Adapting to the Cookieless Era in 2024

Recently, Google announced the first phase of third-party cookie deprecation in what feels like a 5-year saga finally coming to fruition. While the industry has had ample time to prepare, a single identity solution to replace cookies has not been introduced, and it feels like marketers will have to make do with less accurate tracking and ad targeting. Fortunately, there are steps we can take to mitigate any downside, and Rhythm is actively involved in ensuring our clients are prepared. In this article, we’ll discuss what this transition means for the industry, how it will impact advertisers, and what we can do about it.

But first, a quick refresher on first-vs.third-party cookies, as we see a lot of confusion stemming from this delineation.

First-party cookies track activity on a domain, and that domain only.

They’re typically used to personalize the user experience (e.g. remember passwords, content viewed, add to carts), but also track things like site analytics. If an action happens on your site, a first-party cookie can track it, providing a more seamless experience for you.

Third-party cookies track activity across domains, primarily for advertising.

Let’s say you view a product on a popular retail site. Later that day, while reading a news article on a different site, you then see an advertisement for the exact product you viewed. You were targeted using a third-party cookie.

Third-party cookies also allow companies to track user browsing data across the web. For example, you visit a site tagged with the Meta pixel, used to track site visitors, and a third-party cookie is saved in your browser. After that cookie is generated, Meta tracks every site you visit, allowing them to build a robust profile on your browsing habits, including the sites you visit, the content you consume, and the duration of your browsing sessions.

This second scenario flew under the radar for many years following the introduction of cookies, and while not as visible to the naked eye, it contributed significantly to the invasion of data privacy that ultimately led to this cookie deprecation.

How will this impact the advertising industry at large?

The most profound effect will be felt by small ad tech businesses, largely in the programmatic ad space, that have relied on third-party cookies to build user interest profiles and track conversions on their advertisers’ sites. Large companies with robust troves of first-party data like names, emails, and phone numbers, will be better able to create identity graphs that tie their user browsing data to unique profiles. This means that moving forward, first-party data will only become more important than it already has been.

We can also expect to see a growing number of publishers gate content behind paywalls as display advertising will provide less revenue to support a ‘freemium’ business model. Publications like the New York Times or Forbes have long restricted access to site content to drive revenue through subscriptions. It also allows them to better control the type of media delivered on their sites including customized, high-impact ad units. This is achieved through monthly ad spend minimums and ad placement minimums that price out any advertiser not willing to spend above their threshold.

With all of this in mind, we expect to see an increasing reliance on major media companies (think FAANG), as those with the data and resources to build novel ways of tracking and categorizing user data will remain effective.

How will this impact advertisers?

It may sound like a lot of doom and gloom, but that’s not entirely accurate. There will still be ways to reach your audience that don’t rely on the data-rich (to the point of being creepy) strategies that have been effective over the last decade.

First, there will be a growing need to create engaging content that speaks directly to the concerns and pain points of one’s target audience. Rather than hyper-targeting users at the bottom of the funnel with ‘buy now’ messaging, instead leverage blogs and articles that speak about the benefits of your product or service. Educate first, sell later. Your audience will appreciate it.

Some loss of attribution is also expected to result from this cookie deprecation, although platforms are taking the necessary steps to mitigate this. This will look like fewer conversions and higher CPAs in ad platforms, but that wouldn’t be the full story. Dig deeper into CRM data and all conversion activity will still be visible. This means that advertisers must ensure they have a properly set up CRM to capture all the user data submitted on their sites, not only for tracking purposes but also for first-party data collection.

Retargeting will lose effectiveness but won’t go away entirely. Ads that ‘follow’ you around the internet will disappear (unless you run ads through Google’s Display Network or another closed-loop DSP), but social media companies will still be able to see what content you engage with on their platforms and their advertisers’ sites. This allows for retargeting on social media that is just as effective as it is currently.

What can we do about it now?

With only 6 months until the planned Q3 phase out of third-party cookies, advertisers should implement these steps into their marketing strategies now.

Server-side tracking: This will be the new best practice in conversion tracking and custom audience creation because it doesn’t require data to flow through the browser. Instead, a link between the website and client-server is established, and an API pulls data from the server into the connected ad platform. It’s imperative to ensure that hashed Personal Identifiable Information (PII) is being sent through the API as this will be the best way for the ad platform to match its user profiles to the user on your site.

Enhanced Conversions: Introduced in response to tracking loss associated with Apple’s iOS 14.5 update, this Google-specific conversion tracking method involves the transfer of PII from the client to Google’s platform. As Google tags utilize first-party cookies, this setup will be available using the current method of tracking. Marketers must update their tags to include hashed PII to remain privacy-compliant.

Leverage First-Party Data: There is an ever-increasing need to collect first-party data in the form of account registrations, email subscribers, phone numbers, etc., now, to build target leads and customers. This means newsletters, events, and SMS will become more important than ever in talking directly to your customers. We may even see the resurgence of lookalike audiences as a way of leveraging this data.

Build out engagement retargeting funnels: Despite losing visibility into cross-site user behavior, we’ll still be able to track user engagement with ads and videos and retarget these engaged users with additional content. This will increase the need for varied messaging at different stages of the funnel so that users can understand your offer without necessarily visiting your site.

Contextual targeting: We’ve already started to witness a resurgence with contextual targeting, especially as ad tech vendors develop better ways to contextualize pages including images and video. This method of ad targeting remains largely unchanged as it relates to a marketer’s ability to reach a niche audience.

Customer Data Platform: Popularized in the last 10 years, customer data platforms, commonly referred to as CDPs, herald a new age of audience targeting through extensive first-party data capture. Data points are collected from user interactions on one’s site and used to categorize users into audiences based on the actions, time spent, and pages seen on the site. Scale is needed to ensure audience sizes are robust enough to target, but this would be considered the gold standard of audience data capture.

If this all makes you feel a little concerned about the future of the industry, don’t worry. Google Chrome is not the first browser to remove third-party cookies. Firefox removed third-party cookies in 2013 and Safari removed them in 2020. This simply means that as marketers, we’ll need to take additional steps to set up proper tracking systems to ensure high-quality, accurate data is being passed through to ad platforms.