Marketing professionals currently find themselves in a position where consumers and governments will no longer tolerate some of the tracking technologies and strategies that have historically been standard practices for brands, corporations, and agencies.

Why are third-party cookies being phased out?

Specifically, third-party cookies will be phased out within the next two years, causing major disruptions and changes to how marketers track and evaluate consumer behaviors and habits.

To understand the significance of this shift, it’s important to not only understand what third-party cookies are, but also the history behind their creation and use across the industry.

What are third-party cookies?

Third-party cookies are cookies created by a website other than the one a visitor is currently on. Brands use third-party cookies to gain insight into other websites they visit, interests they maintain, and actions they take. 

Cookies were developed over twenty-five years ago by Netscape Communications to understand online behavior. Brands have been using cookies to track website behavior, improve the user experience, and collect data that helps target audiences more effectively. But, that’s changing, and quickly.

Why third-party cookies became an industry norm

One of the main reasons the digital media industry has grown so much is because it is measurable. You can target specific cohorts, and the third-party cookie is an essential part of that ecosystem. It helps brands identify their user across the open web.

Early on, digital marketing was simple and was publisher direct. If you had a million ad dollars to spend, a brand would go to USA Today and say, “I want to take over your entire site with ads for my brand.”

It was very manual, there was a lot of overlap, and a brand might reach the same person across the board without even knowing it. 

And then came the networks. Now a brand would be dealing with many sites — a sort of a conglomerate, with a massive reach across the internet. This made media planning and buying easier.

A lot of technology providers began capturing data on user behavior and content behavior.

The programmatic world led to less focus on contextual targeting and a greater focus on audience targeting. Cookies became a tracking device to enable targeting across sites.

Using this approach, the industry began to flourish. If a brand was interested in reaching a user across the open web, it could partner with a data provider using a mix of first- and third-party cookies, first-party IDs, and other identifiers.

Two reasons: Privacy regulations and changes with technology platforms.

Massive changes in the regulatory landscape affecting digital advertising identification are happening. With GDRP, CCPA, and the California Privacy Rights Act, businesses are being forced to honor global privacy control.

The big tech players are also allowing people to block companies’ use of their data. With about 60% of the browser share, Google plans to phase out third-party cookies in the next year or two, based on users demanding greater privacy and control over how their data is used.

Apple devices running iOS 14 and later will compel publishers to obtain permission to track users across apps and websites.

Challenges the industry faces without third-party cookies

For brands, there are a few challenges. If a brand is running retargeting, for example, it won’t be able to target that individual in another location because it’s been using a third-party cookie to do that.

Now brands may be showing the same ad to the same user 20 times. Frequency capping can’t be done, and they’re overpaying. It makes the entire ecosystem a little challenging and confusing to figure out what an industry-standard path forward may or may not look like.

Apart from GDPR, what makes this more difficult is that there is a technology piece in play.

Over the last ten years or so, the foundation of digital marketing was built on this third-party cookie. It will take longer to determine how to make this new system work. In the next three to five years, there will be a fragmented system.

From what we are seeing today, there will not be a universal solution in the near term, but instead perhaps in the next five to 10 years once the industry wraps its head around how to actually target the changes and come up with actionable solutions that work across the board.

What brands can do to prepare for these massive changes

While these changes are a couple of years out, do not wait to address them at the last minute.

A smart way to go about this is for brands to invest in first-party data strategies.

First-party data acquisition will be most effective, as it is a way for the brand to own its own data and be less susceptible to feeling the effects of these global privacy changes.

An overview for brands to follow when thinking about developing a first-party data strategy includes:

– Develop internal first-party identity graphs

– Build data from internal sources

– Access second-party data through non-competitive partnerships

– Collect their zero-party (or declared) data by asking customers to share more with them

One major impact of this strategy is that once a brand has collected the data it is looking for, the brand can use it for retargeting purposes for greater growth, impact, and tangible results.

It’s important that brands and companies learn about the changes now to forecast, plan, and then implement solutions that don’t leave everyone scrambling for answers.