Life after cookies – What the IDFA change can teach us

June 28, 2021 | Aija Peltola, Chris Kervinen

Life after cookies – What the IDFA change can teach us

I’m sure you’ve heard the news by now: Cookies and cross-site tracking technologies that have been used across the internet to collect details of the audiences, monitor conversions, retarget and more are being banned for good. The events started to unfold earlier this year, when Google stated that it’s going to remove third-party cookies from Google Chrome, predicted to happen sometime in 2022.

But as can be imagined, Google faces tremendous pressures for being a leader in search, search ads and browsers. The more Google cuts off third-party tracking, the more the current ad industry as we know it changes. Simply put, replacing these existing tracking capabilities without damaging advertising companies' abilities too much is not an easy task.

This has resulted a new plot twist: Just a few days ago (24th June 2021), Google has announced they will delay the removing of third-party cookies from Chrome browser until 2023.

In their blogpost, they shared a new plan for Chrome that's going to be executed in two stages:

"For Chrome, specifically, our goal is to have the key technologies deployed by late 2022 for the developer community to start adopting them. Subject to our engagement with the United Kingdom’s Competition and Markets Authority (CMA) and in line with the commitments we have offered, Chrome could then phase out third-party cookies over a three month period, starting in mid-2023 and ending in late 2023."

Stage 1 (Starting late-2022):

Once testing is complete and APIs are launched in Chrome, Google will announce the start of stage 1. During stage 1, publishers and the advertising industry will have time to migrate their services. This stage is expected to last for nine months, Google will monitor adoption and feedback carefully before moving to stage 2.

Stage 2 (Starting mid-2023):

Chrome will phase out support for third-party cookies over a three month period finishing in late 2023. "

Nevertheless, while advertisers have been given a little more time to adapt, the change is here. Many have been left uncertain of what’s to come next. This text sheds light on some of the potential implications.

What happens when Google removes third-party cookies?

The heart of digital marketing has always been its ability to track and collect data on individual consumer level. Unfortunately, this feature is also at the center of the latest data privacy issue, as more and more consumers demand less-intrusive online experience.

Since Google still makes most of it’s revenue through advertisers, especially from search advertising, they have no interest in shutting the door completely. That means, when one door is closed, another one is opened.

In this case, individual identifiers are going to be replaced with FLoCs.

This monstrosity stands for Federated Learning of Cohorts. The purpose and use case of FLoCs is to cluster large groups of individual users into a “crowd”, allowing advertises to target, not specific individuals, but a group of people with similar interests. This information is then going to be stored in the Chrome Browser, and another “profile of you” is going to be created. This data is not going to be linked to a personal profile, but it’s going to be used to put you in a Cohort.

How this affects the digital marketing effectiveness, then?

Apparently not much. After Google’s ads teams have been testing FloCs, it’s been shown to provide an effective replacement for third-party cookies, while keeping the user’s data private on the browser. According to their tests , advertisers can expect at least 95% of the conversions per dollar spent when compared to cookie-based advertising.

So, it’s business as usual. If you’ve seen personalized ads before, you’re going to see them in the future as well. They’re just based now on the cohort characteristics you’re included in, instead of data that could be linked back to you as an individual.

There are, however, important lessons to be learned from all this.

Key takeaways from the cookie apocalypse

Consumer data privacy issues are not going anywhere. Most likely we’ll see more regulations towards consumer-friendly consumption environments, whether it’s physical or digital spaces. Current cohort approach is like wearing masks to fight the pandemic – it certainly helps, but only as a temporary solution. Bypassing current regulations with another tracking approach is only delaying the inevitable, which is abandoning micro-level targeting altogether.

Sometimes the most obvious solutions are the hardest ones to see. Cartoon by Marketoonist

A good indicator for this is the above-mentioned Google research, in which the conversion rates remained the same even though the targeting moved to higher level. This implies that personal data isn’t needed in the attribution process. And if it isn’t needed, it shouldn’t be relied on if you want to build your attribution model on a sustainable foundation.

