The Swan Song of Third-Party Cookies: What Do We Hear in 2023?

How Google phases out support for third-party cookies resembles how James Cameron filmed Avatar 2. There were multiple delays and more than a decade of waiting until both the publisher and the movie world were ready. 

But is the world of advertising ready for the planned death of third-party cookies by the end of 2024? Since it’s the second delay in a row, it seems that Google aims to give the ad industry enough time to prepare for it. 

Why the wait? Why is it even a challenge to get rid of third-party cookies? How do these hold-ups affect ad businesses? Let’s try to figure it out.

While first-party cookies store your data to make the user experience faster and easier, 3rd-party cookies are used solely for advertising purposes. These web cookies allow the ad software to retarget potential customers with personalized ads as they surf the web.

With that, you might’ve already guessed what’s the controversy here. The users don’t like when someone messes with their privacy and spams their screen with ads. The ad business requires third-party cookies as it’s one of the pillars of digital advertising.

To clarify things, here are some of the main reasons why the cookie-land exists.

Publishers depend on third-party cookies less than advertisers, but their addiction is still unhealthy. Some reports state pubs could lose up to $10 billion due to cookie death. Why? Publishers heavily rely on data sharing to fill ad inventory.

Advertisers make the most of third-party cookies, benefiting from targeting and optimized conversions. According to a global survey, in 2021, 51% of senior marketers use third-party cookies as their main data source. 

Cookies have been a part of the industry for a very long time; the very concept of programmatic advertising relies on third-party data. Without them retargeting, frequency capping, and measurement will either become more difficult or require a new approach.  

Personalization has its benefits for regular visitors as well. For 90% of the users, irrelevant ads are "annoying." For 53%, irrelevant ads are the top annoying things in their web surfing. So if a user sees an ad, it'd better be relevant.

So what's the deal with third-party cookies, and why does the Internet want to eliminate them that badly?

To be completely honest, cookies are only a part of the global problem. A huge chunk of US consumers have trust concerns regarding how their data is protected.  Not only do third-party cookies contain sensitive information, but they are also vulnerable to different exploits and personal theft.

Moreover, 71% of consumers agree to share data to improve their experience, and 51% are uncomfortable sharing third-party info, like what sites they visit. The market aims to please the trend for user privacy, and in a world like that, there is little place for third-party cookies. 

Imagine buying a toaster on the web. You browse different websites and watch reviews to buy the toaster of your dreams; once you buy it – your demand for toasters is closed for several years. At least, you think so. That little banner at the bottom of each web page you visit will disagree.

Third-party cookies are often irrelevant in advertising, as they can’t give the marketer a bigger picture. In 2023 annoying toaster ads are outdated, and both the users and advertisers understand that. 42% of Internet consumers having an ad blocker installed only proves the point. 

Modern users switch from device to device multiple times during the day, but third-party cookies are only capable of storing information on one device. So despite having the same Google account on both mobile and laptop, you won’t get the same ads.

As a result, everyone suffers. Advertisers get incorrect view performance, publishers' ad inventory de-values, and users see outdated ads. 

History of Delays

Elimination of third-party cookies is a slow process that started years ago. Firefox has blocked third-party cookies since 2013; Safari did this completely in 2020. But Google Chrome holds 66% of the desktop browser share, so the funeral only starts when the big browser brother decides so.

Initially, Google planned to phase out third party-cookies by Q2 2022. In June 2021, Google postponed it to 2023, and in a year, we have the final (we hope so, at least) hold-up along with the approximate date – the second half of 2024. 

Why the delays? Well, officially, we have a blog post from Anthony Chavez, Google's VP of the Privacy Sandbox, stating: 

"The most consistent feedback we've received is the need for more time to evaluate and test the new Privacy Sandbox technologies before deprecating third-party cookies in Chrome."

If we dive a little deeper, we'll see how far the root of the problem actually lies. 

As 81% of companies depend on third-party cookies, some speculate that Google will never really phase them out. But these claims have little grounds to be true. 

Firstly, Google is actively working on its Privacy Sandbox – a system that should ultimately cover the need for cookies (at least everyone hopes so). Secondly, it's not just browsers preparing for the death of third-party cookies. 

In October 2019, the Court of Justice of the European Union made active consent obligatory for tracking cookies. According to the new GDPR ruling, a website can't apply tracking or analytics to a user unless they tick "agree to all cookies" beforehand.

Companies that shifted away from third-party cookies have prepared themselves for the inevitable. While they may experience inconveniences due to delays, we can only congratulate them. The situation is different for those who did not.

