Google wants to abolish third party cookies

What impact will the abolition of third party cookies have on the advertising industry?

While Mozilla's Firefox and Apple's Safari browsers have been integrating and expanding anti-tracking methods for quite some time, Google has so far held back with Chrome. However, at the latest since the GDPR, it is clear that it will become more difficult, if not impossible, to continue using cookies for tracking. Consumers are to be better protected and other tracking methods such as fingerprints are to be blocked.

What does this mean for the online marketing industry? How can important user data be collected and evaluated without cookies? How can consumers be protected in their internet privacy? What are cookies and what is the difference between first and third party cookies?

What are cookies?

Cookies per se are, despite frequent assumptions, nothing negative. They make it easier and faster to use websites because they save information about users. Visitors can be recognised and certain settings, such as the language of the page or login information, can be saved. Based on web analytics, which are also made possible through the use of cookies, the user experience (UX) of websites can also be improved. Cookies, which are actually small snippets of code, are stored on the respective device and can also be deleted again in the browser settings.

First vs. Third Party Cookies

In principle, a distinction is made between so-called first party and third party cookies. First party simply means that the cookie was set by the visited website on which the user is currently located. Third party cookies, on the other hand, come from third party providers who, for example, place advertisements on the visited page.

The third party cookies mark users of the website, so to speak. If the user subsequently visits a page of the third party provider again, or a page on which the third party provider has placed advertising, he or she will be recognised by the cookie that has been set. The user's behaviour is thus tracked and, among other things, targeted information can be provided on the length of time spent on different pages, the navigation of links and the frequency of page views. This allows interest and user profiles (profiling) to be created and advertising tailored to the user to be played. Conversions can also be recorded by third-party cookies.

First party cookies, on the other hand, come from the website that the user is currently visiting. The user can only be recognised by these cookies on the page on which the cookie was originally set, but not on other websites, as is the case with third party cookies. The analysis of user behaviour can therefore only be viewed by the website operator itself. In this way, first party cookies can be used for various functions.

Cookies categories

A distinction is made between three categories:

• Necessary cookies: These ensure the functionality of a page. This includes, for example, that the shopping basket does not forget that things have already been put in it.
• Performance cookies: They provide information about page loading times, the length of time the user spends on the site, or even usage behaviour with different browsers.
• Functional cookies: are not absolutely necessary, but increase usability for the consumer.-
  First party cookies may not be transmitted to third parties. Third-party cookies, on the other hand, can be transmitted to other website operators & Co. This means that a user's path through the entire Internet can be traced. For this reason, third party cookies are constantly criticized by the GDPR and the European Court of Justice (ECJ).

Google also plans to ban them permanently by 2022.

Third party cookies and data protection

Data protectionists have long criticised the use of cookies by third-party providers. In their opinion, this type of tracking is not anonymous enough. The European Court of Justice and the GDPR have also already strongly regulated the use of third-party cookies. While these could previously be set without the user's consent, users must explicitly agree to third-party cookies or cookies for advertising purposes through the so-called opt-in function.

According to the latest case law, each cookie for the user must be individually selectable or deselectable. Third-party cookies can therefore already be expressly objected to.

Not only the GDPR and the ECJ, but also Apple has declared war on the storage of data by third parties. For this purpose, the "Intelligent Tracking Prevention" was introduced, so that third party cookies are blocked by default in the Safari browser.

Why should third party cookies be permanently blocked?

The number one reason why third party cookies should be blocked is consumer data protection. A ruling by the ECJ in October 2019 showed that pre-set consent banners are illegal. Users must therefore always actively and, above all, voluntarily consent to cookies, and only then may the collected data be used for marketing, analysis and tracking purposes. First party cookies, for example for shopping baskets, login information or language settings, are of course excluded from this.

New tracking methods such as fingerprints, e-tags or the Google ID are also illegal according to the ruling. These methods must also be actively and voluntarily agreed to by the user in order to allow analyses of user behaviour. Fingerprints in particular are a thorn in Google's side, as they have been collecting information about users without any consent or control. That is why the company now wants to ban fingerprints and cookies from third-party providers once and for all.

What impact will the ban have on the online marketing industry?
Mozilla's Firefox and Apple's Safari browsers already block third party cookies by default. Apple has also gone one step further and deletes all first party cookies not after the industry standard seven days, but after just 24 hours. Many third-party providers try to disguise their cookies as first-party cookies and thus obtain user data despite the blockade. Apple has put a stop to this with its "Intelligent Tracking Prevention". This makes cross-site tracking, i.e. tracking the user across several different websites, virtually impossible.

