When was the last time you entered the password for your Facebook, Gmail, or another online account that you frequently visit on your personal computer? You might not remember because the browser remembers it for you. It also remembers the language you chose for a particular website, so you don’t have to change it every time you visit that website. It saves time and improves your browsing experience.
And your browser is able to remember your interaction with a website (and information like login credentials) to offer you a more personalized experience, thanks to digital cookies.
What Are Digital Cookies?
Digital cookies, tracking cookies, HTTP cookies, or simply cookies have been around since 1994. They were created by Lou Montulli. Lou had to find a way around a very specific problem, i.e., servers of an online store getting overloaded by every user’s shopping cart information. The solution was to save the data on a user’s own computer, so it doesn’t take up space in the server storage, and thus the digital cookie was born.
Digital cookies are text files (stored and managed by your browser) that retain information about your preferences and interactions with a specific website.
What started out as a technical solution was adapted for a better user experience. Its domain was further expanded to gather data for targeted marketing, and that’s when the privacy concerns regarding digital cookies started to grow.
There are two types of digital cookies:
First-Party Cookies: These cookies are created by the website/domain you are visiting and pass on information only to that particular website.
Third-Party Cookies: Almost all websites use ads to generate revenue from their online traffic. These ads come from a different website that also wants to gather information about you so they can send you targeted ads that you are more likely to click on. They gather this information by creating third-party cookies. So if you visit a website that has five ads (from five different websites), it might generate six cookies, i.e., one first-party cookie for the original domain and five from each ad website, even if you never click on it or interact with the ad in any way.
Most of the privacy concerns surrounding cookies and the efforts to phase them out are concentrated around third-party cookies.
Cookies: Digital “Assistants” Or Unwanted Spies?
Cookies, especially first-party cookies, are not just harmless; they are useful. But most third-party cookies are only there to collect marketing-related data like age, gender, location, device, and behavioral data. The information is used to serve you ads that are most likely to attract you (which is useful in a way), but the privacy trade-off is too much for most people. As per Google, about 81% of people feel the potential risks of data collected by cookies outweigh the benefits.
People don’t want third-party cookies tracking them and collecting data, but the problem and the solution are not as black and white as simply banning the cookies. An internet where websites are not allowed to monetize their traffic via ads is likely to be more expensive and not as easily accessible. A lot of the freely available information might get hidden behind pay-walls and subscriptions.
So how will the internet look after the demise of the digital cookie?
Third-Party Cookies Phase Out: From Safari To Chrome
The Safari Browser on Apple devices has a feature (Intelligent Tracking Prevention) which blocks irrelevant third-party cookies (not associated with user experience) since 2017. Mozilla rolled out a similar update in 2018.
Whether it’s through the browser’s features or regulatory compliance, the opt-out protocols for cookies have caused a 52% reduction in advertising revenue.
But the real “demise” of third-party cookies will most likely come from Google.
Google To Phase Out Third-Party Cookies By 2022
As of March 2021, Google Chrome claims roughly two-thirds of the browser market share around the globe.
Together, Chrome and Safari make up over 82% of the browser market. One has already taken measures to block third-party cookies, and Chrome is planning to get rid of them by 2022. Statistically, this will kill the third-party cookies.
But not advertising.
Google admits the importance of advertisement for free and accessible internet, but it’s balancing the need for advertisement with privacy concerns surrounding third-party cookies with something called “Privacy Sandbox.” It’s a middle-ground between protecting user’s privacy and providing marketers with the information necessary for targeted marketing (and achieving nearly the same level of conversions they had with cookie-based marketing).
Google Privacy Sandbox And FLoC
The Privacy Sandbox is a technology solution used by Google as an alternative to third-party cookies. It uses Federated Learning of Cohorts (FLoC), which is a new marketing research technique that offers to generate effective marketing data without compromising user security.
The FLoC creates clusters of users, all of which have similar interests. It’s very similar to Facebook’s profiling model that helps you find similar audiences based on one user persona (the lookalike audience). The concept is that marketers will know that three people, A, B, and C are interested in classic cars, without explicitly knowing details like the age and gender of the individual, because these three people would be part of a group, i.e., a FLoC cohort. Google will let marketers see users as one of the billions that are browsing the internet every day. However, marketers will see these people grouped into different islands or niches to market to.
Google’s tests reveal that the FLoC-based marketing will result in 95% of the conversions, compared to the cookie-based advertisement, which is almost as effective. And since it’s expected to make users feel more secure about their privacy, the minimal difference is unlikely to matter.
How Will It Impact Marketers And Advertisers
Google is only targeting third-party cookies with this update, so the data collected from first-party cookies is safe and can still serve as a core element of marketing strategies. The data from the FLoC cohorts will not be as granular as the data collected from third-party cookies, so the marketing efforts will have to be evolved and directed towards a more general/mixed audience. Paid-advertisement, if Google’s 95% estimate is correct, will see a minimal investment cost increase.
Based on how heavily a marketer’s strategy relies on third-party cookies, it will have to be modified and adjusted for the new form of marketing data. But that doesn’t mean they will have to start from scratch and have to re-build segments of their digital marketing strategies from the ground up.
Digital marketing will change with the demise of the digital cookie, but not as radically as you might think.