When the third-party cookie crumbles

It was a throw­away com­ment that led Ronan Shields to break the most impor­tant news sto­ry of his career. The pro­gram­mat­ic edi­tor of US trade pub­li­ca­tion Adweek was speak­ing casu­al­ly to some­one at the IAB Tech Lab, a non-prof­it indus­try research group in the dig­i­tal adver­tis­ing sec­tor.

“They said they had con­cerns Google would do the same with Chrome as Apple did with its ITP [intel­li­gent track­ing pre­ven­tion] roll­out,” he recalls, refer­ring to the 2017 tech­nol­o­gy that pre­vent­ed com­pa­nies from mon­i­tor­ing web users’ brows­ing behav­iour on oth­er com­pa­nies’ sites in Safari.

“I decid­ed to pur­sue it. I called up loads of peo­ple about it, more so than for any oth­er arti­cle I’ve ever writ­ten. It was when I realised that Google’s PR teams were start­ing to get a lit­tle bit more ner­vous than usu­al about what I was writ­ing that I thought, ‘I’m on to some­thing here’.”

After pub­lish­ing in March 2019, Shields found him­self field­ing calls from Wall Street ana­lysts and hedge fund man­agers, des­per­ate to under­stand how one deci­sion from Google might upset the entire­ty of the dig­i­tal adver­tis­ing ecosys­tem. At one point, an investor accused him of fab­ri­cat­ing the sto­ry for the ben­e­fit of a short-sell­er “To be hon­est with you, I would­n’t even know how to short stock,” he says.

It may choke off the eco­nom­ic oxy­gen from adver­tis­ing that star­tups and emerg­ing com­pa­nies need to sur­vive

But Shields’ sto­ry was, in fact, water­tight. This Jan­u­ary, Google offi­cial­ly con­firmed it would be block­ing third-par­ty cook­ies from its Chrome brows­er by 2022. The week that fol­lowed saw stock in retar­get­ing firm Criteo drop to a 52-week low and two indus­try bod­ies pub­licly con­demn the tech giant’s move.

“Google’s deci­sion to block third-par­ty cook­ies in Chrome… may choke off the eco­nom­ic oxy­gen from adver­tis­ing that star­tups and emerg­ing com­pa­nies need to sur­vive,” wrote the Asso­ci­a­tion of Nation­al Adver­tis­ers and the Amer­i­can Asso­ci­a­tion of Adver­tis­ing Agen­cies in a joint let­ter.

Months lat­er, mar­ket­ing after the “cook­iepoca­lypse” is still a top­ic of con­ver­sa­tion at every indus­try event. Why such a dra­ma over one piece of code?

From context to cookies

The dig­i­tal adver­tis­ing world as we know it grew from the third-par­ty cook­ie, a piece of infor­ma­tion that is sent from a web­site and stored in a user’s brows­er. First-par­ty cook­ies are “dropped” by web­page own­ers when a user vis­its their own site to save details such as pass­words. The third-par­ty kind are used pri­mar­i­ly for retar­get­ed adver­tis­ing.

Cook­ies are dropped into browsers by web­pages and a log of users’ anonymised brows­ing behav­iour is built up and sent back to pub­lish­ers’ adver­tis­ing part­ners. This means adver­tis­ers are able to dis­play their ads to the most rel­e­vant audi­ence. It’s also the rea­son the ruck­sack you debat­ed buy­ing on Asos last week keeps pop­ping up in the mid­dle of that arti­cle you’re read­ing.

Before third-par­ty cook­ies, brands would choose where to buy ad space through the lens of con­text. For exam­ple, a sports­wear retail­er would sim­ply choose to dis­play its ads on sites that were read by peo­ple who were like­ly to buy sports­wear, such as ESPN or Runner’s World.

“By the late-2000s, adver­tis­ers had large­ly piv­ot­ed to focus­ing on audi­ence, rather than con­text,” says Cadi Jones, com­mer­cial direc­tor, Europe, Mid­dle East and Africa, at adtech firm Beeswax. “Peo­ple had been talk­ing about the promise of one-to-one adver­tis­ing for so long and sud­den­ly pro­gram­mat­ic trad­ing made that dream seem so much more real.

“Now, in the UK, auto­mat­ed trad­ing based on cook­ie-based audi­ence sig­nals accounts for almost 90 per cent of dig­i­tal media,” she says.

