The ecosystem for digital marketing and advertising may soon be undergoing a major transformation. For nearly a quarter of a century, data brokers, market researchers, and online advertisers have relied on third-party cookies to collect internet users’ digital footprints to build valuable market insights. But that may not be the norm for long.
While such a common, widespread industry practice has sparked some fierce debates over the ethics and legality of corporate mass surveillance, its proponents shockingly face a massive blow when Google, the largest industry facilitator, has finally relented to the other side.
On 14th January, Google announced that it will start phasing out the use of third-party cookies across its native web browser, Chrome. The initiative, known as Privacy Sandbox, outlines a series of open-standard measures that seek to make “third-party cookies obsolete” by further limiting the advertisers’ access to user information.
These measures will restrict the ad-tech companies’ abilities in identifying users and their behaviors across multiple platforms (cross-site tracking) at any stages of buyer’s experience (multi-touch attribution) and even based on their past online activities (retargeting).
Why does Google roll out the initiative in stages?
This clampdown against third-party tracking—following hard on the heels of online users’ demand for better transparency over how their data is used—is not the first initiative introduced to the browser market. Safari and Firefox have already instituted their own mechanisms against intrusive cross-platform tracking as early as 2017—partaking in a broader movement to enhance user privacy by making these changes as a default option.
However, unlike the steps taken by the other two browsers, the plan laid out by Google since August last year will take two years to go in full effect, according to Justin Schuh, the director of Chrome engineering. Such a gradual implementation is highly necessary to enact an effective ecosystem-wide change, as reported by the company.
Accounting for nearly 66% of the browser market, Google recognizes that taking drastic, immediate measures would tip the balance of the industry as most websites currently operate on an ad-supported business model. Undermining the current system in place can jeopardize the presence of smaller players and create a market monopoly. Ultimately, this will inhibit content diversity since most companies, by then, will lack the market capital and interest to deliver content with high-end user experience.
Such a decline in quality would definitely spell trouble for Google, which also operates the Internet’s largest search engine. Therefore, this initiative is important to foster a market ecosystem, in which publishers can still thrive and profit from programmatic advertising without neglecting the users’ concerns over data privacy.
How will the Privacy Sandbox shape the future of digital advertising?
To kick-start the initiative, Google Chrome will roll out new technologies that limit obscure cross-site tracking—starting from next month—by treating every cookie as first-party by default unless stated otherwise. To prevent cross-site information leakage, cookies labeled for third-party use must be accessed over a secure HTTPS connection.
These technologies also ensure that Google has provided adequate infrastructure support for publishers to operate their websites with greater transparency, from ad selection to federated authentication.
For instance, to protect data anonymity, the Privacy Sandbox mechanisms will shard highly sensitive web identities and store the user-level information exclusively in the browser without any option to export. Advertisers can only access this fragmented data via Google’s own application programming interface. This arrangement enables advertisers to obtain highly accurate information about their target demographics. It also assists them in gauging sales conversions without compromising the users’ personal information.
Likewise, the company develops new anti-fingerprinting measures—released later this year—to halt covert tracking or similar workarounds. Device fingerprinting is an intrusive method of building audience personas by gleaning user information from their devices’ specific and unique configurations.
The main criticism leveled at this advertising technique is that the consumers have zero control over the type of information relinquished to the advertisers as it is stored on the server-side. In contrast, cookies are stored on the users’ end and can be removed at any time by users themselves.
So how will these new measures impact on digital advertising, then?
The responses from the industry players so far have varied. Marketers that rely on first-party cookies haven’t been greatly affected. Meanwhile, those solely utilizing cross-site advertising strategies begin to recalibrate their business models to fit the changing infrastructure. We highlight there are four ways, in which market players will pivot their ad targeting strategies on this new environment:
1. The Rise of Contextual Targeting in Digital Advertising
With user data becoming increasingly less granular, the focus of advertising has started to shift from tracking down users’ online activities to figuring out what content they consume. Often known as contextual targeting, this advertising strategy enables marketers to target ads to users who visit or search keywords, topics, and websites relevant to their advertised products and services. It is important to note, however, that proximity and language play a crucial role in how contextual advertisements are catered to the audience.
Ad-tech companies with cross-site tracking verticals will stand to lose in this new environment as the avenues to glean user information across platforms continue to dwindle and eventually disappear. Soon, tailoring advertisements to consumers based on their online signifiers would become more cumbersome and less lucrative. For example, intrusive pop-up ads strewn across the Internet would be dramatically reduced as Google would actively delimit websites with such configurations. Consequently, ad-tech companies wholly reliant on third-party cookies must rebuild their strategies based on the contextual behaviors of the users.
Moreover, with a greater focus on contextualized marketing, advertising collaterals would predictably transcend the mere formats for digital branding. Departing from third-party data collection, advertisers must focus on capturing audience attention more effectively through heightened media experience.
Even better, with the rise of Internet-of-Things, companies now can integrate their digital forte to collect customers’ information while concomitantly elevating their buying experience. Check out the ad made by Amazon below, which showcases the company’s latest initiative in revolutionizing the in-store digital experience!
