Death of the Third-Party Cookie
The party is officially over for third-party cookies.
Eliminating the third-party cookie has been years in the making and will reach several big milestones in 2022 and 2023. Consumers and privacy advocates are celebrating this shift because it gives users more control over how their online data is collected and used, primarily for digital advertising personalization, but many marketers now find themselves in a precarious position.
Without the ability to rely on third-party cookies, many marketers are being forced to rethink their approach to reaching and connecting with consumers, which in turn can affect strategies for targeting, attribution and measurement.
So how did we get here and where are we going? What does your marketing team need to know to prepare for a world without third-party cookies?
Why the Third-Party Cookie Matters
Not all cookies are bad. Cookies identify and track internet users to allow marketers to personalize digital experiences. For example, when you log in and browse different pages on a brand’s ecommerce site, the website uses cookies to remember that you are logged in.
First party cookies get created directly by the website or domain a user visits. They improve the user experience by remembering things like login status, cart contents and user location. The website that owns this data can also combine it with other first-party data (e.g. from CRM systems) to build robust customer profiles that power personalized experiences. For example, a loyalty provider might combine rewards data with a customer’s birthdate in a CRM system to then send a personalized email with a gift on their birthday.
Third-party cookies get created by websites or domains other than what a user visits directly. They generally collect information for digital marketing and support integrations with tools like chat and ad tech. Ad tech platforms run code on websites that places a third-party cookie onto each visitor’s browser. These cookies identify a site visitor and the ad platform connects that person to the actions they take on the website, creating a valuable dataset that gets used to target each visitor across the internet (e.g. on Google and Facebook). These third-party cookies effectively enabled brands to reach shoppers that they weren’t previously able to reach by collecting user behavioral data tied to identity to serve them up as audiences to target in ads.
The use of third-party cookies has increased tremendously since the concept was first introduced, reaching the point of a nearly $20 billion industry built on top of third-party cookies that allows marketers to reach and target new customers on paid media channels. And because they have traditionally been subject to very little regulation (until recently), consumer information collected by using these cookies was often sold without any knowledge from the consumers themselves.
The Path to Eliminating Third-Party Cookies
A combination of both industry and regulatory trends that aim to tip the scales in favor of consumer privacy have contributed to the imminent death of the third-party cookie by 2023.
The most recent industry efforts, and those that have all but sealed the fate of third-party cookies, come from Google and Apple. In 2020, Google announced that Chrome (which maintains nearly 65% of the web browser market) would stop supporting third-party cookies in 2022, later delaying it to 2023. Shortly thereafter, Apple released iOS14 in 2021, which requires users to explicitly consent to Apple’s ad retargeting solution Identifier for Advertisers (IDFA).
At the same time, regulations like the California Consumer Protection Act (CCPA), California Privacy Rights Act (CPRA) and Virginia Consumer Data Protection Act (VCDPA) have granted consumers significantly more rights, such as understanding how their data is used and revoking permissions to use that data.
Against this backdrop, brands that rely on paid media to drive traffic to their website will see a serious impact to their marketing programs — if they don’t make the necessary changes. The death of the third-party is causing some brands to see upwards of a 30% reduction in attributed revenue for pixel-based retargeting audiences, while other brands are faced with rearchitecting their multi-touch attribution modeling to properly measure the impact of their digital marketing efforts. This reality has put the pressure on marketers and ecommerce teams to quantify the impact for their own brands and to create a new strategy without third-party cookies.
Long Live First-Party Data
The death of the third-party cookie will lead to decreased ecommerce revenue. Without the data to reach a wide audience of consumers to power personalization afforded by third-party cookies, marketers will struggle to hit their ecommerce revenue goals. In turn, this will put significant pressure on other channels like email and site personalization, as marketers are already seeing a decline in their digital marketing efforts to drive traffic to their site due to the declining ability of advertising channels to support this traffic.
Ultimately, there won’t be a silver bullet to replace third-party cookies or the reach that comes with it. But marketers do need to find a viable solution to effectively target consumers across channels, and most often that’s collecting data through first-party cookies, typically referred to as first-party data. Importantly, first-party data is future proof; it will always be available and is not subject to any upcoming regulatory or platform changes with regards to consumer privacy because first-party cookies are a tool to help brands build direct, consenting relationships with their customers.
Moving forward without third-party cookies requires brands to dramatically rethink performance marketing as we know it today. Marketers will have to evaluate whether or not their current strategy to reach shoppers is reliant on advertising channels to drive traffic to their site and whether or not they will need to re-evaluate their approach to keep up with an environment where shoppers are now mainly shopping online. Two important areas of focus will be:
Attribution and Personalization
Most brands do not have a sufficient direct replacement for the digital advertising attribution models to accurately measure the performance of their ad programs or extended reach of personalization to drive more engagement and revenue afforded by third-party cookies. That will leave most marketers taking a step backward to the earliest days of ecommerce and digital, relying on generic historical data rather than highly nuanced predictive data (the latter of which looks toward what will happen next to grow revenue and deepen relationships versus simply repeating what has already happened to maintain the status quo).
In response, brands should look for a solution that can advance both measurement attribution and personalization beyond what they were able to achieve with third-party cookies. This approach should center around technology that has a deep understanding of first-party data and can power more forward-looking campaigns across channels, such as those that drive long-term profitability through repeat purchases.
First-Party Data at the Core
The ability of a digital team to cost effectively generate new business and drive repeat purchases without third-party cookies will depend on how easily and efficiently they can support the shift to opt-in first-party data. Unlike third-party data, where going broad was possible, first-party data requires going deep to discover insights and drive more than double the performance. Notably, this approach uncovers more opportunities for retention by enabling marketers to develop deeper relationships with existing customers that lead to more loyalty and more frequent and/or higher value purchases. As a result, retention is the most important lever to accelerate digital growth and protect the business long-term (versus acquisition, which creates an expensive one-and-done buyer problem for brands). Relying on technology and AI will be key to making sure this doesn’t become a people intensive operation, especially for each communication channel.
What’s Next for Your Marketing Team?
The death of the third-party cookie will have a significant impact on how ecommerce marketing teams approach both acquisition and retention. But it doesn’t have to be a bad thing. Rather, the teams that can capitalize on the opportunity to use first-party data will be well positioned to exceed their goals and even surpass their previous benchmarks.
Interested in learning more about what it takes? Click here to schedule time to speak with us and discover how you can empower your team to take advantage of this new era of commerce.
