Sudden Death For Cookies (Finally)?

“The Sell Sider” is a column written for the sell side of the digital media community. 

Today’s column is written by Paul Cimino, president at Cimino Collaborative and head of data strategy at Prohaska Consulting.

I saw the vulnerabilities of cookies as far back as 2013.

In an article titled, “The Cookie Has Five Years Left Says Paul Cimino,” I called the cookie “a very weak computing mechanism.”

“They are flawed, invasive, have privacy issues and have to go,” I said. “I think it will take five years to kill cookies. At that point, it’ll be like birds chirping and flowers blooming, because we’ll find some kind of value proposition that allows consumers to trust us and opt into personalization. I term it, ‘tailor, don’t target.’”

I was a year off and wrong about the birds and flowers.

Google and Apple have each just tightened control of third-party cookies for Chrome and Safari users, making it more difficult for advertisers and companies that use deterministic and probabilistic cookies to track digital advertising behavior and performance across websites.

These changes signal the death of third-party cookies and could devastate programmatic advertising unless significant changes are made to the digital advertising ecosystem.

The cookie crisis

Over the past 10 years, increasing third-party cookie activity has created a mushrooming ad tech industry with hundreds of middlemen that farm, repackage and sell third-party cookie data. Meanwhile, there has been growing concern about data privacy and managing risk due to data breaches and government regulations, such as the European General Data Protection Regulation and the California Consumer Protection Act. Something had to change.

After years of talking about data privacy, Apple and Google tightened browser controls in the name of privacy, but they may also be hurting businesses that depend on third-party cookies to help themselves. Safari’s default setting doesn’t recognize third-party cookies, strengthening Apple’s position relative to all outsiders.

With two-thirds of the browser and ad-serving market, Chrome will now emphasize its first-party data and deemphasize third-party cookies, essentially creating a “data wall” around Google’s ad business and reducing the reach of third-party data and those who depend on it.

With Safari and Chrome collectively representing an estimated 77% of browsers, these moves will devastate third-party cookie makers, creating a crisis for all ad-tech businesses dependent on that data.

Life after cookies

Over the next year all third-party ad tech companies should pay very close attention to what happens to their data. The reduction of reach from Apple’s ITP move will be multiplied by changes to Google Chrome.

The degradation of traffic will depend on two things: users’ understanding of browser cookie controls and how aggressively publishers react. First-party publishers may change the classification of cookies from third party to first party to preserve revenue.

Cookie-dependent companies should study the cookie issue closely and map out a first-party data strategy.

They should build a first-party identity graph that involves multiple ID components and identity methods.

They should also invest in contextual advertising technology and use Amazon advertising services more aggressively.

For publishers, the value of their first-party data should increase. This could enhance revenue for companies that plan thoroughly. Publishers control how Google sees their third-party partners, so they may be able to shield third parties from Google’s wrath. This could be an additional revenue stream for smart pubs.

If these trends ultimately play out in the big tech companies’ favor, we could be going back to the days when the internet had a few large platforms – AOL, Prodigy and CompuServe – that acted as “walled gardens.”

The difference today will be that Google, Apple, Amazon and Facebook will be able to increasingly keep users within their own properties, and the open web will be minimized.

So what?

The death of cookies as we know them leaves the future wide open. And the future is promising, if we start working on alternatives that balance users’ privacy with the value proposition from consumer marketing and commerce.

But the open web needs an open data protocol and businesses with a value proposition that invites consumers to the marketing table. With a new alternative to cookies, AI and machine learning will finally be free to revolutionize marketing communication.

Let’s start brainstorming.

Follow Paul Cimino (@paulcimino), Prohaska Consulting (@TeamProhaska) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.