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How New Cookie Laws May Affect Digital Advertising

Google is set to ban third-party cookies in Chrome by the end of 2021, potentially creating a huge disruption to the digital advertising industry. Here, Relevance offers an easy-to-understand guide to what cookies are, how cookie laws will change, and how this will affect online advertising.

How will new cookie laws affect ads?

What is a cookie?

Cookies are files containing small pieces of information – these files are used to identify your computer while you are using a computer network such as Google, Safari, or Mozilla Firefox. Cookies are created when you visit a website that uses cookies to track your movements within the site. This may sound creepy, but cookies are often used with the intention of improving your web browsing experience – for example, to help you resume where you left off on a website, keep items in your basket, remember your registered login, or serve you advertisements that are useful to you personally. 

If you are an internet user you will regularly be creating these cookies. But, not all cookies are equal. For the purpose of this article, we need to understand the difference between first party cookies and third party cookies. 

CookiePro explains that first party cookies are stored by the website that you visit. They allow the owner of the website to collect analytics data, remember language settings, and perform other useful functions that provide a good user experience. 

Third party cookies are created by third party websites – aka not the website you are browsing. They are typically used for digital advertising and are placed on a website through a script or tag. Third party cookies are accessible on any website that loads the third party server’s code.

First party cookies are supported by all browsers, and as the user you can block or delete them as you wish. Third-party cookies are currently supported by all browsers, but this is set to change, and other browsers (such as Safari) are already blocking the creation of third-party cookies by default. Some users are also deleting their own third party cookies, feeling uncomfortable with how these cookies interfere with their online privacy.

How will rules surrounding cookies change in the Google Chrome browser?

Google plans to phase out third party cookies by the start of 2022. The tech giant also announced on March 3rd 2021 that it won’t use alternative methods to track users online once it ends support for third-party cookies in Chrome. Google has stated that it disapproves of using email as an alternative tracking identifier for ads, and it advises the rest of the industry to follow in its footsteps. 

Google’s plan to phase out third-party cookies in Chrome is part of its larger strategy of creating a ‘Privacy Sandbox’, which aims to protect online privacy by exploring new methods of tracking people without letting personally identifiable information leave the Chrome browser. Privacy is of course rather important in the luxury industries, with HNW and UHNW individuals being particularly sensitive about their data. This means that luxury marketeers will have to ensure they are completely up to date with the new cookie rules and regulations.

To replace third party cookies usage, Google is building an in-browser solution called FLoC (Federated Learning of Cohorts), which offers anonymised segments organised by interest. It has said that in a limited test it delivers 95% of the conversions per dollar spent on cookie-based advertising – something which sceptics are finding hard to believe. However, we don’t have long to wait before testing it, with Chrome 90’s release planned for next month (April 2021).

First party cookies will not be affected by Google’s cookie law change, and they will still function by default in browsers that block or don’t support third-party cookies. First party cookies will continue to require consent, except for in cases when the purpose of a cookie is necessary to the basic operation of a website.

What are the concerns?

As Cookiebot states, third party cookies are far from the only way to track users online; alternative and pre-existing technologies include Local Storage, IndexedDB, Web SQL and more. Other browsers have been blocking third-party cookies for years, and we’ve seen that trackers just use workarounds and new technologies to achieve the same levels of tracking. However, with Google clearly stating that it won’t operate alternate identifiers that track individuals, all eyes will be on the new FLoC solution to see how it will differ.

Many people in the adtech industry are worried that Google’s promotion of online privacy is really just a move to solidify its market dominance, the Drum reports. One big concern is that publishers will need to relinquish their data to take part in FLoC, while those who do not participate in FLoC risk losing a large amount of revenue, with these publishers also having to have to fill the data gap by providing their own mechanisms for advertising. 

While advertisers know that Google’s new initiative will cause a lot of disruption ahead for anyone still reliant on third-party cookies, many see it as part of a wider trend; moving away from third-party cookies as a way of improving targeting accuracy and promoting user privacy, which has already been seen in the industry.

What could cookie law changes mean to advertising as we know it?

As mentioned, having no third party cookies to rely on for data will likely increase reliance on and use of first party cookies. One way that sites may capture more useful first party data is by encouraging people to create accounts – publishers can do this by implementing paywalls, for example. Publisher websites may also ask visitors to share their information by asking for data in return for the download of a whitepaper or report, or in exchange for a reduced or free subscription.

We are also likely to see more budget pumped into so-called ‘walled gardens’, which have less reliance on third party data.  A walled garden is a closed ecosystem which keeps its technology, information, and user data to itself, with no intention of sharing it. Facebook and Amazon are two examples of ad tech giants who operate as walled gardens. AdPushUp reports that both publishers and advertisers are drawn to walled gardens because of accuracy offered by them when it comes to user targeting – in comparison, third party cookies, although providing a fairly clear picture of an audience, can misidentify people due to the fact they are using behaviour to make an assumption about individuals.

We may see more of a move from behavioural targeting to contextual targeting. This could mean for example using time-specific or weather-specific ads to marry with what users are experiencing in the moment, personalising the ad in a new and exciting way. 

It is possible there may be an inability to cap ad frequency without the use of third party cookies. This is because these cookies allow for an ad to be shown to a user a certain number of times; without third party cookies in place, an ad could potentially be shown to a user an infinite number of times. However, to replace this Google is reported to have plans for a feature in its ad stack for Display & Video 360 that will use machine learning to help advertisers manage ad frequency in the absence of third party cookies.

What advertisers can do to prepare

All in all, the death of third party cookies will see an increased need for creative solutions that promote online privacy within targeted advertising. It remains to be seen how much of this problem solving will fall on the advertisers themselves. It will be interesting to ascertain whether Google’s FLoC solution will have gained the industry’s trust by the time cookie laws change, or whether publishers and audience intelligence platforms will decide to find their own solutions, likely in the form of the ‘walled garden’ approach. The Drum reports that some believe that the race is on to build a leading identity solution beyond Google’s control.

Although Google’s discontinued support of third party cookies seems dramatic, the fact that they are being gradually phased out, rather than suddenly banned, allows time for advertisers to work out a plan of action. What is clear is that building up first party or securely ‘loaned’ data will be crucial in a post-cookie world. We can expect online privacy to become much more of a central focus – as the Drum notes, where a lack of privacy was once seen as the cost of using a free internet, today’s consumer demands more. Solutions must be forward thinking – appropriate not just for Google’s new cookie initiative, but for the privacy concerns of the future. Ultimately, we can see this new era as an opportunity to change the industry for the better, potentially making targeting more efficient while less invasive.

If you are concerned about the new cookie laws and would like to speak to an expert, please get in touch today. Relevance is here to help.

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