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April 13, 2021

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The death of cookies part 2: An analytical approach

While the topic of cookie-death has been on the agenda for a few years it is only in the past month, after Googles announcement that they will phase out cookies in 2022, that the conversation has taken off on a big scale.

In our previous blog post we covered the background of the death of third-party cookies, what cookies are and what will happen when Google starts phasing them out from their browser. In this post we will analyse the implications on the advertising market.

Here is what we think will happen:

1. Different solutions that allow us to continue with targeted advertising:

 The first and most obvious trend we see is that companies will try to work around the problem of losing third-party data. All media and tech platforms that depend on ad-revenue will have to face this market change, but different companies are taking different measures to solve the problem.

Googles is currently working on solutions that allow for privacy safe advertising. The “Privacy Sandbox” initiative includes Floc, short for “federated learning of cohorts”, which is a way of grouping people with similar online behaviour which allows for privacy-safe target advertising on a non-individual basis.

2. “Walled gardens”.

Another way to work around the use of third-party data is to collect your own first-party data. Everyone will want you to log in to their platforms to share your information. This way they can gather data without using third party cookies. Data equals power and many companies are looking to take back power to be able to compete with tech-giants.

This is the solution that we are seeing among Swedish media houses, with both Bonnier and Schibsted working towards logged-in users.

Another possible solution comes from the Swedish advertising trade association IAB, who say they are working towards an open-source solution.

3. Tech-giants will gain even more power.

Social media platforms will have a huge head start when it comes to first-party data: As tech-giants such as Facebook already have millions of logged-in users they will be able to gather data that others cannot. Because it will get harder for advertisers to reach their intended audiences in other ways to begin with, advertisers will become more dependent on social media platforms.

 

4. Purchase intent + user data = win

While it might be possible to group user behaviour and work around cookies, one of the hardest things to track in the future will be purchase intent. Platforms with the possibility of combining user data with data connected to intention (visiting a website, adding an item to a shopping cart, search history) will be winners as this will be one of the few options for retargeting. We predict that this will increase the benefits of shopvertising, as both types of data then exist within the same platform and is therefore traceable. This is another reason why tech-giants will likely gain more power.

 

5. Alternatives to cookies will be regulated

As the end goal is to protect the users, alternatives that do not work with privacy will eventually be regulated. This means that while there might be some alternatives to third-party cookies in the future, the long-term winners are the companies that respect integrity and privacy.

6. Ads will become less relevant

 As we talked about in our previous post, ads outside of these walled gardens will likely become less relevant to us and more “spammy”. Without data it is hard to reach a specific target audience based on interests, demographic or previous web behaviour. All media will turn into mass media for a short phase before advertisers find better alternatives. What does this mean for the end user? It depends, some prefer relevant ads and some prefer privacy. The end users are both winners and losers.

 

7. Contextual marketing will increase.

 Native advertising is privacy-safe, brand-safe and reaches the intended audience in a non-invasive way while the audience is already engaged with relevant content. This way marketers can avoid collecting user data altogether. Contextual marketing is a long-term sustainable way of advertising.

Who are the winners and losers of the ban of third-party cookies? We think it is too early to tell, but we are about to see some market disruption taking place.

Want to dig in further? Here is some additional reading (in Swedish):

Google, privacy sandbox and Floc:

Solutions among the Swedish media houses: