What is Cookieless Targeting?: A Complete Guide
Love them or hate them, third-party targeting cookies are going away. We’ve arrived here through new technology and systems of one form or another, some more disruptive than others.
Through ad networks, ad exchanges, demand side platforms, programmatic, and more, advertisers have had some gains and some sacrifices as the digital advertising ecosystem has evolved.
It was the beginning of separating the user from the media, using a pixel to find them again across the internet. Cookies as a mechanism enabled the ability to cherry pick an audience from a broad array of media, but lost the relevance of where you reach that audience, which is very important. The deprecation of third-party cookies brings a shift back to publishers, and connects audiences to content. This approach will not only assuage privacy concerns, but also strengthen user experience as consumers engage with advertising.
Before we get into how to plan for advertising in a cookieless world, let’s take a brief look back at how and why the cookie came to be.
The Role of Third-Party Data in Digital Marketing
Third-party data held promise for digital advertisers because it enabled them to learn about their web visitor's overall online behaviors beyond what they could gauge with first-party data, from other websites they frequent to what they’ve bought to their interests. With this detailed data, you can build robust visitor profiles. With all of this data, you can then create a retargeting list that can be used to send ads to your past visitors or people with similar web profiles.
The original use case for the cookie was retargeting, quickly followed on by frequency capping. This digital marketing approach did not offer a lot of scale or efficiency until the exchanges and real-time bidding (RTB) came about. After that, behavioral targeting, or third-party cookie-based targeting, got advertisers hooked because it was easier, faster, and required less planning and integration.
Why are Cookies Being Phased Out?
In due time, consumers got spooked by ads following them on the internet. As privacy concerns abounded, legislation like the General Data Protection Regulation (GDPR), which requires user consent to track website visitors with cookies, came into effect. More laws and initiatives have come into play since then to usher in a new age of “privacy-first” advertising meant to give individuals more control over consumer data collection and its use. In early 2020, Google announced its plans to retire third-party cookies from its Chrome browser as a response to global consumer privacy concerns.
But just before Google put its take in the ground on consumer privacy, Firefox had also decided to block third-party cookies by default. Safari followed soon after the Google announcement. With Firefox and Safari web browsers making these data privacy updates, roughly 40% of US web traffic now comes from users who already block third-party cookies.
Then, Apple started making considerable privacy upgrades to its iOS. Apple essentially now allows users to view and opt in to or out of every single app tracking or collecting their data. Users can see how often these apps are collecting their data as well as how much data is being shared with third parties for tracking purposes. This limits what marketers can learn about their target customers, and how they collect, store, and use data of all types to engage with them.
Data privacy concerns aside, the reality is that third-party cookies became both an inefficient and ineffective method for targeting users and measuring performance. As smartphones, tablets, and other connected devices were developed, more consumers started using them interchangeably. Third-party cookies are unable to track users across devices, or even between apps, which results in an incomplete picture of the customer journey that often means advertising budgets get wasted on users who have already converted. It also results in consumer annoyance, as a user might make a purchase on, say, their mobile device that third-party cookies are unable to detect, leading to obnoxious retargeting on that user’s desktop computer or tablet.
The Challenges and Opportunities of a Cookieless World
Heavy reliance on third-party cookies as a marketing strategy has left many digital advertisers scrambling to find replacement solutions before the legacy technology is deprecated. While third-party cookie deprecation is a great outcome for consumer data privacy, brands, media agencies, and the ad tech platforms they use could be heavily impacted as the 25-year-old internet infrastructure crumbles. Publishers, too, will face challenges. McKinsey & Company analysis suggests that publishers will have to replace up to $10 billion in ad revenue after third-party cookies phase out. Non-premium publishers will see the effects the most because they are selling the most inventory within exchanges.
While the path to the cookieless future will include some bumps along the way, this new era does stand to benefit both the buy and sell sides in addition to ad tech players. Cookieless targeting creates an opportunity to reshape advertising, ultimately strengthening the value exchange between publishers, advertisers, and consumers as the ecosystem shifts to first-party data strategies. After the loss of third-party cookies and identifiers, advertisers and publishers will find that the value of direct engagement with consumers will improve. The onus will increasingly be on advertisers and publishers to create experiences that consumers consider worthwhile in exchange for their valuable data.
What is Cookieless Targeting?
Cookieless targeting is synonymous with contextual targeting, and while we like to talk about in the context (pun intended) of the post-third-party cookie future, it’s actually been around for more than a decade. Contextual targeting was deprioritized in favor of cookie-based, or behavioral, targeting for the perceived campaign optimization and measurement capabilities that latter allowed. However, as we now know, this was never the intention of third-party cookies, and as device proliferation and fragmentation emerged, it became clear this legacy technology could not accurately track users against standard advertising metrics.
Cookieless or contextual targeting is on the rise again as third-party cookies phase out because its capabilities are now that much more robust, nuanced, and intelligent. Modern cookieless targeting uses machine learning and artificial intelligence algorithms to target ad placements based on keywords, website content, and other metadata. This way, ads are shown to users in relation to the content they are consuming at that moment in time, not their past behavior, such as web pages they have visited. This means buyer intent is far more accurate and can be used to create personalized experiences for the user.
There is proof that proposed third-party cookie replacement solutions such as contextual targeting create a more relevant experience. When digital advertisers start with context, they align ads with content, which results in far more relevance than ads that follow users around on every internet page they visit for days on end. When attention and alignment are the foundation of a digital advertising strategy, ROI improves by as much as 30%. Research also shows that 82% of individuals prefer ads relevant to them.
What is Cookieless Tracking?
Cookieless tracking effectively focuses on user events instead of an anonymous identifier tied to certain interactions. Third-party cookies necessitate advertisers targeting users based on activity across websites. Cookieless tracking, on the other hand, is focused on the content of the websites users frequent. In this way, cookieless tracking doesn’t rely on specific visitor data.
Cookieless tracking necessitates gathering other forms of information beyond third-party data. These data sets include:
- Zero-party data: This is information a user volunteers about themselves to a website, such as preference center data, purchase intent, and how they want to be recognized by the brand. This data can help round out customer profiles with rich, opted-in information beyond first-party data.
- First-party data: This customer data covers a user’s behavior on a brand’s own websites and apps collected via first-party cookies, including clicks and time on page, that enhances understanding of what a user is interested in. Email, social media sites like LinkedIn, CRM, survey, and shopping cart items are also other forms of first-party data.
- Second-party data: This is another brand’s first-party data that is often shared in an anonymous, cooperative-type setting in which different businesses analyze and apply this additional data to learn more about their ideal customers. Just like first-party data, second-party is opted-in.
Collecting and then activating more of these alternatives to third-party data can help strengthen the customer experience. There are a couple different platforms for gathering and then using this data in an advertising context:
- Data management platforms: DMPs help you collect from across sources and then convert first-party data into anonymized data to comply with data privacy laws.
- Customer data platforms: CDPs combine first-party data and identifiers like device IDs from across disparate databases and make this information usable for personalized marketing.
- Identity management platforms: This software integrates consumer identifiers from across both offline and online channels and devices in a privacy-compliant way to form a persistent and addressable user profile.
- Data clean rooms: These platforms share and match aggregated data with an advertiser’s first-party data in a very secure and privacy-safe way to ensure advertising is being targeted correctly to the right audiences.
- Demand-side platforms: DSPs transform first-party based customer understanding into advertising activation across channels and optimize campaigns using a number of levers such as budget pacing and frequency capping.
- Contextual targeting platforms: These platforms let advertisers create different types of contextual categories to deploy to any DSP for more granular targeting.
What Could Replace Cookies?
The cookieless future calls for a shift to a data-first strategy, not waiting around for whatever cookies 2.0, universal ID, or other tracking solutions emerge. Coupled with Apple iOS privacy changes and Facebook’s limited attribution window and decreased ability to measure users interactions across domains and devices, using first-party data will become the mainstay approach.
