Google Privacy Sandbox, Web Design, tech companies

Google’s Cookie Phase-Out: An Overview

In 2020, it was announced by Google that it will join Apple and Mozilla in phasing out third-party cookies in its web browser by 2022. Between them all, it is seen that Google Chrome (64%), Apple Safari (19%), and Mozilla Firefox (4%) take up 87% of the global browser market.

This means that third-party cookies – which have driven the online advertising economy for the past two decades – will soon be consigned to internet history. Although it is still unclear what will follow in their tracks, it can be expected that the world’s biggest tech companies will invest heavily to secure a reliable alternative.

As of mid-March, it has been seen that Apple and Mozilla have already implemented their cookie clampdown, but Google has given itself until 2022 to make the gradual transition. Without doubt, this will lead to a radical overhaul of the online economy that will impact all marketers.

The Role of Cookies

Cookies are used to help businesses perform a wide variety of handy functions online. These small packets of data were first used in the 1990s as a way for sites to ‘remember’ which items a user had added to their shopping cart. Soon, their use was expanded to include authentication of login status, tracking users across different websites, and storing a user’s browsing history.

In short, cookies are a reliable means of passing on information about the online behaviors of individuals. And somewhere along the way, it has been seen that the balance has tipped away from their reliability and towards the invasion of privacy that cookies can enable.

There are many distinct types of cookies. The two most important types are first-party and third-party cookies.

First-party cookies are stored by websites. They enable these websites to remember a user’s settings and can significantly improve the user experience. These cookies are not targeted by the recent and upcoming changes.

Third-party cookies are created and stored by external sites, and not by the site the user is visiting. They can track the user as they move across domains and retarget them with personalized messaging.

What is Changing and Why?

Lawmakers in the European Union and the United States have had third-party tracking cookies firmly in their sights. This needs to be placed in its wider context, however. Online privacy has become a political issue and newer regulations such as the EU GDPR have had a much wider scope than just cookie-based tracking.

Cookies are seen as a symptom, not the disease itself. And while Facebook may tout the success of its personalized ads as proof that consumers want this kind of advertising, there is evidence to the contrary too. eMarketer has estimated that in 2021, 27% of internet users have an ad blocker enabled on at least one device. These ad blockers prevent a piece of JavaScript code from running on the page, so cookies cannot be created.

There has been a broader shift towards greater transparency online today and third-party cookies often operate in a shadow economy. The trouble with such an economy is that its participants are rarely aware of its inner workings. For example, many of us are tracked online without giving permission for adtech companies to gather and trade our data. It can be seen that many brands do not know how their adtech suppliers capture and process customer data.

Regulations such as the EU GDPR have created more awareness of these challenges, with businesses now required to keep transparent data records. The EU GDPR is just the beginning, however, and it can be seen that regulators worldwide are much more attentive on user privacy today. Third-party cookies are an easy target for regulators that do not have a stake in their continued use.

The Future of Advertising Without Cookies

Apple’s CEO Tim Cook struck an optimistic tone at a 2019 conference: “Technology does not need vast troves of personal data stitched together across dozens of websites and apps to succeed. Advertising existed and thrived for decades without it.”

Apple, of course, does not rely on advertising revenues – and one can sense that they are enjoying their new role as privacy protectors.

Advertisers now know that personal data fuels highly effective marketing campaigns. They are unlikely to go back to the old methods if they have a choice in the matter.

Google’s loose cut-off date for third-party cookies in Chrome (“by 2022”) provides scope for experimentation. They will not remove this form of tracking altogether until it can be replaced. The big question for Google, along with other adtech companies like Criteo, is: can cookie-like tracking capabilities be provided, while preserving the privacy of individual users?

This seems like an insoluble paradox. Especially since it can be expected that any short-term workarounds that do not preserve privacy will eventually be shut down by regulators. Google is working on this assumption and it has been made clear that its updates are about privacy, not just cookie-based tracking.

Preparing for a Cookie-Free Future

Under this proposal, advertisers would not be able to target individual users, as they can today through remarketing. Instead, it would be groups that exhibit behaviors implying an interest in their product or service that would be targeted.

In early tests, Google reports that advertisers could expect to see “at least 95% of the conversion per dollar spent when compared to cookie-based advertising”. It should be noted that Google tested this method against cookies only in relation to in-market and affinity audiences in this experiment. But as an initial step, this should be encouraging for advertisers.

Facebook, which retains an enviable trove of first-party user data, is also testing new ways to replace its retargeting methodology. The early front-runner is built on “aggregated event measurement”, a similar principle to Google’s cohort-based federated learning. It can also be expected that retailers like Amazon and Walmart will make gains, as they can build advertising products within their ‘walled gardens’ of first-party data. Significantly, this first-party data reveals what people buy, as well as what they search for.

Strategic Shifts for Marketers

The most obvious strategic shift is a move away from individual user tracking and towards more contextual advertising. This means getting close to the patterns of the customer journey, rather than following each customer’s journey.

For example, in the automotive sector brands would target the behaviors that customers exhibit on their path to purchase and create sequential content to match that journey. That could mean placing ads alongside articles that review certain models of cars, or YouTube videos of a latest TV ad campaign.

Advertisers will need to layer greater understanding of their customers on top of this approach. This can come in the form of first-party data, which can be gathered by companies by getting closer to their customers. It is essential to demonstrate that data will be handled responsibly, but also that customers can expect a better service in return for sharing their sensitive information. To help with this, ‘data privacy by design’ should be aimed for by marketers on their websites and apps as standard.

Moving Forward

There is no need for marketers to panic about these ongoing changes. All the above stems from a customer-centric view of how the online world should operate. If it is kept in mind by marketers and the focus is on maintaining customer privacy, future regulations will offer little concern. That shift in emphasis will not remove the pressure to deliver results, of course. But as an industry, it can be seen that we all need to move on from an economic model that requires invasive tracking to deliver those results.

With the collective might of Google, Facebook, and a sizeable adtech industry working on new alternatives, there is cause for optimism among marketers that they will continue to achieve results. No matter where their experimental new methods lead, it is abundantly clear that brands will need to think differently about their data to take advantage. That work starts today, by building closer relationships with customers.

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