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The future of digital in a world without third-party cookies

Your guide to managing the transition.

Kati Willmer, Programmatic Manager

by Kati Willmer, Programmatic Manager

Core Investment

In recent months, the reunion of the TV show, Friends, has gained a lot of media attention for obvious reasons. Originally cast in 1994, the show ran for ten years, with 236 episodes created. After seven seasons, the cast were reported to be paid one million dollars per episode, and by the time they reached the final series, the show was airing in over one hundred countries worldwide.

In 2004 the TV landscape was still quite simple. You either watched Friends live at a specific time, or your recorded it on your DVD player. Alternatively, you may have visited your local Xtra-Vision store to either buy or rent the series.
Now the landscape is substantially different. HBO Max, a video on demand subscription service owned by AT&T will stream the new episode in the US. In Europe, it is still not clear who will own the rights here. Netflix own (some) of the rights to Friends in Ireland, but reports suggest Sky may secure rights to air the episode locally.

Either way how people will watch the episode today, compared to 1994 will have changed substantially, a testament to the impact digital technology has had on the TV market.

Another launch occurred in 1994. The web cookie began to make its presence felt across the internet. The original purpose of the cookie was to track a user’s browsing activity online, to help improve their user experience. In short, it worked, but has received years of criticism and judgement. Especially in relation to how this data is used.

Unlike TV, the cookie hasn’t evolved. How an online user was tracked in 1994, is exactly how most tech companies still track their users today. However, this is about to change.

Google announced their intention to phase out third-party cookies in a blog post in early 2020. The impact of this decision could change the online advertising industry as we know it. Even though it is a constantly evolving situation, this is what we currently understand.

 

What is a third-party cookie?

Cookies are bits of code stored by websites to track browsing activity.

Originally designed for websites to remember a user’s browsing history, this technology later allowed marketers to target users based on behaviour as well as track digital campaign performance and attribute online purchases or actions to their advertising activity. Known as third-party cookies, they can track users across multiple websites.

 

What’s driving the end of third-party cookies?

There are two big factors driving the demise of third-party cookies.

1. Cookie Blocking

Third-party cookie blocking is one factor contributing to their demise. Safari began the trend in 2017, with Intelligent Tracking Prevention (ITP) 1.0, which is now at ITP 2.3 after several updates.

Mozilla Firefox then followed in 2018 and Microsoft Edge in 2019. Both Safari and Firefox browsers now block third-party cookies by default rather than users having to enable the function.

Google Chrome was the last to join the party, announcing they would phase out cookies by 2022. Recently, they’ve also announced they won’t support any solutions that recreate the individual level targeting cookies provide and won’t be creating an alternative.

In 2020, approximately 56% of Irish people used Chrome and 30% used Safari, with Firefox and Edge accounting for 6% (Statcounter Global Stats, 2020).

This means Marketers are only able to track and target 64% of Irish users with third-party cookies, which will drop to 8% after 2022. In addition, research from Statista in 2018 highlights that 27% of the Irish users use an ad blocker, mainly due to privacy and security concerns, faster load time, and reduced content distractions. As a result of browser and user cookie blocking, cookies are becoming less reliable as tools for tracking and measurement.

2. Privacy concerns & regulations

The other factor is privacy, which has become a growing concern for online users and organisations. Recently enforced regulations, such as GDPR in the EU, have given users control over their data by allowing them to opt-out of being tracked. Third-party cookies have the capacity to collect various types of information, some of which may be personal or sensitive or lead to inferred data and profiling which raises ethical concerns.

Outside of regulations and ethics, it is also a matter of consumer attitudes; surveys and studies (OneTrust, 2020) showed consumers are more likely to share their data with companies they believe can and will protect it, especially if there is clear benefit to them.

While consumers enjoy personalisation, there is a lack of trust and transparency as to how companies use data which is causing consumers to hold back.

 

What will this post third-party cookie world look like?

