What Google Chrome's Cookie Apocalypse Means for Streaming Advertising
With all the focus on FAST and other advertising-based channels, there’s been a surprising lack of attention on Google's once-imminent, now-delayed Cookie Apocalypse, a nickname for Google's decision to ban third-party cookies from Chrome.
For perspective, when Apple made a similar decision with the iPhone, Meta reported that it would cost Facebook over $10 billion in lost sales in that year alone. The Publir website reported that after Apple decided to block third-party cookies, ad CPMs on iPhones dropped by 77%, and predicted that "Google blocks third-party cookies by default in Chrome as expected in 2022, this could result in revenue declines of up to 40% unless publishers implement measures to mitigate this loss."
For some publishers, third-party cookies enable the targeting that differentiates web-based ads from broadcast ads. If you lose the ability to target, you lose the benefit that delivers greater efficiency to marketers and increased CPM on your ad inventory. In this article, I'll cover Google’s proposed actions regarding third-party cookies, the status of those plans, who this impacts, and what advertisers and publishers can do to mitigate this impact.
Let's start with a closer look at what Google is banning.
Differentiating First-Party and Third-Party Cookies
Specifically, Google is phasing out support for third-party cookies but not first-party cookies. As Table 1 shows, first-party cookies are created by the website you're visiting to improve the user experience and gather data to market more effectively to that visitor. First-party cookies collect what's called first-party data, which is specific to that site and includes information like login details, user preferences, and shopping cart contents.
Third-party cookies are created by parties other than the website owner to collect data to be used by publishers and advertisers to sell more effectively to that visitor. Third-party cookies collect third-party data that are sold to enable more effective ad targeting. If I visit four websites checking sneaker prices, a third-party cookie tracks that. Within a few hours, if I’m watching a video with an ad slot, a sneaker reseller can bid on that slot because it knows I've been shopping.
These types of ads are called remarketing, and they’re a staple of programmatic advertisers as you've certainly personally observed. Today, they almost exclusively rely on third-party cookies, which means remarketing becomes much more challenging if third-party cookies disappear. More data on this below.
Table 1. First-party cookies vs. third-party cookies
Regarding data privacy, first-party data, which is collected in myriad ways, has always been fair game. As you’ll see below, increasing first-party data collection is a key strategy for minimizing the loss of third-party cookies. For now, recognize that banning third-party cookies doesn't degrade a website's ability to personalize a visitor's experience, though it does make it more challenging to present relevant advertising.
To complete the taxonomy: Second-party data is first-party data shared between two companies. For example, if a sneaker company exchanged its first-party data with a company that manufactures basketballs, this data would become second-party data for both companies. Finally, zero-party data refers to information that customers willingly share directly with a company, often in exchange for a benefit like a free download or the chance to win a prize.
Now, let’s focus on Google's recent announcement and what came before it.
Google's July 2024 Announcement: And What Came Before
On July 22, 2024, Google announced, "Instead of deprecating third-party cookies, we would introduce a new experience in Chrome that lets people make an informed choice that applies across their web browsing, and they’d be able to adjust that choice at any time. We’re discussing this new path with regulators and will engage with the industry as we roll this out."
By way of background, Google first announced the plan to phase out third-party cookies in August 2019. This was driven by the need to protect user privacy and comply with evolving regulations like Europe’s GDPR and California’s CCPA. However, Google also recognized that removing third-party cookies would disrupt the digital advertising ecosystem, leading to a significant loss of revenue for publishers and advertisers who relied on this tracking technology.
To minimize this revenue loss, Google introduced the Privacy Sandbox, which is designed to replace third-party cookies with new technologies that aim to protect user privacy while still enabling effective online advertising. The Privacy Sandbox is a collection of APIs and proposals that offer alternative methods for targeting ads, measuring ad performance, and preventing fraud without relying on third-party cookies.
Why Did Google Delay the Third-Party Cookie Phaseout?
Google originally planned to phase out third-party cookies by 2022, but this timeline has been pushed back multiple times, with the latest target set for 2024. Several reasons contributed to these delays:
- Regulatory Scrutiny: Google’s decision to eliminate third-party cookies has drawn significant attention from regulatory bodies, particularly the UK’s Competition and Markets Authority (CMA). Among other issues, regulators are concerned that removing 3PCs could consolidate Google’s dominance in digital advertising by making it harder for smaller competitors to operate effectively.
