The Death of 3rd Party Cookies and What It Means for Digital Marketing

Digital marketing as we know it is about to go through a huge transformation. Google has announced its plan to phase out third-party cookies by next year again (they keep pushing the deadline), putting the digital advertising industry on notice. Cookies, which have been instrumental in tracking user behaviour across the web, are being put to pasture in favour of more privacy-centric technologies.

Cookies have been around since the dawn of the internet, and this change is going to change how we design and build for the web moving forward.

What Are Third-Party Cookies?

Before we get in to third-party cookies, lets understand what cookies are! Cookies are basically tiny text files stored in a web browser when a user visits a website. Websites and their developers use them to remember information about a user’s visit, such as login status, preferences, and browsing history, etc. These are called First-Party Cookies.

Third-party Cookies, on the other-hand, are cookies set by a domain other than the one a user is visiting. These cookies are used to track users across different websites, allowing advertisers to collect data on browsing habits and serve personalized ads.

For instance, if you visit a shoe stores website and then see ads for the shoes you were checking out on other websites, third-party cookies are at work.

So why are we phasing out Third-Party cookies?

According to Google, the decision to phase out third-party cookies stems from growing concerns about privacy and data security. Hannah Tomisto-Inch, who works on privacy at Google, explains the rationale behind moving away from "identifiers", what they call these cookies.

“We have reached a clear turning point where the downsides of the identifiers outweigh the benefits. People are increasingly aware of how their data is used online and their expectations for privacy are growing.”
-- Hannah Tomisto-Inch, Director of Privacy & Chrome Partnerships at Google

As a result, Google is aligning with the broader industry trend towards more stringent privacy regulations and user expectations.

Data Breaches

In the past decade, we've seen several high-profile data breaches and scandals in the news, such as the Cambridge Analytica incident. These incidents have eroded trust in how large data farming companies handle our data. Governments worldwide have responded by dragging out tech company CEO's to congress and implementing strict privacy regulations like the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the US. These regulations impose strict requirements on how businesses collect, store, and use personal data, making it difficult for third-party cookies to comply without significant changes.

Surveillance Economy

We've all had the sense that we are being watched, and thats kinda not un-true. Privacy advocates argue that third-party cookies create a surveillance economy where users’ online behaviours are constantly monitored and monetized without their explicit consent.

Because of the shift in government and public opinion around privacy, tech companies are now prioritizing privacy to align with user expectations and regulatory requirements. By phasing out third-party cookies, tech companies are trying to regain the public trust by giving users tools to understand their digital footprint and allowing for greater control over their personal information.

How does this affect Digital Marketers and the industry?

For digital marketers, the end of third-party cookies is a huge shift. The ability to track users across multiple sites to deliver highly targeted ads has been one of the industries biggest innovation.

Without cookies, marketers cant deliver the same level of personalization in their campaigns. And people have grown to appreciate and want hyper-personalization in their daily experience on the internet. It feels odd when you see an ad that doesn't speak to you.

For the advertisers, according to Garrett Johnson, an assistant professor of marketing at Boston University, advertising prices fall by 52% when users opt out of cookies, highlighting the financial impact this change could have on the industry. This might sound good to business budgets, but the drop in prices is correlated to the drop in efficacy and conversion rates.

What are alternative solutions and how do we adapt?

Digital marketers are adaptable and resourceful, and the industry is already exploring various alternatives to third-party cookies. Here are the four main categories:

Contextual Advertising

Instead of tracking individual users, ads are displayed based on the content & subject of the webpage. For example, an ad for financial services might appear on a finance-related website. While this method offers a degree of relevance, its not quite as laser focused as user-based targeting.

Cookie-less Replacement IDs

These include using email addresses or other identifiers to track users across sites. Websites prompt users to log in or enter their details for a lead magnet, which are used to create profiles based on that data. But this relies heavily on user conversion, and scale of website traffic, which can be expensive in the long run.

Privacy-Centric Advertising

Technologies like Google’s Privacy Sandbox aim to balance user privacy with the need for targeted advertising. Early experiments show that these tools perform slightly better than cookie-less options but still lag behind traditional third-party cookies.

Walled Gardens

Platforms that require a login and encourage users to stay on the platform are walled gardens. Platforms like Facebook, Google, and Amazon are the bigger players, but more and more platforms are coming up like Substack, Kajabi and Patreon. These platforms collect huge amounts of first-party data, and have a dominant advantage because they can track user behaviour within their ecosystems and provide targeted advertising solutions.

So who wins from this cookie-less world?

In a nutshell, the big guys. The winners are likely to be large tech companies and their walled garden platforms with vast amounts of first-party data, such as Google, Meta (formerly Facebook), and Amazon.

These “walled gardens” have the scale and the user base to continue delivering targeted advertising within their ecosystems without relying on third-party cookies. Jamie Seltzer, Global Executive Vice President at Havas Media Network, explains in the HBR Ideacast podcast on this topic, that these companies are well-positioned to adapt quickly and maintain their advertising effectiveness.

Other businesses that have proactively prepared for this shift by investing in first-party data strategies and privacy-centric technologies will also come out on top. They will be able to leverage new tools and methodologies, such as contextual advertising and Google’s Privacy Sandbox, to navigate these changes and continue engaging their audiences effectively.

What are marketers in the industry saying and how are they preparing?

The industry is already preparing for this shift, and essentially rethinking the relationship marketers and their customers, with an emphasis on the customers experience.

“Without a third-party cookie, it forces us to step back and think about what are the best media experiences for our consumers.”
-- Jamie Seltzer, Global Executive Vice President at Havas Media Network

Businesses in Europe have been at the forefront since the adoption of GDPR in 2016, and have seen some promising results from reframing their digital marketing with Privacy-First in mind and focusing on customer experience from the ground-up.

Where do we go from here?

Phasing out third-party cookies is going to be a net positive despite the initial struggle to adapt. Larger platforms, who are driving this change, will have a first mover advantage from their extensive first-party data. And smaller advertisers may struggle to keep up, but this transition also presents an opportunity for innovation and improved consumer trust.

Businesses can prepare by conducting thorough audits of their internal processes and tech stack to understand their current dependency on third-party cookies. This involves a deep review of their media spend that are reliant on cookies, and identifying the legal frameworks in their jurisdiction for data collection and usage. By baselining where they stand, they can prioritize their next steps for adaptation.

Digital marketers need to also invest time to learn the new technologies and techniques, prioritizing data privacy, rethinking their customers experience, and staying nimble. Those who adapt quickly and effectively will be the fittest to survive.

To sum it all up

The death of third-party cookies marks a pivotal shift in digital marketing, driven by calls for better privacy and data security. With all change comes opportunities, and this is an opportunity for the industry to innovate and build more trust with their audiences. By understanding the alternatives and preparing strategically, digital marketers can navigate this transition and thrive in a cookieless future.

How are you preparing for a cookie-less world?

Mohamed Hamad

Mohamed Hamad is the founder of Third Wunder, a Montreal-based digital marketing agency, with 15 years of experience in web development, digital marketing, and entrepreneurship. Through his blog, The Scratchpad, he shares insights on digital marketing and design trends, and the lessons learned from his entrepreneurial journey, aiming to inspire and educate fellow professionals and enthusiasts alike.

The Death of Third-Party Cookies and What It Means for Digital Marketing