Brands and their media agencies get more control over the advertising strategies in this way, as first-party data is something they are already collecting and using. There is additional benefit in that first-party identity strategies are also innately privacy-compliant, since they are based on opted-in information, which strengthens both consumer trust and customer experience. Here are some options on the horizon that leverage first-party cookies:
- Hashed emails: Hashed emails are effectively email addresses that a user has consented to giving a website that are then encrypted into a unique 32-character code to protect their privacy.
- Unified ID: DSP The Trade Desk’s third-party cookie replacement solution is an open source ID framework built from hashed and encrypted email addresses. The framework is a collaborative effort among ad tech industry partners. Universal identifiers based on a permanent user identifier like an email address can be used across websites, channels and platforms.
- FLOC: Google’s Federated Learning of Cohorts (FLoC) places users in a large, anonymous group of individuals with similar recent browsing activity. Advertisers can then target ads based on the collective interests of these groups.
- Contextual advertising: As explained earlier, contextual targeting lets brands serve ads based on the content of a web page, not on customer data. Machine learning is applied to predict which pages advertisers should target at which time.
What Does “Cookieless” Mean for Advertisers?
There has been much positing about what the cookieless future will mean for all partners in the advertising ecosystem, including consumers. Here is what some of the major industry and business outlets have to say about the impact of the cookieless world on advertisers.
- 4 reasons to bake cookieless targeting into your media plan (StackAdapt): This blog post espouses the virtues of cookieless (contextual) targeting, describing it as “multi-channel and scalable, making it a reliable means for reaching your audience.” It also lets advertisers experiment with different marketing strategies. The author expects the role of contextual targeting to continue to grow, but also predicts that cookies will still exist in some way, such as when visitors opt-in to engaging with websites, apps and portals. In this way, the digital future will be more cookie-limited than cookieless.
- Now is the time to explore cookie-free tactics (Peer39): Our blog post on cookieless targeting points out that the window of time is closing for advertisers to “experiment, compare, understand and map their audience-based approach to a modern contextual approach while they have both available to test, compare, and tweak as they explore the best path forward.” This will necessitate shifting from a focus on the user and their past behavior, and, therefore, the cookie, to the content that user is consuming, and where, when, and how they consume it.
- The ultimate guide to advertising without third-party cookies (Nativo): Finding alternatives to third-party cookies “will enable advertisers to not just maintain their current capabilities in audience targeting, but actually improve them, given that so many potential users are already being lost to traditional cookie-based targeting,” the author says. Contextual targeting and advertising will help advertisers serve more relevant ads based on website content.
What Does Cookieless Mean for Consumers?
As referenced, a cookie-free world can mean better user experiences for consumers. This is predicated on the fact that any replacements for third-party cookies will be based on collecting richer, opted-in zero- and first-party data.
- 3 ways intent data maximizes digital ad performance (Aberdeen): This blog post lays out the fact that our current way of digital advertising is quite substandard—the average clickthrough rate for display ads is only 0.46%. Put a punchier way, “you’re more likely to have a heart attack when browsing the internet than click on a digital ad (even accidentally).” As advertisers move to other ways of targeting users, consumers will benefit from ads that are more relevant to them, based on the content and context of the websites they are engaging with at the moment, not a pair of shoes they purchased six month ago.
- Tracking cookies are dead: what marketers can do about it (Invoca Blog): Perhaps the blog with the most catchy subhead, Invoca declares that “Contextual advertising (and content) is the new cookies” and the great opportunity it presents for better value exchange for the consumer. Contextual targeting means not only less creepy ads, but also more relevant content, that will take greater connection between advertisers and publishers to execute “content as ads” at scale. And of course, it will require a focus on gathering more first-party data, both on the advertiser’s and the publisher’s side.