Mozilla has also updated its browser to protect against third-party cookies. Almost 80 per cent of all cookies from advertisers are now blocked in Firefox. This leads to non-personalised advertising for the user and thus to more wastage and higher costs for advertisers. The loss of advertising expenditure for online advertising due to the blocking of third-party cookies is estimated at 15 per cent in Germany.

Now Google also wants to take the step of banning third-party cookies. This has a huge impact on the tech giant itself, as it needs these kinds of cookies to evaluate its ad conversions. Instead of cookie tracking, Google wants to introduce the so-called "Privacy Sandbox" within the next two years. This should satisfy both users and publishers and minimise the losses in web analysis.

Websites could then use a "privacy budget" instead of cookies, with the help of which requests are sent to APIs. These also collect usage data, but the user remains anonymous, since as an individual he or she is always only a small component of a higher-level target group. Users are therefore not identifiable by name, but can still receive personalised advertising. With the "Privacy Sandbox", Google relies on its special position as a tech giant and causes an entire industry to switch to the sandbox. With the sandbox, Google sets a new standard for advertisers and agencies and ensures that they do not have to do without essential tracking.

However, it is still uncertain how high the losses in the online marketing industry will really be due to the renunciation of third-party cookies. For its study, Google evaluated data from its own advertising tool Ad Manager and predicts a loss of up to 52 percent in relation to the advertising revenues of publishers.

Three US researchers, on the other hand, claim that the losses in advertising revenue will only amount to four percent. The losses from blocking third-party cookies in Mozilla's Firefox were around 15 per cent in comparison. It remains to be seen how high the deficits will really be, since Google's Chrome browser is used by an average of 60 percent of the German population. Accordingly, significantly higher cuts than for Firefox and Safari are quite realistic.

How is tracking supposed to work without cookies?

Third party cookies will be banned in Chrome by 2022 at the latest. So how can online marketers continue to analyse and improve the performance of their websites and ads, and collect data for personalised advertising, if users increasingly object to cookies and they will soon be eliminated altogether? Publishers will have to resort to alternative methods of user tracking.

For example, semantic targeting can be used. Here, certain keywords are specified and the advertisements are then placed in a relevant environment. This contextual targeting method thus plays ads when users are on a relevant page for the specified keywords.

The advantage of this is that the user is usually already occupied with the content that is also the subject of the advertisement. If you are on a cooking page, for example, advertising for cooking utensils is displayed. The saving of personal data is completely dispensed with here.

With this type of advertising targeting, the focus is once again more on context, as thematically appropriate ads have higher click and conversion rates. This is in line with Google's new algorithm update (BERT), which, among other things, refers to the optimisation of the relevance ranking of SERPs based on the contextual behaviour of SERPs.

The international trade association of the online advertising industry is also introducing a new tracking option. According to this, standardised tokens, so-called Digitrust Universal IDs, are to be introduced with which users can control all the information available about them. At the same time, consumers will remain anonymous. In this way, users will have full control over their data, but companies will still be able to access the stored information.

Another possibility is people-based targeting. Here, the stored information is not based on the device, but on the user himself. This works entirely without third-party cookies. First, brands and companies have to identify their customers and connect with them. Then, the company's internal data, such as purchases or even email engagement, is analysed for the individual customer. So instead of using third-party cookies, companies can simply use their own existing data to effectively analyse users and thus serve personalised advertising. Of course, only with a corresponding contractual basis.

A final method is targeting via the authentication cache. However, this type of tracking also falls under the new ECJ ruling and the user must actively agree to this method. If they agree, they receive a fictitious user name as soon as they call up a page. By means of this name, he can always be recognised again, at least as long as the cache is not deleted. However, if an ad blocker is installed, this type of tracking is completely prevented.

Marketing experts will thus inevitably have to deal with Google's "privacy sandbox" or resort purely to alternative targeting methods such as semantic tracking.

Two years should be enough time to find suitable alternatives for analysing and evaluating user behaviour.

Because performance marketing currently contains some variables that are difficult for advertisers to calculate due to the losses in tracking and targeting, we at DEUS Marketing continue to focus on valuable and informative content that offers the user maximum added value and thus binds customers in the long term. By conveying expertise and publishing personal content, we build trust and anchor brand promises and advertising messages effectively and sustainably in the minds of the target group. Because only through the interplay of performance and brand/content marketing measures can the sustainable acquisition and retention of customers succeed.

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