What Are Cookies?
Let’s start with the basics, what are cookies? Why does one constantly have to accept or deny cookies to visit websites? Let’s break it down a bit.
First off, there are two different types of cookies: First-party cookies and third-party cookies. First-party cookies are files that are created by websites that a user visits. They save browsing information to remember preferences (improving UX), keep users signed in, and in cases, give relevant information based on location; this is also used to improve user experience. These cookies come from sites that the user visits of his/her own volition.
Third-party cookies are created by websites or domains that are different from the one the user is visiting. These are generally used by advertisers and social networks, to monitor a user's online activity and for behavioral targeting and personalized marketing. Cookies are important to advertisers because the data they obtain from users translates directly into sales as it allows them to market more effectively and accurately to their audience. In recent years, advertisers have come to rely on data from third-party cookies.
How Third-Party Cookies Work
Third-party cookies are placed within another host website via scripts or tags. They are accessible on any website that loads the third-party server’s code. This allows users to be tracked across multiple sites, so that the cookies can amass a greater amount of data about a user that would be impossible to generate if based on only one site visit. User profiles can be created from third-party cookies to deduce how to present ads to users in the most effective way, i.e. a social media feed or a sidebar advertisement or a video, and much, much more.
Privacy Concerns Threaten Cookies
The future of third-party cookies to collect data is in question as more users are concerned about their privacy online. According to a dentsu.com report, worldwide, “91% of consumers are concerned about the amount of data companies can collect about them, and 42% have taken steps to reduce the amount of data they share online.”
Concerns over privacy, while not new, are growing and with general distrust and unease surrounding data harvesting gaining momentum, there’s been a rise in technology platforms that limit data collection from cookies. Apps such as Jumbo and Disconect.me make it easier for users to control their privacy on platforms such as Google and Facebook. In addition, platforms themselves and governments are promising limits around data collection from third parties. For example, Europe has recently passed The General Data Protection Regulation (GDPR), the toughest privacy and security act in the world thus far. The reach of the law extends across the globe to any company that is targeting or collecting data related to people in the EU. The GDPR threatens fines of millions of Euros to those who violate the law. The popular tide is turning against advertisers who depend on third-party cookies to sell items.
Changes to traditional cookies and marketing leave marketers navigating unknown territories as they try to find other ways to collect data, connect with clients and would-be-clients online, and drive sales. The inevitable reduction and perhaps even total removal of cookies from online data collection is not, however, something that would spell the demise of brands or targeted advertising. Companies are positioning themselves to own both advertising inventory (i.e. space for sale for advertisers) and their own first-party data. This will mean that future or existing laws and regulations that target third-party cookies will less impact these highly prepared platforms. Google is one such organization that is well-positioned with diversified assets and a treasure trove of first-party data.
Although the goal of collecting data is to understand consumer behavior and influence it to drive sales, this must be met with trust from the user or client. This is why first-party cookies will continue as the foundation of data collection in a post cookie world. There’s a level of trust built into first-party cookies, it’s information that users have acknowledged sharing and brand that users have willingly engaged with. Based on first-party data, predictive modeling can use machine learning and AI to disclose patterns and traits that may influence buyers to make further purchases.
Brands will look for new ways to use their first-party data to reach current customers and they will seek out the platforms that can help them manage the customer relationship management data already in their possession. These brands will have the greatest rate of success as the world transitions away from traditional third-party cookies as a data source.
Locked Environment Browsing
Another possible workaround to the phase out of third-party cookies may be to permit users to access a site only via a login. This change would represent a major shift for users who are accustomed to accessing information without knowingly sharing their identity. This type of access has long been accepted on platforms such as Facebook and Instagram, because of the social nature of the sites (to show you your feed, Facebook has to know who you are) but less so in sites such as news and shopping, where browsing anonymously is generally permitted. If this type of browsing takes off, then there will be new relationships to cultivate between publishers, consumer sites, and advertisers.
Another plausible solution is Google’s Federated Learning of Cohorts (FLoC) which is part of Google’s Privacy Sandbox. FLoC is a third-party cookie alternative that uses in-browser interest-based advertising. It uses device-only processing to keep web history private on the browser and individual data becomes part of a larger pool of data, safeguarding personal privacy. This solution, however, is still in process and tweaks will need to be made to adequately protect privacy and appease advertisers.
Value and Education
While some marketers are struggling to adapt, others see the backlash against third-party cookies as an opportunity to create holistic, trustworthy relationships between brands and their audience. Much of this will involve educating consumers as to how their data is being used (and how it is not being sold or manipulated). It must also hinge upon consumers feeling empowered to decide, or not, to share their information and if they do so, they should feel adequately compensated. Consumer permission will be part of the future of data.
Building Brand Trust
Once a level of trust is established, brands will still need to use blended approaches to how they collect data and market to consumers. Brands will employ a broader range of data sources and leverage technologies such as machine learning to discover consumer interests, patterns, and needs, without the invasive third-party cookie approach. These combined fronts will help ensure that a brand’s advertising campaigns are effective, while better safeguarding privacy and respecting laws.
Over time, the trust established between clients and brands will usurp the importance previously placed on third-party cookies to personalize marketing. Relationships will be of better quality and trust will help enable targeted marketing and product recommendations with a foundation of confidence and brand loyalty. Leading industry expert, Carl Carter says, “The industry is moving towards a ‘first-party identity resolution’ approach to tracking users across touchpoints, which is centered on trust because the data comes from consumer permissions.” In an example of how platforms will be complying with new regulations and backlash against data breaches, he cited Apple’s iOS14 system that will allow users to control their data sharing app by app.
As with all changes, those who can adapt and pivot quickly will be poised to thrive in the latest chapter of the still relatively young and exciting world of digital advertising. Acknowledging and protecting users’ rights to privacy are important, positive shifts in online advertising and stand to improve client and brand relationships.
If you're looking for a nearshore Digital Marketing partner with software development services, or a technical staff augmentation service, Pixel506 can help. We are located in Costa Rica but also have Pixelians (team members) based in Peru, Nicaragua, and Colombia. We help businesses gain a competitive advantage and exceed business goals through software development, design, user experience strategies, data, and innovative solutions. Founded in 2009, we have over a decade of experience helping big, medium, and small companies succeed in the digital world. Contact us today to see how we can help―we look forward to getting to know you and your business over a digital cup of coffee.
- Third-party cookies are generally used by advertisers and social networks, to monitor a user's online activity and for behavioral targeting and personalized marketing.
- Concerns over privacy, while not new, are growing and with general distrust and unease surrounding data harvesting gaining momentum, there’s been a rise in technology platforms that limit data collection from cookies. In the near future, advertisers must find solutions to collect data without the use of third-party cookies.
- Changes to traditional cookies and marketing leave marketers navigating unknown territories as they try to find other ways to collect data, connect with clients and would-be-clients online, and drive sales. The most successful businesses will find new solutions and ways to collect data.
- First-party cookie data will continue to be important. Based on first-party data, predictive modeling can use machine learning and AI to disclose patterns and traits that may influence buyers to make further purchases. Other solutions will arise such as Google’s FLoC, but need finetuning.
- In the end, digital marketers will use multifold approaches to connect with consumers in ways that feel less invasive and develop a deeper sense of trust between consumers and brands.