Third-party cookies are toast. What's next?
In 1994, Netscape engineer Lou Montulli invented a tiny text file that would become one of the most consequential creations of the digital age. He called it a cookie. Websites could save one of these files to a person's computer every time they visited, remembering that person rather than treating each visit as a separate, unconnected event.
Montulli's first-party cookies focused on helping websites remember preferences, such as language, location, or shopping cart contents. However, by the time Microsoft's Internet Explorer started grabbing market share from Netscape two years later, a variation on the theme had appeared.
Third-party cookies extended the tracking option beyond a single website. Anyone could use them in any number to track user visits across multiple sites. This allowed businesses to catalog user interests, measure ad response, and identify deeper patterns of behavior.
Advertisers caught on quickly, using third-party cookies to build real-time graphs of people's interests at scale and across devices. There was just one problem: Nobody told users this was happening.
Closing the file
Almost three decades later, Google claims it wants to close the privacy hole Montulli inadvertently opened. The days of third-party cookies are numbered.
In 2024 (pushed back from later 2023), Google's dominant Chrome browser will begin phasing out third-party cookie support as part of its 2019 Privacy Sandbox Initiative. A new Topics API will replace cookies with a machine learning system that categorizes users according to the websites they visit. It will also constrain alternative user tracking methods such as device fingerprinting.
This move isn't entirely of Google's choosing. Successive waves of regulation including the EU's General Data Protection Regulation (GDPR) and ePrivacy Directive (ePR) have tightened rules on cookie consent. The ePrivacy Directive, also known as the EU cookie law, requires websites to obtain prior consent from users in the EU before showing them cookies.
The pressures are also commercial and technical. Ad blockers and rival browsers such as Apple's Safari and Netscape's successor Mozilla Firefox have taken to blocking third-party cookies by default, making it harder for marketers and advertisers to use them.
Replacing third-party cookies
What does the disappearance of third-party cookies mean for the data mining ecosystem they spawned? "The industry is quite split," believes Philip Acton, UK country manager for the ad platform provider Adform. "Some think it will be a challenge, while the other half think it is a real opportunity for us to clean up our act and focus on something that is more compliant and user friendly."
In the worried camp are German publishing companies like Axel Springer. It recently complained to the European Commission that Google's third-party cookie ban will reinforce the company's grip on advertising and breach EU law.
In Acton's view, the industry has three options. The first is maintaining the status quo – the established idea of contextual data – which uses content to feed users ads based on their viewing habits.
The second is Google's Topics, which is itself a refinement of the contextual idea but with an important twist. "It's Chrome acting as the gatekeeper. It's another example of Google making changes but wanted to be the controller," says Acton.
Data quality could be a limiting factor in Google's approach. "The data you'll get on your advertising campaigns will most likely be aggregated with data from other brands and potentially your competitors," he warns.
Relying on first-part data
That leaves a third option: The first-party data that brands and publishers collect themselves, implicitly gathered by first-party cookies and explicitly provided by the users themselves. This data is more persistent – and as long as the user agrees to be tracked, it solves the consent problem. First-party cookies also offer a rich data source for programmatic advertising. Adform figures suggest that this is already matching the popularity of third-party data in European countries.
The challenge is that there are many different types of first party ID, including publisher consortia, probabilistic IDs and authenticated IDs. In response, Adform added a new feature to its Flow platform, ID Fusion, which works with multiple IDs.
For Acton, simply sticking with Google will come at a cost, forcing a business to rely on its ad framework. Diversifying is essential. "The advertisers and tech partners that jump on board with first-party data are going to be the ones who win as opposed to those who go all in with Google," he predicts.
The omni-channel grail
Jacqueline Leng, VP of global solutions for data marketing company Kinesso, agrees that first-party data is the way forward but thinks that the industry must still become more multi-dimensional. It must support the omni-channel concept, in which multiple channels, including mobile, PC, telephone, and brick and mortar, fuel a single understanding of the customer.
"The biggest challenge is consumer journey mapping," says Leng. Something has to bind those data sources together across the different channels. "The question is what the connector will be."
Third-party trackers excelled at this, and the industry will have to make first-party alternatives work a lot harder to do the same job in their absence.
Meanwhile, regulation could have unintended side effects.
"It's given more power to the customers, but it's also given a lot more control to the walled gardens," says Leng. "Google is getting bigger while the small players can't survive. This is why Facebook faces a challenge. They only have an app. That's why they are pivoting to the metaverse."
AI to the rescue
Looming over the debate about cookies is the potential for new technologies like AI to support connected omni-channel experiences. This also lies at the heart of Google's vision.
"We stand against tracking and profiling," says Colin Hayhurst, CEO of UK-based privacy search engine startup Mojeek. His company focuses on using contextual data to serve advertisements to users. Although a minnow next to Google or Bing, Hayhurst believes this approach works well without the need to smash privacy.
"People express their intent in a search query. Given a location and a language setting, you can serve them relevant ads," he adds.
He believes that this basic contextual advertising is just the beginning: "We are reaching a stage in machine learning where we can start to have contextual ads outside search."
This might not be that far from what Google has in mind for Topics – a gigantic algorithmic ad system that can understand the subtleties of changing context from page to page as the user browses.
"I think we will see the rise of startups doing contextual advertising," says Hayhurst. "If I were starting a new company now, I'd do contextual ads for publishers."
Back to the future
Ironically, this sounds not dissimilar to Google's stance when it reinvented search in 1998. Montulli invented the cookie, which advertisers and publishers pounced on. But it was Google's empire across desktop and mobile that turbocharged it.
Since then, though, the tools have changed. Widespread AI has become a reality, providing a promising alternative to those small tracking files when it comes to viewing peoples' online activities in context.
With regulators bearing down on Google's hegemony, it has little room to maneuver. For the advertising giant, this is a moment of danger. For everyone else, it spells opportunity.