What the Third-Party Cookie Phaseout Really Means

TL;DR: Google has begun phasing out third-party cookies, starting with Tracking Protection for 1% of Chrome users, which will expand to all users by Q3 2024. This change is critical for marketers as it limits traditional targeting and tracking strategies that rely on third-party cookies. Marketers must now focus on first-party data, explore new technologies and platforms for targeting, and diversify their marketing strategies. Lotame, the end-to-end data collaboration platform, emphasizes its readiness for this change with cookie-independent solutions. The article highlights the importance of adapting to these changes for continued success in digital marketing and advertising.

Google Begins Phasing Out Third-Party Cookies: What You Need to Know

Can you believe it? Google has finally done it. On January 4, 2024, Google began rolling out a new feature called Tracking Protection to 1% of Chrome users globally, which restricts third-party cookies by default. This gradual rollout follows years of speculation and preparation, with the industry bracing for the eventual demise of third-party cookies. Experts predict the complete phase-out to happen by the end of this year, with Google already aiming to expand Tracking Protection to all Chrome users by Q3 2024.

Why This Matters for Marketers

The impending phase-out of third-party cookies is a crucial turning point for marketers, and here’s why:

1. Redefining Targeting Strategies: Marketers have traditionally leveraged third-party cookies to create targeted advertising campaigns based on users’ browsing behaviors across different websites. This change means that the conventional methods of tracking and targeting will be significantly limited. Marketers will need to shift their focus towards alternative targeting strategies that comply with new privacy norms while still effectively reaching their Yu audience.
2. Increased Reliance on First-Party Data: With third-party cookies on the way out, the value of first-party data – information collected directly from your customers and audience – becomes paramount. This shift will require marketers to invest more in direct customer engagement channels, like email marketing, loyalty programs, and customer feedback platforms, to gather valuable insights.
3. Exploring New Technologies and Platforms: The demise of third-party cookies will likely accelerate the adoption of new technologies and platforms for tracking and targeting. This includes unified ID solutions, contextual advertising, and developments in AI and machine learning for predictive analytics. Staying abreast of these technologies and understanding how to integrate them into your marketing strategy will be essential.
4. Diversification of Marketing Strategies: It’s more important than ever to diversify your targeting strategy, test different approaches and reduce reliance on any single solution. There’s no one-size-fits-all replacement to the loss of third-party cookies. At Lotame, we believe interoperability is key to filling different gaps and maximizing scale for both targeting and measurement.

Google’s move to phase out third-party cookies serves as a catalyst for a significant transformation in digital marketing. Marketers must be proactive in adapting to these changes, focusing on building direct relationships with customers, respecting user privacy, and embracing new technologies and channels for reaching audiences. This transition presents both challenges and opportunities to innovate and redefine the future of digital marketing.

Insights from Lotame

Alexandra Theriault, Chief Growth Officer at Lotame, points out that Google is somewhat behind in this game. “30% to 50% of the web already blocks third-party cookies in Safari and Firefox by default, yet this hasn’t led to a significant shift towards cookieless solutions from brands and agencies. Google’s 1% may not be the catalyst the industry needs.”

Eli Heath, Head of Identity at Lotame, adds, “This change affects only a small fraction of browsers. The real call to action is for the industry to intensify efforts in testing cookieless solutions, especially for Chrome, which remains largely unaffected. This is an opportunity to gain insights into the effectiveness of post-cookie strategies.”

Understanding Cookies and Their Role

Okay, so third-party cookies are going away. Does that mean all cookies are on the chopping block? Let’s back up a bit. To truly understand what the third-party cookie phase-out means, we need a solid understanding of the different types of cookies and their role in digital advertising. 

Not all cookies are the same. They vary in type and function. While all cookies are pieces of code saved by websites onto a user’s web browser, their uses – from tracking and personalization to session management – differ significantly. It’s the third-party cookie, which tracks users across different websites, that is currently in the spotlight due to privacy concerns.

What Third-Party Cookies Do

Third-party cookies are set by domains that a user doesn’t directly visit. This occurs when a publisher adds third-party elements to their website, such as ads, chatbots or social plugins.  

Once third-party cookies are installed, they track users and save their information. This information is used for behavioral advertising, ad targeting, and measurement. For instance, if a blogger adds a YouTube link to a blog post, and a reader clicks this YouTube link, then a cookie from YouTube will be added to this user’s browser. This YouTube cookie can track the user until it expires.

Google is phasing out third-party cookies to make the web more private and secure for users while also supporting publishers, though many are skeptical about this move.

What Other Types of Cookies Do

Different types of cookies, such as first-party cookies, session cookies, persistent cookies and secure cookies, do different things.