Making dough from cookie crumbs

That fig­ure, plus the fact Chrome has a 66 per cent share of the brows­er mar­ket, is the rea­son Google’s deci­sion has caused so much com­mo­tion with­in the ad indus­try.

Some of the pan­ic is war­rant­ed, par­tic­u­lar­ly in the start­up sec­tor. Investors aren’t fans of uncer­tain­ty and, with the crum­bling of third-par­ty cook­ies coin­cid­ing with new pri­va­cy reg­u­la­tions in Europe and Cal­i­for­nia, the adtech sec­tor is no longer the sure bet it once was.

“Ven­ture cap­i­tal­ists, who once thought they could help cre­ate the next Google if they invest­ed in the right com­pa­ny, just aren’t get­ting the return they want as quick­ly as they want,” says Shields. “They’ve lost inter­est.”

But for the bet­ter-fund­ed play­ers, as well as those nim­ble enough to piv­ot in the next two years, Google’s deci­sion will not mean the utter “death of dig­i­tal adver­tis­ing”, a phrase that’s been bandied about some­what dra­mat­i­cal­ly in the indus­try.

For starters, the past five years have seen the dig­i­tal media land­scape diver­si­fy to the point where cook­ie-informed, in-brows­er adver­tis­ing isn’t as vital to adver­tis­ers as it once was. Cook­ies, for exam­ple, don’t exist with mobile apps or con­nect­ed TV.

Sec­ond­ly, many saw Google’s deci­sion com­ing. Apple’s ITP imple­men­ta­tion set a prece­dent fol­lowed by Mozilla’s Fire­fox, which start­ed block­ing third-par­ty cook­ies by default in June 2019. Mean­while, the pres­sure on Google to pro­tect users’ pri­va­cy has grad­u­al­ly mount­ed.

“It would have been unre­al­is­tic to not believe that, at some point, this would take place,” says Krys­tal Olivieri, senior vice pres­i­dent of glob­al data strat­e­gy and part­ner­ships at WPP’s media arm GroupM. “We’ve seen dif­fer­ent indus­try groups, tech­nol­o­gy ven­dors and adtech ven­dors try to find solu­tions that could solve this in advance.

“Most of the clients I’ve spo­ken to have been quite prag­mat­ic about it. They’re just eager to start think­ing about how they will future-proof their adver­tis­ing invest­ment to make sure the deci­sions we make right now can set them up for a world post-cook­ie.”

A new dawn of digital advertising

It’s too soon to tell what that world looks like. Some believe qual­i­ty pub­lish­ers will claw back pow­er from the dig­i­tal duop­oly of Google and Face­book, offer­ing pre­mi­um inven­to­ry bol­stered by rich sub­scrip­tion data to brands that decide to move back to con­tex­tu­al adver­tis­ing.

Oth­ers pre­dict this will be the nail in the cof­fin for pure­ly ad-fund­ed pub­lish­ers, who will no longer be able to draw adver­tis­ers a clear pic­ture of their read­er­ship.

Some pre­dict a bud­get shift away from ban­ner and video ads into less tar­get­ed forms, such as con­tent mar­ket­ing.

Mean­while, oth­ers watch brands scram­bling for their own cus­tomer data and believe we’re mov­ing into a world where com­pa­nies focus less on tar­get­ing and more on deep­en­ing their rela­tion­ship with exist­ing con­sumers. As Olivieri puts it: “In the world we’re mov­ing into with­out cook­ies, it will be a chal­lenge if you don’t have first-par­ty data.”

A small minor­i­ty pre­dict a cull in dig­i­tal adver­tis­ing bud­gets alto­geth­er. But that’s a view not shared by Jones. “Peo­ple are not going to stop spend­ing mon­ey on the inter­net, because ads on the inter­net are proven to work,” she says. “They’re now think­ing about the oppor­tu­ni­ties, about what it means and how they can make busi­ness­es that are going to be suc­cess­ful in the new land­scape.”

Olivieri agrees: “I think a lot of peo­ple realise we prob­a­bly stretched the cook­ie fur­ther than it should have gone. They’re opti­mistic about being able to piv­ot and focus on poten­tial tac­tics that may actu­al­ly deliv­er greater val­ue than the cook­ie.”