A constantly evolving situation, it is not yet clear how all these changes will fully impact the technology and media partners we utilize today or how the cookie-less future will look.

Major changes will be required to ensure digital advertising can continue to achieve the targeting and measurement we have today. With third-party cookies removed, Marketers will see reduced capability to track campaigns and target users, unless there are steps taken to mitigate the data loss. Any solutions also need to put user-privacy at the forefront, as advertisers who don’t respect their privacy will lose consumer trust and experience greater opt-outs.

 

So, what are the most likely solutions?

While we know ad targeting and measurement of digital media will change in the future, we don’t know how effective some of the new alternatives will be. The future is likely to be based on a combination of solutions including:

1. First Party Data and Identity Solutions: These types of solutions still aim to granularly target individuals, so will be difficult to scale and maintain user privacy. Developing a first-party data strategy and ensuring there is a successful integration of first-party data with your advertising platforms is the first step. Knowledge of publishers’ first-party data capabilities will also be more important than ever, as well as keeping up with viable identity solutions.

2. Publisher alliances: With Google and Facebook’s domination of online ad spend increasing (estimated by Core to be 84% in Ireland alone), Publishers have sought to fight back by forging alliances.

The Ozone Project in the UK is just one example, with 90+ trusted and premium publishers including The Times, The Telegraph and The Guardian coming together to offer advertisers a single view of users across all their titles.

Going alone will not be the answer for many publishers, so an offering like this would be very welcome in Ireland.

3. Machine Learning and Probabilistic Modelling: As the industry moves away from personal data, Google and others are moving towards machine-learning and probabilistic-modelling to group people in to cohorts (rather than individuals) to ensure ad targeting is scalable and privacy safe. Facebook are planning to do similar following recent IOS 14 changes.

Ad Technology has always filled in the blanks when it comes to measurement using algorithms, samples and modelling to extrapolate data. Research carried out by Flashtalking in 2018, found that 64% of their (third-party) tracking cookies were either blocked or deleted by web browsers. With rejection rates as high as 75% on mobile devices.

4. Focus on Attention: It doesn’t matter how many impressions an advertiser invests in, it is the impression you make that counts. Research has shown that digital ads viewed on trusted and high-quality sites with low ad clutter, yield better results for attention and viewability. Identifying high quality placements which deliver on these metrics should be a bigger focus in the future. Also, expect more research into how and why audiences pay attention to some ads and not others.

5. Contextual targeting: Linked to attention, contextual targeting is experiencing a return in popularity.

One often-overlooked factor in driving better digital ROI is the context in which ads appear online. We know that ads perform best in high-quality contexts, yet too often we see campaigns with little focus on context, and little understanding of where ads are appearing.

As it doesn’t require personal data, contextual targeting is one of the safest and most cost-effective ways to invest in digital post third-party cookies.

6. Dynamic creative: Marrying context and creative has always been important and by utilising dynamic creative you can use signals such as time of day, weather, keywords, events, and context to deliver a more impactful and relevant message to your target audience.

Signals used in Dynamic Creative are also untouched by legislation and don’t rely on third-party cookies.

 

 

Twenty years from now, after the latest Friends Reunion special, it is hard to know how the TV/Video landscape will have evolved. Will all “TV” consumption run through the internet? Probably.

Will RTÉ have created a rival to Netflix that is streamed around the world? Potentially. Will we still be watching Friends reruns? Unfortunately, yes!

Online we can probably be a bit more certain about our predictions. The third-party cookie will be a thing of the past. At the same time, discussions and issues around data and privacy will still exists.

But in the meantime, Core’s recommendation is for advertisers to continue testing alternatives and remain adaptable in this area. Keeping up to date with the new industry solutions will be key. Bear in mind that they will need to be tested and be privacy compliant. The internet is still only thirty-two years old, so is still finding its feet. We expect another few bumps along the road in the next few years, as we move into an era where privacy is so crucial to the user. Advertisers just need to be proactive in this area, to ensure they aren’t one of these bumps.

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