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The Oracle Data Cloud blog highlights the latest data-driven insights and trends in digital marketing and ad tech.

Is there a future for 3rd party audiences without cookies?

Tim Carr
Product Marketing Director, Audience

The dust has settled on Google’s announcement that they will be deprecating 3rd party cookies within two years—a move that has left many digital marketing pundits concerned about the future of the industry. While some industry commentators and thought leaders have gone to great lengths to paint a bleak picture of our cookie-free future, this is a natural evolution of digital media, and one that has long been on the cards.

Eliminating 3rd party cookies undoubtedly impacts multiple stages of the digital advertising supply chain, but suggesting it is going to be a death knell to the industry or destroy 3rd party audiences altogether, is misleading.

 

The logical next step

Apple (Safari) and Mozilla (Firefox) both blocked 3rd party cookies on their web browsers in 2019, so it was only a matter of time before Alphabet’s Google Chrome followed suit. The big difference with Chrome is that as of December 2019, it accounted for nearly 70 percent of the global desktop internet browser market share, so blocking cookies has far-reaching effects. Some companies are better positioned to deal with this change than others, but Google’s proposed two-year timeline allows industry stakeholders to adjust and build solutions that permit them to move forward in a cookie-free environment.

The reality is that advertisers will always need a means to connect with online users. They will need to reach people—both current and prospective customers—in relevant environments and engage them with content that resonates. The digital advertising industry relies on this fundamental truth and it’s unlikely to change as digital demands more of the marketing budget. With that said, 3rd party cookies have been instrumental in online advertising for more than 25 years, so what will be the lasting effects when they are gone?

 

3rd party cookies versus 3rd party audiences

First, let’s be clear: 3rd party cookies are not the same as 3rd party audiences. This is an important distinction for advertisers who could incorrectly suggest that cookie-blocking leads to the demise of 3rd party audiences. This is false.

Cookies store small pieces of information about a user’s interaction with a website. First party cookies are created by the website the user is visiting at that time, and store information such as login details and items added to the shopping cart as the user moves from page to page. Third party cookies are created by websites other than the one the user is currently visiting, and are predominantly used for cross-site tracking, profiling, retargeting, and ad serving. Marketers use 3rd party cookies to gain a glimpse into a user’s activity on a specific web browser. It’s worth noting that cookies have been around for more than two decades and many industry pundits consider them outdated compared to today’s technology.

The reality is, across acquisition and retention objectives, marketers require a variety of data and identifiers to support all their use cases. For this reason, 3rd party cookies, on their own, are a poor representation of an individual and shouldn’t be relied upon as a sole identifier.

Third party audiences, on the other hand, encompass a wide swath of audience types and data sets. And while some 3rd party audiences rely on a single source of data, many do not. A substantial number of 3rd party audiences often rely on multiple sources of data. They are created by combining available offline and online data from myriad sources, including retail purchases, automotive purchases, loyalty card information, demographics, and, currently, cookie IDs.

Those marketers declaring the death of the 3rd party audiences due to the removal of cookies need to consider the role of cookies in developing audiences for targeting purposes. High-quality audiences are created using multiple sources of data to ensure consistency and accuracy. Furthermore, marketers need to remind themselves of what the best proxy is for a real person online. Or rather, what digital identifier best reflects a person’s online presence? Because it’s not the cookie, and it’s never been.

In a cookie-free world, marketers are better served to think of identity as simply another attribute of a person and adopt a people-based but identity-agnostic mindset. This means investing in the development of a robust ID graph that spans across adtech and martech platforms but also future-proofing marketers by helping them avoid becoming over-dependent on any one identifier in the future, such as hashed emails.

 

Why the demise of cookies doesn’t mean the departure of 3rd party audiences

The cookie is one identifier among many, and a combination of identifiers are needed, from myriad data signals, for marketers to deliver effective advertising. Email addresses, a brand’s unique customer ID, device IDs, and loyalty and references numbers are examples of the many non-cookie identifiers you can leverage. Using multiple identifiers means you can traverse adtech and martech ecosystems across any channel, device, or platform, and, ideally, carry a seamless conversation with customers on their unique path to purchase.

Removing the cookie from the audience creation and delivery mix means we rely on other data signals in its place. Granted, some companies are better positioned to deal with this compared to others. But the net positive is that the changes and solutions developed to manage the removal of cookies have the potential to result in a better internet for advertisers and consumers alike.

 

The questions that require answers

That's not to say eliminating cookies doesn’t present new challenges yet to be solved and will take the better part of the next two years to overcome.

Publishers, for example, do not share the same luxury that the major social media and ecommerce platforms have—large, registered user bases. These platforms leverage their own data in addition to 3rd party audiences connected through registration-based integrations to fuel advertising without ever needing cookies. Publishers, on the other hand, rely on cookies for their advertising revenue. In fact, a Google study found that when cookies are blocked publishers lose, on average, half of their ad revenue.

Potential solutions to alleviate the impact on publishers included facilitating more publisher-direct ad-buys, forcing users to create accounts and sign-in to sites, and even developing universal identifiers people can use across the web or consortiums of publishers. Each proposed solution has its own challenges and setbacks. For example, it’s doubtful that users will accept having multiple logins for individual publishers, and more direct ad-buys conflict with the industry’s growing reliance on programmatic advertising.

These challenges, along with others pertaining to the growth of emerging formats, including Connected TV and Over-the-Top devices, plus the role of identity-free targeting methods such as contextual advertising, are what industry leaders will focus on solving during the next two years.

 

An industry built on innovation expects change

The digital advertising industry is built on evolution and innovation. While the removal of cookies will undoubtedly cause confusion and, in some cases, upheaval among many stakeholders, there is always light at the end of the tunnel.

Consider the myriad changes that have occurred over the last 25 years in digital advertising. The first-ever banner ad was sold to AT&T in 1994, and since then the industry has blossomed through the arrival of ad serving, search, social media, ad exchanges, ad servers, pop-ups, programmatic, ad blocking, big data, retargeting, and data regulation. All these milestones have brought with them new and unique challenges advertisers had to overcome. Who says this needs to be any different?

The reality is, by the time Google eliminates cookies completely, there will be something available to replace it—something equal, perhaps better, that helps advertisers engage individuals appropriately and provide them with the right content. There’s unlikely to be a silver bullet—one solution that replaces what the cookie does today—but instead marketers can shift between a portfolio of solutions to manage their digital advertising strategy.

Right now, though, stakeholders from all corners of the industry—brands, agencies, platforms, publishers, and technology vendors—need to collectively work together to make this happen, and to ensure that the solutions developed serve businesses and advertisers while also respecting the privacy and protection of consumers.  

Want to have a longer conversation with us around 3rd party audiences or 3rd party cookies? Contact an Oracle Data Cloud Consultant now.

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