How the digital advertising ecosystem will revolutionize without cookies

The elimination of cookies will result in the entire digital advertising industry experiencing an unprecedented (r)evolution over the next two years. What will cookies look like at the beginning of 2020? How will online marketing be organized without them? What will the alternative proposed by Google look like? Pierre Berendes of Gamned! shows: a new economic paradigm is emerging!

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Cookies are going through a difficult phase. They have been the target of public freedom advocates on the Internet for five years. A situation that benefits the big companies of the online industry - the famous GAFAs (Google, Apple, Facebook, Amazon) - as they ban them from their browsers in return. Google announced it in mid-January: within two years there will be no more cookies on Chrome. But Firefox and Safari have already made the same arrangements in 2013 and 2017. What new scenarios may then arise for the online advertising industry and for consumers?

First, a few facts: When browsing the web, cookies record several pieces of information to help the user navigate. There are session cookies that disappear when the browser is closed, permanent cookies that allow the user to avoid re-entering the login and password; and finally, the famous third party cookies. The latter are the most numerous nowadays ... and the most exposed to the upcoming changes and online advertising use.

Today, there are probably several hundred cookies stored on every computer. They come from media providers, ad servers, social networks, programmatic advertising platforms like DSPs, ad verification, ad safety, attribution, retargeters, contextual targeting professionals, and so on... Without third-party cookies, Internet users become anonymous and untargeted for ad distribution tools. They are therefore indispensable for marketers as they are used to compare, share and monetize data.

 

Opening the hunt for third party cookies

The situation could not last. Third party cookies need to disappear from the ecosystem. Google has it announced loudly on January 15 and takes two years to remove cookies from its browser (Chrome), which, mind you, has a 65% market share. Google is only following in the footsteps of the other browsers that were the first to go in this direction. Mozilla started blocking third-party cookies on Firefox back in 2013. The latest Firefox version shows users how many trackers they are following on a website. Best of all, it automatically disables third-party cookies via its Enhanced Tracking Protection (ETP) technology. That's more than 10 billion cookies per day, or 175 daily per user.

Other browsers have also strengthened their tools to protect users. In 2017, Apple released its Intelligent Tracking Prevention (ITP). Since then, cookies have become "persona non grata" 24 hours after visiting a website. And so-called "persistent" cookies are disposed of after seven days. Not easy, even for Facebook, which records its advertisers' conversions in a 28-day window, or Google Analytics, which keeps them in the browser for up to two years. Recently, Safari stopped sharing details about the URLs of websites visited.

As a result, it is impossible to target an Internet user. But Internet users should not be mistaken: This programmatic disappearance of third-party cookies does not mean the disappearance of advertising - quite the opposite. This ongoing eradication reinforces the dominant position of GAFAs. They are sucking up data and gradually shutting down third-party tracking streams. Convenient to establish their dominant position and better lock Internet users into their ecosystem.

Will consumers be the winners in this change? Unlikely: Cookies will be sacrificed in favor of privacy, but they will be replaced by proprietary platforms that will be much more opaque. There will be an additional layer to an already complex ecosystem of advertising technologies to enable targeting that is very similar to third-party cookies.

 

Google Chrome locks the doors

What consequences will the absence of third-party cookies on Chrome have for players in the digital advertising ecosystem? Retargeting, which relies heavily on these cookies, will be impacted immediately. Restrictions on third party cookies will also prevent DSPs and DMPs from syncing. Independent attribution providers will suffer significantly. By making it easier for users to delete or block third party cookies, many providers will have to find new solutions or risk disappearing.

But what will Google actually do? Google will take two years to clean Chrome from these parasitic cookies. It is foreseeable that many initiatives will be launched to replace the current cookie technologies. A movement that Google intends to accompany, if not orchestrate. Google is already one step ahead with its API, Privacy Sandbox project, an open standard that will continue to allow publishers to monetize their websites. Only on the day that this alternative will come into force will the cookies disappear; not before. The first information filtered out is not positive for independent vendors and marketers: an exit is foreseeable for DMPs, multipoint attribution, third-party data or post-view tracking. But it will still be possible to measure conversions by tracking clicks. Targeted targeting will also become more difficult.

If a cookie does not belong to anyone, Google's proprietary solution that replaces cookies will certainly rely on Google's internal ecosystem. Google, moreover, does not need cookies for its tracking, since there are already Google code parts on most websites. So who, other than GAFA, will access this privileged data - the so-called "first party" data? The publishers. They are the ones who will take over. But before that, they must be given time to establish a viable business model, or the ecosystem could go bust.

On the other hand, Google must be careful not to circumvent the antitrust laws that have already cost them billions of dollars in fines. A complex equation to solve. The two years Google has given itself will not be too much to do this!

 

Regulation that favors the GAFA

Facebook, Amazon and Google are not affected. Why not? Their advertising systems are based on permanent, proprietary cookies that are required for users to use their services. The necessary user consent is obtained de facto automatically and without wastage. This will strengthen the position of this triple alliance, which already generates almost 75 percent of advertising revenues in Europe. The independent providers who are committed to an open Internet will have to pay the price. The GDPR has already significantly reduced the use of third-party cookies. It has thus strengthened GAFAs, as they have a direct relationship with consumers. Data will no longer come out of their "closed gardens" (walled gardens).

Nicely paradoxical, if we consider that the purpose of these regulations is to limit the dominance of American, technological platforms while protecting consumer privacy. By eliminating the cookie, Google, Amazon and Facebook become even more powerful.

There seems to be no doubt that the likely elimination of third party cookies will lead to lower programmatic revenues in the short term. To assess the future value of advertising inventory under this emerging paradigm, a media provider need only measure the performance of its audience on Safari, where third-party cookies are already absent. The price is divided by a factor between 2 and 3. A Google study foresees a 62 percent drop. In any case, it will be a lot of lost revenue.

 

The emergence of proprietary cookies

There is a real opportunity for media providers to extract more value from their visitor data. The disappearance of third-party cookies means that brands and publishers need to get closer to consumers. Therefore, they should gradually deploy their proprietary identifiers. The smaller the publisher, the more they rely on Third Party Cookies. Without third party cookies, these small publishers will have to integrate into mergers of proprietary cookie consortia or adapt to unified authentication solutions in the future. This is already happening with the unified login shared by Tamedia, Admeira, CH Media and NZZ in Switzerland, the ID Alliance in Germany, the Nonio project in Portugal and Geste's future PassMedia in France. The flip side of the coin is that it will be mandatory to identify yourself to each provider at least once a month. The good news is that the disappearance of cookies will make the relationship between publishers and their readership much more valuable via subscriptions and behavioral data.

In the long run, the proprietary cookie will provide the expected benefits to publishers and allow them to efficiently control their monetization in both subscriptions and advertising. It is time for all independent players to come together to strive for a single, independent solution to balance the GAFAs.

 

The key to the future: consent, not data

The documentary on Netflix, "The Great Hack" about the Cambridge Analytica scandal, was enlightening for many. The end of cookies is reshaping the digital marketing ecosystem, including how brands interact with customers. The new "black gold" is no longer data, but user consent.

Ownership of brands' user data is already dead, though we may not have fully realized it yet. In today's world of third-party cookies, data collection is essentially invisible. Users browse while cookies track their activities behind the scenes. Today we have data, but not actual user consent. From now on, this will be the new law: no data without consent! No, this is not the end, but just the beginning of a new story.

* Pierre Berendes is Managing Director at Gamned!

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