Bidding farewell to third-party cookies is not as easy as it may sound. By the start of 2023, 55% of companies are not ready to say goodbye. 42% of them expect lower ROIs and worse campaign efficiency management. The best-prepared countries are Italy, Spain, and Brazil due to their tight privacy regulations.

Most advertisers and publishers have these particular challenges to overcome:

The majority of demand-side platform do not support people-based identifiers. 73% of companies state they can't get the required data with their current tools. 60% of them lack proper data management as well.

Only 38% of marketers are confident that their data systems could win and retain customers. Solely 11% of respondents said that data is readily accessible to them.

The heavy reliance on third-party cookies messes up acquiring customers in new ways. But 44% of advertisers lack proper funding to do that, with 55% lacking access to data silos.

44% of marketers expect to increase their spending by 5-25% to cover the gap that the cookieless world brings in 2024. 

But not just the data and technologies concern advertisers so much. Say "Hello" – to Federated Cohort of Learnings(FLoC), Google's first-born alternative to third-party cookies. It was first introduced in 2019 as a part of the Privacy Sandbox project. 

The concept is simple – the algorithm anonymously groups people with similar interests into cohorts shared with advertisers afterward. However, testing has shown that despite the company's efforts, FLoCs were vulnerable to reverse-engineering that makes the user deanonymized.

Naturally, this resulted in a delay as Google evolved FLoCs into Google Topics – a successor to FLoC that has a similar concept but works differently (don’t worry, we’ll explain how a bit later). Along with this system, Privacy Sandbox includes FLEDGE, Attribution Reporting API, and CHIPs.

Testing all of these takes time. Moreover, there is a growing concern that the death of third-party cookies will only benefit Google, making its walled garden the only place to go for most brands. Being infamous for wanting power, Google has committed to the Competition and Markets Authority(CMA), UK's anti-monopoly watchdog. 

Thus, they can only release Privacy Sandbox when CMA approves that there are no competition concerns. 

All of the above takes a lot of time, so delays are natural. But the vengeance will come upon third-party cookies. If you are a brand or a publisher, postponing the cross towards alternatives is foolish. 

The main issue is that there's yet to be an obvious alternative. Among the available options the ad industry has:

With around $600B spent on digital ads in 2022, 77% of revenue accounts for the world's largest "walled gardens" that belong to Google, Facebook, LinkedIn, Amazon, and TikTok. This is great for advertisers, as these systems can provide them with first-party data and cross-device targeting.

As for publishers, 71% think they need to be in higher priority while working with walled gardens. 51% of publishers consider walled gardens to be their most significant competitors.

Universal identification is a concept where multiple sources of information about a user merge to create a single user identifier. Of course, the data is anonymous and can be passed onto approved partners through a supply chain. LiveRamp, TradeDesk, DigiTrust ID – this solution has many pioneers.

As wonderful as it may sound, most of these systems rely on first-party data; thousands of publishers and advertisers must systematically collect and share user data. Furthermore, nobody knows if Google will support universal IDs and how that will work with Google's Privacy Sandbox.

Zero-party data is information that the customer intentionally shares with the brand. While first-party data comes from the user's activity, zero-party data could come from surveys and polls.

The great thing about zero-party data is that it all comes voluntarily with the expectation that providing it will give them a better user experience. With information like that, you don't have to question the source, worry about covering cross-device usage or doubt its accuracy. It's a win to win for both parties.

What’s better,  if you’re a publisher that decides which ads to show up, you could potentially use zero-party data for targeting through an ad server. Another win, but this time for publishers.

Forbes calls it "the new oil," and it's hard to disagree. Collecting zero-party data is a no-code task involving quizzes, surveys, forms, and more. It has to be engaging, creative, and benefit the user. 

Google's alternative for cookies determines topics representing your top interests for the week based on your browsing history. Topics are kept only for three weeks and stored entirely on your device without involving extra servers(even Google's). 

When you visit a resource, Topics picks just three topics, one topic from each of the past three weeks, to share with the site and its advertising partners. 

The hasty cat makes blind kittens, and we can't say postponing third-party cookies' death is necessarily bad. 

Yeah, there is no universal alternative for publishers and advertisers; Google constantly changes its course to apply the industry and the law, while users are thirsty for more privacy. Third-party cookies have been a part of the Internet for a long time, so the chaos surrounding their elimination is unsurprising. 

We can only advise procrastinators: "Start acting now." The wind of changes will probably ruin a lot of companies, so it's better to be prepared. Good luck!