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Back in the 1990s when websites were struggling to remember who their users were–or what they did in previous website sessions, Lou Montulli, a 25 year old network engineer at Netscape, invented the HTTP cookie which today is simply known as cookies. Cookies have now become an inevitable aspect of the Internet, helping businesses accomplish a wide variety of purposes.
Montulli set out to solve a widespread problem of the early web: Websites needed a mechanism to better remember their visitors. Whenever a user loaded a new page, the website would treat them as a stranger. There were many uses for giving browsers a “memory,” such as shopping carts, personalized content, logins, and other interactive features that would take advantage of such a memory.
Montulli considered a range of potential solutions before settling on the cookie, as he explained in a blog post. Ironically enough, he never meant cookies to track and target customers with ads across the Internet. Within two years, advertisers learned how to hack cookies and do precisely what Montulli had tried to avoid: follow people around the World Wide Web.
Third-party cookies have benefited brands for decades. Today, the digital advertising industry is worth over $600 billion, and Montulli’s cookies are responsible for a large part of that growth.
Third-party data is quickly becoming second-class. In great response to user privacy concerns, Apple Safari, Google Chrome, and Mozilla Firefox have all announced their desire to phase out support for third-party cookies in their web browsers. The impact on the digital ecosystem will be profound.
Google’s answer is called the Privacy Sandbox. The premise behind the Privacy Sandbox is to allow individual user data to remain in the browser instead of allowing ad tech and ad agencies to control and sell the third-party data. The goal is to allow for privacy but still ensure consumers see personalized ads that are relevant to them.
Recently, Ars Technica revealed that 96% of US users opted out of app tracking in the iOS 14.5 update, where Apple enforces a new privacy policy called App Tracking Transparency. Now, iPhone, iPad, and Apple TV apps are required to request user permission to use techniques like IDFA (ID For Advertisers) to track their activity across multiple apps for data collection and ad targeting purposes.
Apple’s move is a game changer. Now, app developers and advertisers relying on targeted mobile advertising for revenue are realizing their worst fears. The change met fierce resistance from companies like Facebook, whose market advantages and revenue are built on leveraging users’ data to target the most effective ads for those users.
Facebook was enraged. They went as far as to take out full-page newspaper ads in the New York Times, Wall Street Journal, and Washington Post with the headline, “We’re standing up to Apple for small businesses everywhere.” Facebook claimed that Apple’s privacy change would not only hurt Facebook but destroy small businesses worldwide.
Verizon-owned Flurry Analytics, which is used by over one million mobile apps, says US-based iPhone users agree to be tracked only 4% of the time. This trend clearly shows users are rejecting tracking at a much higher rate than previously projected.
How will a cookie-less future affect advertising? In a cookie-less world, advertising strategies must adapt to rely less on third-party data for targeting and retargeting ads. Today, digital marketers are investing in gathering their own zero- and first-party data on their customers and exploring contextual advertising strategies.
As third-party cookie data comes to an end, marketers must adapt and accept a future of consent-based advertising. This means overhauling their strategies, including reevaluating their ad spend with Facebook and Google.
“It will likely take many years for a stable environment that balances standards-based data-driven advertising and consumer privacy to emerge,” said Eric Schmitt, senior direct analyst at Gartner. “Marketing leaders responsible for ad budgets, media mix, planning and measurement will need to adjust strategies as Google rewires its data policies, ad products, and capabilities against a backdrop of new privacy norms and elevated antitrust dynamics.”
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