A new advertising world: a look at the alternatives to third-party cookies

Third-party cookies: the world of advertising is changing

There was a real outcry in the advertising industry when Google announced last year that third-party cookies would no longer be supported in Chrome in the future, thereby taking away the world’s most important sales channel for third-party ads. The decision of browser providers to block third-party cookies is posing a major challenge for advertisers, given that the majority of the world’s ad campaigns are built around third-party technology. So, is advertising on the web on the brink of extinction?

The answer is no, quite the contrary. New solutions and alternatives to personalized tracking are already being developed, such as Google’s Privacy Sandbox package of measures, which promises to reconcile advertising and privacy. We talked about this issue with Katharina Arntzen, Head of Ads Privacy In-Country Leads in Google’s EMEA Go-to-Market-Team.

Google has made it clear that it will join other browser providers in stopping support for third-party cookies and corresponding follow-up technologies. Why, what were the motivations for this decision?

Katharina Arntzen: It’s difficult to conceive of the internet we know today – with information on every topic, in every language, at the fingertips of billions of people – without advertising as its economic foundation. If digital advertising doesn’t evolve to address the growing concerns people have about their privacy and how their personal identity is being used, we risk the future of the free and open web. That’s why we’ve been working with the broader industry on the Privacy Sandbox to build innovations that protect anonymity while still delivering results for advertisers and publishers.

Once third-party cookies are phased out, we will not build alternate identifiers to track individuals as they browse across the web, nor will we use them in our products. Our web products will be powered by privacy-preserving APIs which prevent individual tracking while still delivering results for advertisers and publishers.

What are the implications of this decision for advertisers who have used third-party cookies up to now? What do you advise them to do now?

Katharina Arntzen: We see four key priority areas that advertisers need to address in 2021.

• First, it is important for brands to build direct relationships with customers and to strengthen customer relationships. A first data strategy is crucial, whereby it is important to keep privacy top of mind and clearly communicate what customers are agreeing to.
  
• Secondly, companies should ensure their first-party data is cleaned up, well maintained and connected within companies’ internal systems. According to a study commissioned by Google and conducted by the Boston Consulting Group in 2020, companies that link all of their first-party data sources outperform those with limited data integration in important metrics. These companies see incremental revenue from a single ad placement, communication, or outreach, is up to twice as high as companies with limited data integration, and they can perform 1.5 times better in cost efficiency metrics, too.
  
• Thirdly, businesses should consider using what we call our global site tag. With this tag, advertisers have the opportunity to improve the accuracy of their online conversion measurements, while at the same time enabling insights to optimize digital marketing campaigns.
  
• Fourth, advertisers should think and plan for the long term. They should invest in building trusted customer relationships, as well as in a strong first-party data strategy and a privacy-forward online experience.

Google is already developing privacy-compliant alternatives as part of the Privacy Sandbox project. These include the so-called Federated Learning of Cohorts (FLoC). How does this technology work and what are its advantages?

Katharina Arntzen: Federated Learning of Cohorts (FLoC) at its core is an open source technology that proposes a new way for businesses to reach people with relevant content and ads by clustering large groups of people with similar interests. This approach effectively hides individuals “in the crowd” and uses on-device processing to keep a person’s web history private on the browser.

The browser uses the FLoC technology to determine which cohort corresponds most closely to the user’s recent web browsing history. The user’s personal browsing history doesn’t leave the browser or the device, and it’s not shared with anyone. Users can continue to see relevant ads and content without needing to be tracked across the web.

In the initial experiments, we found that FLoCs can perform remarkably well ‒ we were able to achieve a 350% improvement in recall and 70% improvement in precision over random clusters.

Federated Learning of Cohorts is one of several Privacy Sandbox proposals for showing relevant content and ads. It’s still in the early stages and Chrome is working in collaboration with the web ecosystem, including the W3C (World Wide Web Consortium), and will continue to implement feedback, make improvements, and share progress. We hope that other platforms and browsers adopt this new technology in the future as a privacy-safe way to support the broader advertising ecosystem.

Critical voices believe that the technical innovations, while a great plus for data protection and for consumers, at the same time make marketers more dependent on Google. What is your opinion on this?

Katharina Arntzen: In fact, our recent decision of not building alternative identifiers solutions to track people across the web may result in some businesses moving away from our platform, as we build towards tools that are more privacy preserving, and others offer the ability to track users across the web using PII. So we realize this means other providers may offer a level of user identity for ad tracking across the web that we will not – like PII graphs based on people’s email addresses.

We don’t believe these solutions will meet rising consumer expectations for privacy, nor will they stand up to rapidly evolving regulatory restrictions, and therefore aren’t a sustainable long-term investment. Instead, our web products will be powered by privacy-preserving APIs which prevent individual tracking while still delivering results for advertisers and publishers.

What further developments towards privacy-compliant advertising is Google planning in the coming years as part of the Privacy Sandbox project and beyond?

Katharina Arntzen: We have several proposals in the Privacy Sandbox for advertising use cases such as conversion, remarketing, and personalized advertising. We are keen to continue to engage with the industry on those and make sure they work for everyone. Keeping the internet open and accessible for everyone requires all of us to do more to protect privacy – and that means an end to not only third-party cookies, but also any technology used for tracking individual people as they browse the web. We remain committed to preserving a vibrant and open ecosystem where people can access a broad range of ad-supported content with confidence that their privacy and choices are respected. We look forward to working with others in the industry on the path forward.

Bye-bye, third-party cookies: entering a new world of online advertising

With all this in mind, advertisers will be kept on their toes. The phasing out of third-party tracking will require them to focus more strongly on privacy. Building stronger customer relationships and ensuring greater data transparency will be the highest priorities. Instead of third-party tracking, companies will have to use more first-party data. When it comes to analyzing conversions as well, first-party solutions like the global site tag (gtag.js) are becoming increasingly relevant.

To conclude, only time will tell which non-personalized tracking methods will catch on. After all, there are still many regulatory challenges to overcome here as well. For example, the initial tests of the FLoC method underway since March haven’t been conducted in the European Economic Area yet due to issues relating to data protection regulations. So, with regard to online advertising and tracking, the name of the game will be to sit tight, closely monitor developments, and work toward first-party data sources, transparency, and strong customer relationships now and not later.

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