Google plans to make third-party cookies obsolete over the next two years on its Chrome browser. This has the potential to impact the $19 billion programmatic advertising industry, taking the power away from the ‘middle man’ and handing it back to publishing companies. So, what does the future of online advertising look like for publishers?
Google’s announcement to end third-party cookies follows the implementation of its ‘Privacy Sandbox’ launched in August 2019, aimed at developing a set of open standards to improve user privacy on websites, “while also supporting publishers”.
This month, Chrome Engineering Director Justin Schuh said that, following feedback from the Privacy Sandbox, Google is confident that it can “sustain a healthy, ad-supported web in a way that will render third-party cookies obsolete”.
“Users are demanding greater privacy – including transparency, choice and control over how their data is used – and it’s clear the web ecosystem needs to evolve to meet these increasing demands,” he said.
What are third-party cookies?
Cookies are pieces of code stored and managed by internet browsers to identify user preferences and provide a personalised browsing experience. They remember elements about a website visited by a user, including location, language preferences, login details, products viewed, products added to a shopping cart, number of articles accessed per month, or article topic preferences.
First-party cookies refer to information that is stored by the website that the user visits, usually to provide a good user experience.
Third-party cookies are stored by domains other than the websites a user visits with the aim of tracking the user across websites to collect behavioural data and serve advertising deemed relevant to the user, including retargeting.
How are third-party cookies used for advertising?
Third-party cookies are required by publishers using programmatic advertising networks to generate advertising revenue on their websites.
Programmatic network providers work as a ‘middle man’ between marketing teams and publishers.
Programmatic advertising allows marketing teams and publishers to automate the buying and selling of their advertising. Third-party cookies are used to segment users so that advertisements are only paid for and delivered to users deemed most likely to purchase based on their demographics, location, interests and browsing behaviour.
For marketing teams purchasing programmatic advertising, the process allows them to better target buyers and streamline their advertising campaigns across multiple websites. The process is popular because it can be cost-effective and efficient.
Publishers who enjoy high website traffic are most likely to use programmatic advertising networks to generate ad revenue on their websites. The programmatic system allows publishers to fill their online inventory with advertising efficiently and with little input from their sales team.
Most Australian niche magazine publishers with digital properties don’t use programmatic advertising, instead packaging online advertising with their print and content marketing offerings. There is also a strong case that online advertising inventory available on niche websites is naturally targeted by user interest.
Regardless, the rise of programmatic advertising has had an impact on smaller publishers with some clients preferring to trade solely within the programmatic advertising networks rather than purchase directly from publishers.
The future of the third-party cookie
Google’s plans to end third-party cookies from Chrome are significant because the browser has a 69 per cent market share.
Other browser providers have already offered solutions to improve user privacy. In 2019, Apple and Firefox also announced new initiatives to improve user privacy; Apple a new tool to block third-party ad trackers, and Firefox a feature that blocks third-party cookies on its browser by default.
But Google said that it doesn’t believe that ad blockers are the answer, and wants to take time to find alternative solutions.
“We believe this has unintended consequences that can negatively impact both users and the web ecosystem. By undermining the business model of many ad-supported websites, blunt approaches to cookies encourage the use of opaque techniques such as fingerprinting (an invasive workaround to replace cookies), which can actually reduce user privacy and control. We believe that we as a community can, and must, do better.”
What does the future of online advertising look like for publishers?
The relationship that publishers foster with their audiences will become increasingly important.
The key is to ensure that the first-party data around that relationship is being captured, processed and communicated in the best way to drive advertising revenue. Publishers will need to make sure that their content management systems and CRMs can provide them with appropriate insight into their audiences online behaviour.
The Reuters Institute for the Study of Journalism’s recent Journalism, Media, and Technology Trends and Predictions 2020 report noted the importance first-party data would play in the media landscape this year: “At the very least, collecting first-party data – in the form of asking for registration in return for content – will be a key focus for publishers, a likely response to reduced cookie support from leading browsers and tightened privacy regulations in Europe and North America.”
Content association Digital Context Next believes that, as third-party cookies decline, “publishers hold the richest data sets on the web”, particularly when considering the rise in the context of advertising.
“Instead of relying on profiling individual users, advertisers are increasingly looking to leverage the context around what a user is reading and their behaviour onsite as a replacement of third-party data.”
The association also suggests that, to be successful, sales teams will need to be across not only website traffic and engagement statistics, but also a deeper understanding of website users and their “stories”.
“Third-parties have spent over ten years building and telling audience “stories”. Want to find a sports enthusiast? They could once build you an entire back story about these users, and allow you to target them all over the web…Luckily, publishers are in a great position to start building their own audience “stories” with rich first-party data, not relying on third-party data to do this work for them.”
Panelists at Publishing Executive’s recent FUSE Media Summit recently spoke about the opportunity to diversify online revenue, citing audio, podcasting, video, content marketing and premium content as avenues to be explored.
One panelist said: “Cookies are going to push all of us to think about other formats that we should be in instead of just display. I think you’ll see a lot more experimentation over the next year or two to try to find other ways to monetize at high rates that aren’t targeted display ads.”
Is programmatic advertising really on the way out?
While first-party data is accurate and ensures user privacy, programmatic agencies believe that it is too limited.
“Publishers will have some view of consumers based on their account details, behaviour, interests in their site but what about what’s happening outside their domain? Publishers will need access to enough data to complete the picture if they want to scale their campaigns,” Chris Hogg, Managing Director of data management platform Lotame, has said.
Programmatic advertising is still expected to dominate digital ad sales in 2020.
Zenith Global Brand President Matt James said in a recent report, “The ongoing death of the cookie means that the industry needs to rethink the way we design targeting and personalisation while respecting consumers’ privacy rights.”
“High-quality, first-party data is more vital to the success of programmatic marketing than ever before.”
The marketing and ROI agency believes that first-party data can be activated into the programmatic trading system, with the right connections, allowing brands to continue to target based on user preferences.
If this is done, Zenith said that it will make programmatic marketing more effective and attract higher levels of investment from brands.
However, Digital Context Next warns publishers against giving away their data.
“The relationship that a publisher has with its audience via subscriptions and behavioral data is becoming much more valuable. But publishers must shift their mindset and stop needlessly giving away their data. They must protect their advertising revenue by building a first-party data strategy to reduce their reliance on third-party cookies.”