In 2016, Amazon successfully redefined online retail with Amazon Go, the first hybrid store that allows customers to enjoy hassle-free grocery shopping through automated payment and checkout process on a digital app. With greater demand for contextual targeting, we will see more companies emulating Amazon.
2. Content Marketing to Dominate the Conversation around Digital Advertisements
Sans cross-site programmatic tactics, the power of digital advertising would largely concentrate on the media owners and content creators. Under this new paradigm, industry players must rely on first-party audience insights provided by relevant marketing channels, either their own or those purveyed by others. These channels encompass websites, OTT media services, in-house software programs, among many others.
Within the current industry, however, some advertisers still craft their strategies around harvesting clicks and conversions generated by online users across the web. While this is significantly easier to perform, the measured results are less accurate. It requires advertisers to bombard the customers with content, even at the expense of quality.
Nonetheless, with the cookie crackdown in progress, advertisers must eventually forgo the practice. They need to conceptualize strategies that pivot around industry-specific goals and procedures. Such a migration would see a tremendous drop in clickbait content and other invasive advertisements. This, in the end, will help publishers generate impressions and data with better value.
The erasure of third-party cookies from the market ecosystem also spurs more cross-collaborations between publishers and advertisers. In other words, publishers will allocate more time and resources to provide high-quality, organic content to entice advertisers. To accomplish this, publishers must gauge their organic content in terms of traffic and engagement whereby they can auction off slots adjacent to their most visited pages to prospective marketers.
Additionally, SEO and SEM—the fundamental elements of digital content creation—will take center stage of the new advertising landscape. Marketers and advertisers alike will utilize these online tools to enhance their digital presence as they operate independently of cookies. The analytical data obtained from the optimization results will offer great insights into the audience’s varying media consumption patterns.
3. First-party Data Gains Greater Importance
As the backbone of digital advertising, first-party cookies will become more valuable for identifying market demographics. Unlike its third-party counterpart, the first-party data is primarily designed to enhance the user experience when visitors access the websites. It helps publishers identify the users to implement settings suited to their browsing needs.
Many publishers are already incorporating first-party cookies to execute their day-to-day operations. Those who haven’t will likely follow suit to assist them in collecting user-level information with better accountability.
With the ever-growing prominence of first-party cookies, we will see a rising trend of paywalls for premium content. Meanwhile, those with the ad-monetization model in place will employ registration requirements from visitors in exchange for their value offerings.
Currently, the market challenge lies in how publishers can remain privacy compliant when integrating first-party insights into their programmatic strategy. Internet users will likely push for greater transparency thanks to Google. The market for first-party data also transforms, in that the supply side will exert more power than the demand side. The sudden increase of advertisers in need of new marketing spaces is a contributing factor.
4. Marketing Agencies Reaffirm a Strong Foothold in Digital Advertising
There’s no denying that Google’s clout on the data market is massive. When the news first broke out, Reuters reported that the market shares of several advertising software companies dipped, including Criteo SA by 8% and Trade Desk inc. by 1.4%.
While Google isn’t likely affected by its own decision as it still relies on other means of data collection—primarily first-party analytics, including from YouTube, the sudden loss of market confidence indicates that the rest will be greatly affected. Google corroborates this with its own study on the pivotal role of cookies in digital advertising. The study analyzed the impacts of user tracking in 500 publishers. It finds that publisher revenue declined 52% on impressions sans cookies, with news publishers experiencing a sharp 62% drop.
But the absence of cookies can be a gold mine for some. Taking advantage of this change, some marketers have planned to consolidate their buying power to become premium publishers. They do so by converting their business models into walled gardens—a closed ecosystem where they have full control over applications, content, and media.
But switching to this lucrative business model isn’t always feasible. To help brands execute first-party data strategies, advertising agencies are often called in for negotiation and consultation. The market trend supports this conjecture. As reported by Adexchanger, Omnicom Media Group has managed to cinch more than 50,000 deal IDs across its clients.
The Future of Data Collection
Although Google’s decision to remove third-party cookies will disrupt digital advertising, some of these changes are inevitably for the better. For years, users have lamented the invasive nature of third-party cookies. They deem the lack of transparency in data transactions could potentially risk their online safety. But there’s a light at the end of the tunnel. Google’s participation has served as a wake-up call for other industry players to take the issue of privacy more seriously.
Of course, valid criticisms over market monopoly by big technological companies, like Google and Apple, still exist. After all, our extensive dependency on their technological offerings necessitates greater accountability and transparency on their end. Nonetheless, the announcement from Google is still a victory, albeit small, in the grand scheme of things.
But we are still hopeful that more tech firms will take great strides in a positive direction. Being less reliant on third-party cookies, companies in droves will realize the significance of quality over quantity in advertising strategies. In fact, some industry players are vying to reach the cultural prominence of tech giants like Google and Facebook. They are competing against one another to develop sophisticated and highly retentive advertisements to the market. Not only has this fostered a safer environment for online marketing, but it also stimulates more vibrant technological innovation.
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