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Publishers and third-party cookies: State of the industry

A great deal has been written about the deprecation of the cookie since the first major players began switching off third-party cookies. Fast forward to 2021, and the developments seem to be moving at a much faster pace – this time with Google firmly in the spotlight.

First, the tech giant announced it would switch off third-party cookies within two years. Soon after, the Competition and Markets Authority (CMA) launched an investigation into the company’s suspected breaches of competition law. Then came two further announcements from Google: firstly, that FLoC (Federated Learning of Cohorts) would replace third-party cookies; and secondly, that it would cease to collect advertising identifiers in iOS.

With key stakeholders confirming that the majority of digital advertising still relies on third-party cookies, now is the time for publishers and brand advertisers to consider how they might best survive the soon-to-be depleted cookie jar. However, as the IAB’s latest update reveals, there is a distinct disconnect between the importance of post-cookie-era solutions and business readiness. In fact, two-fifths of respondents (40%) admit they aren’t fully prepared for the change.

In this report, we take a closer look at the current advertising ecosystem, as well as examining how the industry is responding to the cookie challenge. We also ask industry leaders their opinion on the steps publishers can take, as well as which emerging solutions, or combination of solutions, might help publishers pave the way forward in this cookieless future.

How reliant are publishers on third-party cookies?

The simple answer is that it’s hard to measure accurately, with a wide range of estimates across the industry. At the conservative end of the scale, Chris Hogg, EMEA Managing Director at Data Management Platform (DMP) Lotame, says “from our data, around 50% of the web is on Chrome, where third-party cookies are still available”.

Remi Cackel, Chief Data Officer at global media platform Teads, reports that “most digital ad spend relies on cookie-based data. Third-party DSPs are bidding on average 75% less when a third-party cookie is not available.” With far-reaching impacts across the entire marketing cycle for brand clients, these impacts “are kept hidden today as cookies are still largely usable for around 65% of global web traffic”.

For publishers, meanwhile, the challenge will focus on inventory monetization capabilities, which is “directly based on the diminution of the eligible demand observed on the client side. Publishers also need to be proactive about the cookieless situation to future-proof their business and revenues”.

Cory Munchbach, Chief Operating Officer at pure-play Customer Data Platform (CDP) BlueConic, states that “anything programmatic is essentially third party. In fact, nearly 85% of the top 1,000 sites have cookies set by a third party, which highlights its prevalence”.

Meanwhile, Mattia Fosci, Founder and CEO at EU-funded privacy-first DMP, ID Ward, expects third-party data to be present in “99% of ad transactions”.

Why are major platforms switching off third-party cookies?

Before we answer this question, it’s important to note that although some browsers are no longer supporting third-party cookies, they haven’t been blocked altogether. Whereas cookies in Chrome are currently turned on by default, by 2022 they will be turned off. Inevitably, this does mean that a large proportion of audiences will likely become invisible overnight. So, why the shift?

User privacy

Over the years, DMPs have developed increasingly sophisticated technology – including AI – to harvest inordinate volumes of data, segment it, and sell it onto third parties. Unlike first-party data (directly from customers and prospects), and second-party data (obtained from a data partner in a strictly one-to-one permission-driven environment), the origins of third-party data are much harder to track. What’s more, even though cookies don’t include PII (Personally Identifiable Information), they can still allow an individual to be tracked by their location via mobile ads.

User experience

Harvesting details in this way not only compromises user data but also detracts from the user experience. In fact, it has driven over a third of consumers (36%) in Europe to turn to ad blockers to prevent being spammed with irrelevant or repetitive advertising – rising to 67% of Chrome users. In addition, the sheer volume of third-party trackers in use – surpassing a thousand in some cases – is causing unacceptably high levels of latency.

A secondary benefit for monopolists?

Ironically, as a consequence of turning off cookies, many smaller publishers and brands who advertise on these large tech platforms will find it harder to gain full visibility into their campaigns and maintain a direct connection with their customers without huge investment.

Commenting on the potential for tech platforms to leverage this opportunity, Cackel says “third-party cookies are based on a 90s sub-optimal technology which creates unneeded complexity (in terms of both privacy and the unsustainability of the millions of cookie-matching requests which take place every second). While the latest Google proposal would surely solve those two points, these changes should not be a pretext for competitive advantage (e.g. removing granular targeting capabilities for the publishers and only allowing it within walled gardens and social platforms)”.

Given Google’s vested interest (nearly 90% of its revenue depends on tracked advertising), the consensus is that it will hold true on its assurances of developing robust and ad-friendly replacement technology well before switching off cookies.

What alternatives will Google provide?

FLoC

Perhaps the most important initiative revealed is FLoC, which groups users based on similar interests while keeping individuals anonymous. Google reports that testing has been promising, with nearly a 350% improvement in recall and 70% in precision. However, as VideoWeek observes, FLoC is not a “wholesale replacement for third-party cookies”. While the API enables targeting based on users’ interests, it does not solve issues such as measurement and fraud prevention.

Trust Tokens

Another initiative in progress is to replace cookies with Trust Tokens, which authenticate a particular user (while remaining non-personalized and cryptographically-signed), before placing users in aggregated groups.

TURTLEDOVE

Meanwhile, TURTLEDOVE, which stands for “Two Uncorrelated Requests, Then Locally-Executed Decision On Victory”, works in two stages.

First, a contextual ad request and an interest group ad request are sent at different times. This de-correlation prevents enriching any type of contextual ad request with interest group information, and vice versa.

Second, the ad auction occurs client-side rather than server-side, so that the platform conducting the auction cannot tie the two requests together.

Google is also currently testing an expansion on this proposal known as FLEDGE.

This article is an extract from our free to download report, How Publishers Can Swap Out The Cookie Jar.

Hazel Broadley,
Author, How Publishers Can Swap Out The Cookie Jar

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