Groundwork for a Cookieless Marketing Apparatus

Dealing with a disruption of the magnitude of the disappearance of third-party cookies is never going to be painless. That said, this particular disruption can be viewed as a catalyst for some much-needed change in the marketing industry. Third-party cookies are a powerful tool, but one whose availability and ease of use have caused many marketers to rely on it to a fault. Taking an optimistic view, third-party cookies’ disappearance may ignite a wave of innovative, creative work across the industry, making the cookieless world a better world for companies and consumers alike.

To prepare themselves to participate in this better, cookieless world, companies will need to run through four steps:

  1. Discovery: Companies — especially those that rely primarily or exclusively on third-party data — must evaluate the non-third-party data that is currently at their disposal. What first-party data does the company have? Are there critical gaps in this data, and if so, is there a plan to fill them? Does the company have any relationships through which it can access second-party data?
  2. Consolidation and Cleansing: Data access is just as important as data ownership. Companies must establish clear processes for cleansing data and storing it in a way that keeps it accessible to stakeholders across an organization.
  3. Data Strategy: Once a company’s first-party data is made accessible, the company must map out a strategy for how to activate it. For some companies, this will involve an element of direct data monetization. For others, it will only involve finding ways to leverage first-party data as an adequate stand-in for third party-data.
  4. Identity Resolution: Finally, companies need to develop a plan for creating a persistent identifier that affords a cross-channel view of the same customer. This identifier will take a different shape than the one it took during the era of the third-party cookie, but it will be no less important. Depending on a company’s internal analytics capabilities, its best bet may be to outsource this step to an identity resolution vendor.

For most companies, these four steps will double as a means of transitioning from a DMP to a well-constructed, well-managed CDP — which, at the end of the day, will be the foundation of an effective (third-party) cookieless marketing apparatus. This is not to imply that marketers should trade an overreliance on one tool (third-party cookies) for an overreliance on another (a CDP), but rather to suggest that marketing needs to become increasingly characterized by holism and consumer-centricity.

For all intents and purposes, Google’s announcement may have put third-party cookies to bed, but in the grand scheme of things, this has not caused the sky to fall so much as it has illuminated it with the light of a new day. Provided the industry embraces change instead of fighting it, the future of marketing remains as bright as ever.

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