- Industry Readiness: Many advertisers, publishers, and other stakeholders in the digital advertising ecosystem were not fully prepared for the removal of third-party cookies. Surveys indicated that a significant portion of marketers lacked awareness of or access to effective alternatives, leading to concerns about disruption in the industry.
- Technical Challenges: Developing and testing the Privacy Sandbox technologies has proven more complex and time-consuming than initially anticipated. Google needed more time to refine these technologies, gather feedback, and ensure they would work effectively across the web.
- Economic Impact: The potential economic impact of removing third-party cookies has also played a role in the delay. Without 3PCs, publishers and advertisers could face significant revenue losses due to reduced targeting precision and lower CPMs (cost per thousand impressions). Google likely recognized the need to balance privacy concerns with the economic realities of the digital advertising ecosystem.
On the economic impact, Google shared test results comparing ad performance and revenue from ads based upon data supplied by the Privacy Sandbox compared to third-party cookies. Respecting ads placed via Google's Display & Video 360 (DV360) platform, ads based on Privacy Sandbox data were 95% as effective as those based on third-party cookies, which is good for advertisers.
However, during these tests, publisher revenue still dropped by 14%, likely due to lower bid prices or fewer ads. For remarketing, Privacy Sandbox ad spend was only 49% as effective as that based upon third-party cookies. Commenting on this data, Google stated that “these results are likely because remarketing today is more reliant on third-party cookies which enable a highly precise level of ads personalization, and the eligible inventory is limited because few supply-side platforms (SSPs) are currently testing the Privacy Sandbox.”
Since Google didn’t distinguish the impact of lower-quality data from the impact of lack of inventory, you can't determine the direness of this last result. Still, you can see why few would argue with Google's decision to delay the third-party cookie phaseout.
Who This Impacts
It’s safe to say that if you don't know what third-party data is or you don’t use it in your advertising, the phasing out of third-party cookies probably won't affect you much. Similarly, if you’re advertising within the three major walled gardens—Amazon, Facebook, and Google—it likely won’t matter since those ads are directed by first-party data collected directly by those platforms.
However, you will be impacted if you use a Google, Meta, or Amazon ad network or Supply-Side Platform (SSP) to advertise on sites outside these walled gardens. Like the remarketing discussed earlier, ads outside the walled gardens rely on cross-site tracking data collected by third-party cookies. Without third-party cookies, the ability to track users across different sites diminishes, affecting how these ads perform.
If you’re an advertiser that extensively uses third-party data for remarketing or other strategies, losing third-party data from Chrome could significantly impact your targeting ability and overall marketing effectiveness. If you’re a publisher, the inability of your advertisers to target effectively could decrease your CPM, reducing your ad revenue.
It's noteworthy that Google is actually late to the party when it comes to phasing out third-party cookies. Firefox deprecated them in June 2019, and Safari disabled them by default in March 2020. As mentioned, Google first discussed deprecating third-party pixels in Chrome in 2019. While Google enjoys by far the largest browser share, making its decision to phase out third-party cookies most impactful, it shouldn't come as a surprise to anyone.
The Impact of the Delay
For those whose marketing relies upon third-party cookies, remember that Google didn’t quash the deprecation of third-party cookies; it intends to let people make an "informed choice" about them. Interestingly, this choice is available to all Chrome users today, as shown in Figure 1 from the Chrome Settings window. What's unknown is how obvious Google will make this choice available to Chrome users.
Figure 1. Chrome users can opt out of third-party cookies today.
According to at least one observer, 40% of Chrome users have manually disabled third-party cookies already, though I couldn't find the source of this data or otherwise verify it. The closest parallel is Apple's App Tracking Transparency (ATT), which asks users via a pop-up if they would like to be tracked and indicates what data will be tracked if they accept. Figure 2 shows the 2023 opt-in rates for several countries from the Business of Apps website, with Germany at the lowest at 20% and the US close behind at 24%.
