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DIGITAL STRATEGIES, PROGRAMMATIC ADVERTISING | READING TIME: 4 MINUTES | 12 JANUARI

The Cookieless Future of Programmatic and Display Advertising

Programmatic advertising has historically relied on cookies to ensure that the companies’ ads are shown to a relevant audience. However, privacy-related issues have pressured browsers to stop certain forms of cookies, leaving advertisers in a position where they need new strategies to accurately target their audience.

The web was revolutionized in 1994 with the introduction of the “persistent client state object” – a technology that enabled site owners to track new and returning website visitors. By downloading a small file to each website visitor’s device for future reference, it is possible to track user activities on the site. Later on, these small files came to be known as “cookies”.

Websites became “smarter” by remembering users’ login details and personal preferences like frequently visited pages, etc. Websites using cookies were able to provide suggestions to users based on their browsing history and interests. Cookies also provided the user with a seamless experience by allowing them to start off their session where they left off. In ad tech, cookies enabled website publishers to track users’ activities on the web. Gradually, cookies became primarily used for user personalization, session management, and tracking.

Digital Advertising and Cross-website Tracking Using Cookies

The digital advertisement world has greatly benefited from being able to use data collected using cookies to reach a more relevant target audience. Recently, incidents of data breaches have raised concerns and alarms amongst customers regarding how their data is being used. As customers became aware of their data being used without consent, many changes were implemented to prioritize customer privacy.

Several laws such as the EU General Data Protection Regulation (GDPR) and California Consumer Protection Act (CCPA) in the USA were brought into effect to regulate the collection of users’ personal data. Companies like Google and Facebook have taken measures to modify their data collection policy, one of which is limiting the use of third-party cookies on their platforms. It is believed that these changes will greatly impact the programmatic industry and display advertising.

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Let us discuss how cookies work and what role they play; this will help us to understand the future of the programmatic advertising industry, especially the one without cookies.

  • First-Party Cookies
    These cookies are created by the host domain that the user is visiting, and are supported by all internet browsers. These cookies are used to enable features such as shopping carts, usernames and passwords, language preferences, etc. These are also used by the website owner for calculation, page viewing, sessions, and the number of website visitors – overall improving the user experience. Only the host domain has access to the data collected by these cookies.
  • Second-Party Cookies
    This data is transferred by the host domain (the company that created the cookie) to another company under a data partnership. The aim of such a transfer is generally to enable ad targeting between brands that will mutually benefit from the information in the cookies.
  • Third-Party Cookies
    These are created by websites other than the one the user is visiting. They are commonly used through added elements such as plugins, chatbox, ads, etc. These cookies typically collect data in the form of type of device, user location, and user behavior on the website.

The Elimination of the Third-Party Cookie

Third-party cookies are created or used by domains other than those visited by the user, so there is seldom any transparency between users and whoever was behind the cookie. This could also mean that the user is unaware of their data being collected. Apple’s Safari browser in 2017 was one of the first to act on these concerns by introducing Intelligent Tracking Prevention, ITP2.2. Following these footsteps, Mozilla Firefox in 2019 introduced Enhanced Tracking Protection (ETP). Correspondingly, Google Chrome announced they would phase out third-party cookies over 2020 and 2022.

Google’s decision to drop the third-party cookie is predicted to greatly affect programmatic advertising, as Chrome alone holds 62% shares of the internet browser market. Some elements that will be gravely affected include behavioral targeting, as retargeting, ad retargeting, audience targeting, frequency capping, and view-through attribution.

Programmatic Advertising Without the Third-Party Cookie

Programmatic advertising has long been dependent on data collected from third parties for the purpose of retargeting, behavioral targeting, conversion tracking, and more. Scrapping third-party cookies will definitely affect the programmatic advertising sector. Following are some examples of how the removal of these cookies will affect several areas.

  • Publishers such as Ad Exchange and Supply-Side Platforms (SSP) have used third-party cookies to identify users on their websites but will have to shift to using other cookies.
  • AdTech Platforms that have used third-party data for a long time will be greatly affected by the lack of relevant users to display ads on the browsers. They will have to find a different approach for conversion tracking, ad targeting, and frequency capping.
  • Advertisers will have to rely on data and targeting from publishers, as well as to build proprietary databases

The Cookieless Future of Online Advertising

Strategies and target relevance in the programmatic and display advertising industry are seeing great changes as a result of the shift from third-party cookies. Alternate options will have to be developed to mitigate the absence of third-party cookies, some of which are listed below:

  • Building First-Party Data: It is a good idea for advertisers to acquire first-party data through CRM platforms, advertisers’ websites, in-app cookies, and foot traffic.
  • Contextual Advertising: Similar to traditional print advertising, advertisers can place ads on web pages based on the content of those pages. For example, an advertiser can place an ad for cooking equipment on web articles covering food cuisines or recipes.
  • Developing a Whitelist: In this method, advertisers can target specific domains, channels, and apps that might result in populating a website with the related ads.
  • Other Digital Channels: Search engine advertising remains a powerful way to communicate to a relevant audience since ads are shown for specific search terms. There are also other options like Connected TV (CTV), OTT, mobile apps, and Digital Out-of-Home (DOOH) mediums that can be used to efficiently reach relevant potential new buyers.

The New Paradigm in Online Advertising

As third-party cookies are phased out, programmatic and display advertisements will see a shift in methods for acquiring and targeting data. However, this will also bring in an opportunity to experiment and explore other options for ensuring ad relevance in the advertising world while taking user privacy and data security into consideration.