- How to target your audience without third-party cookie data (Gartner): This article highlights the downsides of cookies, noting that “the attribution accuracy of third-party cookies has often faltered with poor consumer identity match rates between 40% and 60%.” More importantly, moving away from this legacy technology means marketers can identify and innovate on improved ways to communicate with consumers and execute effective advertising with privacy at the forefront. They also name contextual targeting as a possible replacement strategy as a way to create personalized advertising without the need for constant consent.
What Does Cookieless Mean for Publishers?
Similar to advertisers, publishers can also turn to strategies based on first-party cookies to prepare for the deprecation of third-party cookies. With their direct relationships with users, they, in many ways and cases, are well-positioned with enough data to build robust user profiles.
- Deprecating the cookie: the impact of eliminating third-party identifiers (VentureBeat): While some claim third-party cookies have not served publishers’ interests, the reality is that publishers do stand to lose monetization capabilities once they are deprecated. Publishers can react by honing and packaging their first-party data offerings, focusing on “unique data that can be captured at scale and can add value to advertisers.” They can also work to get visitors to register for newsletters or subscriptions, converting them to authenticated users.
- Where will our data go when cookies disappear? (TechCrunch): This article echoes the sentiment that first-party data will “become immensely valuable, and publishers must start identifying how they can harness and monetize it.” It references some of the aforementioned potential cookie-replacement solutions, such as unified IDs.
- The demise of third-party cookies and identifiers (McKinsey & Company): Publishers can make up for the loss in ad revenue the deprecation of third-party data might produce “with a combination of first-party data gathered through a combination of paywalls and required registrations, and updated contextual targeting and probabilistic audience modeling (analytics that incorporate an array of unknown elements).”
Can You Target Audiences Without Cookies?
Yes! For any advertiser that thinks they won’t be able to target users once third-party cookies fade away, it’s simply not true. Rather, the type of targeting they will be able to do will evolve. They will no longer be able to conduct behavioral targeting with much efficacy, but they will be able to do contextual targeting. The benefit of the latter is that it leads to increased relevance at lower cost compared to the former, because ads are targeted to the content and context of a page.
First-party cookies with consent will form the foundation of cookieless targeting strategies, leading to more accuracy and privacy compliance. There is a wide variety of sources from which to glean first-party data, from websites to CRM databases to surveys, which can contribute to a more robust user profile. Advertisers that build relationships with publishers owning vast first- and zero-party data sets also stand to improve their marketing outcomes.
How to Prepare for a Cookieless Future Today
With third-party cookie deprecation likely less than a year away, advertisers can shift their cookie-based strategies into cookieless ones to future-proof themselves for a cookieless world:
- Plan your first-party data strategy: If you haven’t already, start inventorying and understanding where all of your first-party data lives across your organization so you can both understand gaps you have and assess which types of technology solutions can help you store, manage, analyze, and activate that data.
- Strategize for collecting more data: You will constantly need to collect more data about customers and prospects even in a cookieless world. Communicate that when consumers consent to sharing their data, it leads to more relevant advertising and communication. You can trial new and interesting ways to collect this data, such as quizzes, surveys, QR codes, and newsletters.
- Identify the right data partnerships: You can supplement the first-party data you have by tapping into partners with both standard and unique data sets you can use to enhance your cookieless targeting. These include location, weather, and purchase intent.
- Tailor your targeting strategy: By understanding the right cookieless targeting criteria for the audiences you are trying to reach, you can better understand which categories to pursue, along with which to avoid, based on safety, suitability, and sentiment.
- Tap into the right technology: There are platforms that can help you access pre-bid contextual categories to find the best inventory to target and then activate in your DSP of choice across channels. The best ones use technology focused on semantic understanding, brand safety, and page quality so you find a perfect match for your ad.
Peer39 Contextual Targeting is Ideal in a Cookieless World
Third-party cookie deprecation certainly marks the end of an era, but the cookieless future will be bright for those advertisers who pivot to first-party-based strategies like contextual targeting to engage with users. To learn more about how Peer39 can help you prepare for the cookieless world, get in touch today.
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