Figure 2. Opt-in rates for selected countries
Some observers predict that the Chrome opt-in rate will depend on how Google presents the decision. According to Stephen Caffrey, CEO of display.io and Founder of Sponsorcart.io, “If it’s an unmissable prompt, expect ATT-like opt-out rates. If it stays buried in settings, it will be a nothingburger.”
Figure 3. An artist’s depiction of the impact of cookie deprecation on the digital advertising industry
That said, In Martech Weekly, Juan Mendoza argues that Google’s delay changes nothing. “What Google now plans to do is to abdicate responsibility for the mess they’ve created. The master plan is to shift the burden of phasing out third-party cookies onto the users of Chrome. What this will look like is a big red shiny button on every Chrome browser to remove third-party cookies from your browser forever. Sounds pretty good, right?”
As Joe Root stated in the Permutative blog, “Google’s announcement risks creating a false sense of security for publishers and advertisers alike. Cookies no longer exist for 70% of the internet, Google is simply handing the timelines for the remaining 30% over to consumers.”
I couldn’t verify the 70% number; that’s some combination of the Safari and Firefox users that seems far lower than 70%. Still, the point is clear: third-party cookies are going away sooner or later. If your targeting (or your customer's targeting) depends upon third-party cookies, you’re already behind the curve in terms of finding a solution.
Alternatives to Third-party Cookies
So, third-party cookies are going away; what to do? If you perform a simple search, you'll find myriad approaches, most driven by the product or service sold by the website recommending that particular solution. These break down into three basic approaches:
1. Develop and Deploy First-Party Data
First-party data includes information like purchase history, website behavior, and preferences gathered through your channels, such as your website, mobile app, or CRM system. While the primary focus of first-party data is to sell more effectively to existing customers by personalizing their experience, it can also be a powerful tool for market expansion.
How? There are several ways, but one common approach is to use first-party data to create lookalike audiences. This involves taking your most valuable customer profiles and using them to find new prospects with similar characteristics. For example, platforms like Facebook, Google, and LinkedIn allow you to upload your first-party data (e.g., email lists or customer data). These platforms then analyze your data against their broader user base to find individuals with similar behaviors, interests, or demographics, thereby expanding your reach to new, highly targeted audiences.
2. Contextual Advertising: Reaching Audiences Without Tracking
Contextual advertising targets ads based on the web page content a user is viewing rather than their browsing history. For instance, an ad for running shoes might appear in an article about marathon training, reaching users in a relevant context without the need for invasive tracking. Contextual advertising is a strategy that can help you reach new users interested in related content but haven’t directly interacted with your brand before.
3. Find Alternative Ways to Gather Tracking Information
Technologies like Google’s Privacy Sandbox is Google's attempt to replace third-party cookies with a suite of privacy-preserving tools that allow for ad targeting, measurement, and fraud prevention without tracking individuals across the web. In its article, Maximize ad relevance without third-party cookies, Google outlines multiple ways to use data collected using Privacy Sandbox techniques to target prospects for in-market, remarketing, and audience extension, three activities that previously relied upon third-party cookies.
Of course, technologies in Google's Privacy Sandbox are not the only alternatives. Universal IDs and ID graphs have emerged as prominent solutions in the post-cookie era of digital advertising. Two notable examples are LiveRamp's RampID and The Trade Desk's Unified ID 2.0. RampID, formerly known as IdentityLink, is a pseudonymous identifier tied to devices in LiveRamp's Identity Graph, enabling cross-device and cross-channel user identification. It uses both deterministic and probabilistic data to create a comprehensive user profile.
Unified ID 2.0, on the other hand, is an open-source initiative that aims to create a standard identifier based on hashed email addresses. These solutions, along with others like ID5's IdentityCloud, strive to provide a privacy-compliant alternative to third-party cookies while maintaining effective targeting and measurement capabilities for advertisers and publishers.
As the digital advertising industry moves toward a future without third-party cookies, the strategies and technologies discussed above, and those you can easily find with a simple web search, offer a roadmap for maintaining and enhancing your marketing efforts. In 2024 and beyond, it’s not just about setting up an AVOD or FAST channel; it’s about adopting privacy-compliant strategies that support the high CPMs programmatic advertising is designed to deliver.
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