Third-party cookies have been the bedrock of retargeting ads for over a decade now, with Facebook, Google, and Amazon all using them for their retargeting ads.
If you are not familiar with retargeting ads, they are online ads targeting consumers based on their previous internet behavior. For example, suppose a customer abandoned a product in a shopping cart. In that case, a company selling the product can present it to them again while they're browsing the internet, searching in Google, or checking their Facebook.
As you can see, these types of ads are very useful and effective because you are only targeting consumers that have already shown some interest in your product/service/company.
Times Are Changing
People are demanding that their online privacy be protected, and third-party cookies (used by retargeting ads) seem to be the focus. While there are legitimate concerns with online tracking and the role third-party cookies play, it is forcing many businesses to rethink their advertising strategy.
That being said, before we can discuss the real impact of eliminating third-party cookies, let's first review the difference between a standard (first-party) cookie and a third-party cookie.
What Are Cookies?
A cookie is a small piece of data stored in your browser to record browsing activity, for example, which website pages you've visited. Also, they can help pre-populate some form fields (e.g. name, email, etc.).
As you can imagine, a website that remembers where you left off or pre-populates form fields is helpful, and most privacy advocates are not concerned with these first-party cookies. However, they are concerned with third-party cookies; so what is the difference?
What Are Third-Party Cookies?
Third-party cookies are a lot more powerful because they track users across multiple websites and gather long-term browsing history. For example, when you view a product on Amazon and then find it following you around the web, those are third-party cookies at work. But Amazon is not the only company using them. Many publishers, social media sites, and search engines use them.
A Public Fight
One very public fight over third-party cookies is between Facebook and Apple. More specifically, Safari's latest browser is blocking all third-party tracking, seriously affecting Facebook's retargeting ads. For example, without third-party cookies, it will be harder for an advertiser (e.g. small business) to run Facebook ads only targeting people familiar with their business/product/service. Obviously, this will make Facebook retargeting ads less effective, diminishing their value and ultimately decreasing Facebook revenue.
For Apple, this is a user privacy issue, but for Facebook, this is a core business issue.
The Impact On Small Businesses
Facebook retargeting Ads are just one example, but any advertising platform that relies on third-party cookies (e.g., Google Adwords) will undoubtedly be impacted. Simply put, a successful ad is a relevant ad. Therefore, the more information you have on a potential customer, the more relevant you can make your offering, product, service, or promotion.
For example, most businesses will run at least two advertising campaigns, one targeting potential customers and one targeting existing customers.
As you can imagine, if you lose the ability to differentiate between potential customers and existing customers, you lose the ability to target them with different offerings. Also, without third-party cookies, you may unintentionally advertise a product to the customer that just purchased it - most people find this infuriating.
The Impact On Publishers
Many of us find display ads irritating, but for numerous publishers (newspapers, blogs, etc.), they are a lifeline and the only reason they are still in business. Without question, eliminating third-party cookies will make retargeting ads less effective; hence, advertisers will pay less to display them on the publisher's site. Possibly forcing many to adopt the paywall business model.
The World Without Third-Party Cookies
As mentioned earlier, Safari is already blocking third-party cookies, but Google is now moving towards eliminating them as well (Chrome browser). And considering Chrome is the most popular web browser in the U.S., this move is significant because it will mean more than 50% of web users in the U.S will not be tracked by third-party cookies.
In a nutshell, we are certainly moving towards a world without third-party cookies. However, the need to track user activity online will never go away. Retargeting ads are just too important to advertisers, so it is only a matter of time before third-party cookies are replaced by alternative technology.
Google is already moving in a new direction with the latest open-source standard. Here is an insert from Google's article on the subject "..we announce a new initiative (known as Privacy Sandbox) to develop a set of open standards to fundamentally enhance privacy on the web. Our goal for this open source initiative is to make the web more private and secure for users, while also supporting publishers."
While this type of initiative will help Google and their advertising platform, we are not sure how useful this will be to Facebook and other platforms reliant on retargeting ads.
From the user privacy viewpoint, eliminating third-party cookies is a step in the right direction because many large advertisers and platforms took user tracking too far. However, countless small businesses depend on retargeting ads to drive their sales, especially when we consider that more and more organic content is squeezed out by paid ads. Requiring many small businesses to adopt the pay-to-play model.
We certainly don't think retargeting ads will disappear. However, this transition period (from third-party cookies to a new method/technology) will unquestionably make many advertising campaigns less effective. This is all bad news on the surface, but many businesses will look at this as an opportunity to improve their existing ads. Also, the less competition there is for ads, the less expensive they will become.
Lastly, digital marketing, social media, and online ads are still some of the most effective ways to grow your business, and eliminating third-party cookies does not change that.
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