Rob Wild, Digital Director of L.E.K Consulting Europe, details how businesses can shift away from third-party cookie strategies and adapt to this transition.
Third-party cookies are now a common theme in web users’ daily activities, as we are frequently prompted to accept (or reject) them when browsing the internet.
There has been an increasing tendency toward greater privacy. This has, in part, been driven by regulation but also voluntary action by internet platforms. Google Chrome, for example, recently became the latest web browser to commit to dropping third-party cookie tracking in response to consumer sentiment.
Whilst good for user privacy, the shift to a first-party data model poses a challenge for businesses that have built advertising practices around third-party cookies. It necessitates a shift in strategy if these businesses want to remain competitive following the so-called ‘cookie apocalypse’.
So, what can businesses do to understand and address the impact of these changes?
Understanding third-party cookies
At its most basic, a cookie is a small piece of data that is downloaded from a user’s device when visiting a website, most commonly in a text file format. The file contains and collects data about the user’s browsing activity for that specific website.
Cookies can then be further distinguished based on their application. While first-party cookies are typically deployed to enrich the user experience on a website, third-party cookies are mainly used for targeting. Third-party cookies are designed to collect user data from various websites, enabling third-party entities like advertisers to enhance their marketing approach by gaining sensible information on users’ online behaviours.
Growing concerns over digital privacy in recent years have led to tighter controls around third-party cookies. Regulations, including the General Data Protection Regulation (GDPR) in Europe and the California Privacy Rights Act (CPRA) in the US, have contributed to the restriction of third-party cookies and a larger emphasis on the right to online privacy.
In response to changing attitudes to privacy, many web browsers, including Safari, have started phasing out third-party cookies. Google Chrome has also recently announced the beginning of the process to phase out third-party cookies by default, starting with 1% of Chrome browsers.
The ‘cookie apocalypse’ is a widely used term describing the predicted disruption caused by the phase-out of third-party cookies, specifically for businesses that strongly rely on third-party collected data to drive their operations.
The industry expects third-party cookies to become redundant in the coming years, forcing businesses to adapt their strategies accordingly.
The impact of the cookie apocalypse on businesses
Customer’s shifting perceptions and changes in the regulatory framework around third-party cookies are set to become a serious challenge for many marketing and customer experience leaders.
Specifically, businesses directly affected by these changes can be segmented into three main groups: marketers, advertisers, web browsers, and mobile operating systems (OS).
Marketers often use third-party cookies to track the effectiveness of campaign performance. To adequately navigate the decline of third-party cookies, these organisations will have to rethink their approach by adopting privacy-orientated technologies (PETs) to align with more demanding data privacy requirements.
But crucially, marketers also have the distinct opportunity to gain a competitive advantage as a result of these changes, if they react quickly and improve their customer acquisition capabilities relative to their competition.
While marketers will likely get off the hook by developing a different approach to track users’ engagement, advertisers are likely to face more significant challenges.
Smaller companies, that rely on third-party cookies in order to develop personalised advertising content, are bound to face a greater challenge. These businesses already have limited access to first-party data and are unlikely to have the funds to invest in new tools in the short term.
Conversely, mobile operating systems and web browsers are already developing solutions to ensure businesses can build effective advertising campaigns without the requirement for third-party cookies. These companies are in a stronger position to benefit from the decline of third-party cookies and have access to more revenue generation opportunities through investment in first-party data and browser-owned tools, such as Google’s Privacy Sandbox.
How businesses can adapt to the changing data tracking landscape
Ultimately, the phase-out of third-party cookies can present an exciting chance for most businesses to re-consider their data and marketing approach and invest in the development of more effective technologies.
Fundamentally, marketers, advertisers and web browsers/OS must shift towards more privacy-conscious business models. First-party collected data will likely become integral to these new approaches. Solutions will include harvesting data directly from interactions with customers, as well as strategies that require explicit consent from web users to allow data collection and targeting.
Going forward, businesses that wish to successfully tackle the changes brought by the cookie apocalypse will need to prioritise the adoption of new tools to personalise online interactions and customer experience.
On the other hand, more concerns will follow for those businesses that have been caught unprepared or have ignored the warning signs.
For those businesses that will be affected by this, the challenge today is to leverage the shift away from third-party cookies and re-imagine their marketing and data collection approach to capture the opportunities brought by these changes.