• First-party cookies: The website that a user visits sets first-party cookies. First-party cookies collect data for several purposes, such as calculating page views, the number of users and sessions. Publishers can share this data with agencies or advertisers for ad targeting. Analytics tools also use first-party cookies to understand a user’s behavior and present it for the publisher’s understanding in graphical or tabular form. 
• Secure cookies: Secure cookies are cookies with encrypted data that can only be set by HTTPS websites. Typically, e-commerce websites use secure cookies for payment and checkout pages to promote safer transactions. Likewise, online banking websites also use secure cookies for security purposes.
• Persistent cookies: Persistent cookies can remain on a user’s web browser for years. Publishers can use these cookies to track a user and their interaction with the website. For example, a web browser has persistent cookies if a user logs into Gmail, closes the tab, restarts their device, turns the device back on, reopens the browser, visits the Gmail account and is still logged in.  
• Session cookies: Session cookies expire quickly – either immediately or a few seconds after the user leaves the web browser. E-commerce websites use session cookies to keep a user logged in, remember a product placed in the cart and calculate user sessions for analytical purposes. If e-commerce websites didn’t use session cookies, items added to a cart would be removed before the user reached the checkout page.

The Shift Away from Third-Party Cookies

The three major browsers — Safari, Firefox, and Google Chrome — have made moves to restrict or eliminate third-party cookies. Safari and Firefox have already blocked them by default. Google Chrome, which holds a significant global market share, is now following suit, marking a pivotal shift in online advertising and data tracking practices.

What This Means for Businesses and Advertisers

If your marketing strategy heavily relies on targeted advertising using third-party cookies, it’s time to rethink your approach. Preparing your websites and advertising strategies for a post-cookie era is crucial.

The Role of First-Party Cookies and Alternatives

As the digital world braces for the end of third-party cookies, first-party cookies and alternative solutions are gaining prominence. Understanding these changes is crucial for businesses and advertisers to stay ahead in a rapidly evolving online environment.

Understanding First-Party Cookies

First-party cookies are set by the domain that the user is visiting directly. They play a vital role in enhancing user experience, including:

• Personalization: Tailoring website content to individual user preferences.
• Analytics: Providing website owners with insights into user behavior on their site.
• User Authentication: Enabling users to stay logged in on websites they visit frequently.

Unlike third-party cookies, first-party cookies are generally seen as less intrusive because they are limited to the domain that creates them. As a result, they are more acceptable under consumer privacy expectations.

Emerging Alternatives to Third-Party Cookies

With the decline of third-party cookies, several alternatives are emerging to address the gap, ensuring that user privacy is respected while still allowing for effective advertising and analytics.

• Google’s Privacy Sandbox: An initiative by Google to create a set of open standards for enhancing privacy on the web. Key technologies under this initiative include the proposed solution Topics API, which assigns broad interest categories based on browsing history without revealing specific sites, and Privacy Budget API, which empowers users to control data access for ad purposes. While earlier concepts like FLoC are no longer actively developed, the Sandbox continues to explore new approaches to balancing privacy with online functionality.
  
• Universal IDs: Solutions like Lotame Panorama ID create unique identifiers for users based on their first-party data. These IDs are then used across different websites, enabling targeted advertising without the need for third-party cookies.
  
• Contextual Advertising: A resurgence in contextual advertising, where ads are placed based on the content of the website or webpage, rather than the behavior of the user, is becoming more prevalent. This method respects user privacy while still allowing for targeted advertising.
  
• First-Party Data Aggregation: Companies are increasingly focusing on collecting and using first-party data, obtained directly from their customers with consent. This data is invaluable for personalized marketing and improving customer experiences.
• Seller-Defined Audiences: This concept represents a shift in how publishers utilize first-party data. Publishers gather data from their own sites – such as user interactions, clicks, and preferences – to create unique audience segments. These tailor-made groups are then offered directly to advertisers, giving publishers a more significant role in the advertising ecosystem. Unlike standard audience targeting methods, seller-defined audiences are built on direct insights from site visitors, offering a more nuanced and effective approach for advertisers.
• Privacy-Enhancing Technologies (PETs) or Data Collaboration solutions: These technologies enable data to be used in ways that protect individual privacy. Data clean rooms are a type of PET gaining lots of industry hype. These tools offer a secure, controlled environment that allows multiple companies or divisions within a company to combine data for joint analysis. Data collaboration platforms, like Lotame’s Spherical platform, combine some of the benefits of data clean rooms with more advance capabilities such as the integration of diverse data sources, access to advanced analytics, and the ability to activate insights across multiple channels.

  

Lotame’s Perspective and Solutions

At Lotame, we’ve anticipated these changes. That’s why we’ve created Spherical, the be-all-end-all data collaboration solution. Our platform empowers digital marketers to unite, analyze, and activate data for innovation and growth. With Spherical, digital marketers can combine data internally and partner externally for actionable customer intelligence, data informed audiences, and identity powered activation.

All of our data solutions are also underpinned by identity, independent of third-party cookies, positioning us well for the present and future. We marry deterministic methods and machine learning to deliver the scale and precision marketers need to reach consumers across the global open web. We accomplish this via our proprietary graph and award-winning identifier, Panorama ID. Together, they connect and unify data touch points such as emails, cookies, customer IDs, and device IDs to present a single view of a user that marketers can activate their own customer data on or use to buy targetable audiences across publisher inventory. No third-party cookies required. Discover for yourself how leading brands around the world are increasing cookieless addressability with Lotame.

Next Steps 

The shift away from third-party cookies is a significant moment in digital advertising and online privacy. It’s a complex transition, but with the right strategies and tools, businesses can navigate this change successfully. For more information on how Lotame’s Data Empowered data collaboration solutions can help you make smarter, faster and easier decisions with your data in this new era, contact us today.