Toss Out the Milk, The Cookie Party is Over

For 25 years – since the introduction of Internet Explorer 2 – our browsers supported third-party cookie technology that formed the basis of internet advertising.

The cookie party is ending.

Tech lawyers and business executives need to learn about what will be following the cookie era, as online advertising pivots to survive omnibus consumer privacy laws like GDPR and CCPA that make old-fashioned adware impossible to use and therefore obsolete. What happens to the cookie and what comes next? Companies will need practical advice on how to advertise in the new web environment.

After privacy regulators in Europe, Canada and elsewhere clearly stated plans to enforce collection of consumer information only with express permission of the consumer data subject, the third-party cookie’s days were clearly numbered.  HTTP cookies – some session cookies, some persistent cookies – involve usually-secret placement of code on a consumer’s web browser which could remember items in a shopping cart, record browsing activity and save data entered into website fields. These cookies are likely to survive.

Third-party tracking cookies tend to compile long-term records of a consumer’s browsing history and provide that data to whoever could read it. Some websites could set over 800 cookies on a passing browser. The New York Times reported that it found that people reading a controversial article may be tracked by nearly 50 companies, including those that sell that tracking information to scores more companies. The Times author stated, “as advertisers pushed for ways to better target ads, ad tech companies created vast networks to harvest user data and broker ads on billions of web pages, providing a one-stop shop for advertisers to reach web users.”

The GDPR mandated privacy by design for web browsing, requiring technology companies to develop software that protects privacy by default, and automatically opts the user out of these huge ad networks unless the use chooses to accept the intrusions. The CCPA applies to persistent identifiers, including cookies, and provides consumers rights to learn about the information collected and to request that data be erased. Allowing consumers to opt-out of the cookie networks is bad enough for the current ad industry, but the EU’s requirement of an automatic opt-out by default signals the death of that business model.

And Big Tech is responding. Safari (2017) and Firefox (2019) are already blocking cookies effectively. The world’s most popular browser, Chrome by Google, is rolling out similar third-party cookie blocking technology.  According to the blog for Elevated Internet Marketing, “Once Google kills third-party cookies on Chrome, it will still allow tracking to continue without passing personal information onto advertisers. This will give Google more power, but also increase privacy online.” Google has announced its goal of making third-party cookies obsolete by 2022.

The Google announcement quickly affected the online advertising industry. Shares of Criteo crashed to a 52 week low and other companies with cookie-based advertising infrastructure dropped in a similar manner.

What follows the third-party cookie in the online advertising space?

Google’s advertising is not simply disappearing. Clicks and purchases will be stored in the browser and not broadcast to third parties, giving browser companies like Google more control over the data. Prioritizing privacy means significantly less measurement and targeting from an indiscriminate mass of ad networks. Whoever has access to first party data will continue to thrive. Loyal audiences will command a premium.

Cookies are a device-based tool.  The software rests on a device, tying that device to browsing history. The future may involve much more marketing directed at a specific person whatever device that person uses to surf the web. Facebook assigns a unique identifier to each person, and this can be used to track people across the platforms they use to access the web – smartphone, laptop, iPad, television – and benefit from a fuller picture of a consumer. Brands have always used first party data to appeal to customers, but tools are developing to allow deeper relationships.

Closed corporate systems like Facebook with huge herds to milk for data will certainly benefit. But the death of third-party cookies may spur a movement toward a universal personal ID that can used by any marketer. MarTech Advisor writes, “The race has already started so vendors only have two years remaining to develop their universal ID solution, win enough partners to become relevant in scale and a feasible industry alternative (in fact selective Customer Intelligence platforms have started establishing such IDs.) Publishers will have an incentive to work with a couple of universal ID suppliers to not make themselves too dependent on any one provider.”

AI allows brands to extract marketable intelligence from customer telephone conversations, just as it allows Amazon to draw useful information from a customer’s on-site browsing habits. New uses of machine learning will be applied to first person consumer data to understand their needs and desires in a way that supports traditional marketing tools.

What was old is new again.  Keyword targeting was an early search marketing tool and is likely to regain its relevance. This system uses your currently expressed interests to market to you, rather than your overall behavioral profile, like the third-party cookie regime. According to Marketing Land, “With contextual targeting, the ads you see are based on the content you are looking at instead of your overall behavior profile. So when you are looking at your knitting blog, you see ads for knitting needles, and when you’re reading up on how to improve the click-through rate on your email newsletters, you see ads for relevant email automation platforms.”

Movements in the marketing tech industry show that privacy laws like the GDPR have succeeded in creating a desired effect – structural changes that promote consumer privacy and grant consumers greater choice. The cookie may crumble, but advertisers will still eat.