The vaccination – or the permanent solution for the problem in this case – is to shift from hyper-granular online-only sales attribution ( which also has other problematic aspects ) to granular & holistic approach to marketing effectiveness measurement. In this approach the input data consists of product-day-store-level sales data & media channel-media items -level marketing data.

Putting all media channels to the same perspective by measuring them with the same metrics has been a hot potato for a good while now, but it’s importance will only increase in the near future for one specific reason (which has two implications) – the shift to digital marketing during Covid-19.

The sudden push into remote working spaces and heavily online-oriented lifestyles forced majority of marketers to allocate their media spend into online media channels to catch the consumers where they spend most of their time – online. This may seem like a no regret move, but the reality of things isn’t as black and white.

The effectiveness of digital marketing did no doubt increase substantially as consumers migrated into the world wide web. But as many marketers followed suit, digital channels quickly became overpopulated. One of the downsides of digital media channels is their inelastic effectiveness curves, so pouring most of the media budget into these channels did not, in fact, provide the final solution for marketers. Instead, it’s now more important than ever to know the net-net impact of your digital marketing activities.

Digital media channels have been traditionally measured by metrics that are not comparable to other channels. This has to change in the future if marketers want to ensure efficient budget allocation. Cartoon by Marketoonist

The second implication and the flipside of this trend is that traditional media channels (TV, print, direct mail etc.) have increased their potentiality due to decreased competition. Dominating the airspace in these medias is likely to be easier now, which in turn provides substantial opportunities for brand building, which is extremely difficult in digital channels.

Again, having the same metrics for the whole media mix enables marketers to understand how and why the ROMI develops over time.

Moreover, sooner or later all marketing data lives under the same roof (like we’ve seen with other data-driven systems and solutions). But only the first-movers reap the highest profits when it comes to marketing effectiveness.

It’s never too late to kickstart the change. Here’s what the cookie monsters can do already today:

Cookie rehabilitation 101 - What should you do next

1. Improve your first-party tracking capabilities

When 3rd party cookies are gone, we are left with first-party cookies. Therefore, step one is to make sure your first-party cookies are running with full capacity. In this case, the key to survival is to learn how to obtain and use independently collected first-party data from different systems.

As we are left “on our own” in a sense, publishers are given the responsibility to make sure their website is using all the available tools to collect information about the visitors on their own, with for example registrations and subscriptions.

We can see examples of this with Amazon and Apple, who have been the masters of collecting first-party data for years. We can expect these two most likely entering the advertising market in the future. In a nutshell, if a user is willingly logged in to a system that collects the first-party data, such in Google and Microsoft, they can be served with tailored ads. There is and will be lots of lessons to be learned from these giants.

2. See the possibilities of current or alternative tools as they adapt to change

Believe me, no third-party cookie reliant company wants to get left behind as their business is wiped from under their feet. These companies will also try to adapt and overcome the new obstacles. It might be reasonable for you to stick around with your favorite tools and see if they can still offer you something, either now or in the future.

For example, Facebook is actively improving and implementing their server-side tracking to adapt and ease the loss of Facebook Pixel conversion tracking. And let’s not forget Google’s tests on Cohorts so far. Clusters of audiences are still able to be bought based on their interests. If this does work, we are in a sense getting a better, more privacy-protected solution for closely similar outcomes. This raises the question, why wouldn’t we want more privacy for us and our customers while being able to do marketing effectively?

3. Review your current partners and search for new ones

As mentioned, there’s not a company out there who is willingly stepping out from the game in the post-cookie world. This means that you have to take time and realistically evaluate your current affiliate networks, advertisement agencies and other partners for their capabilities today and in the future.

Try to build honest and open discussion around what will change, how this affects the day-to-day processes and where the company wants to go in the future, should similar issues arise. As in any relationship, the true solutions are only attainable through transparency, selfless actions and dialogue.

Also, a word to the wise, the best bet might not be to put everything in red, but instead look for objective partners instead of using the advertisers’ own platforms for analyzing and improving the effectiveness of your marketing activities.

As a conclusion, even though conversion tracking, remarketing, programmatic measurement, profiling and targeting as we know it is partly coming to an end, there is life after cookies. Similar to how Covid-19 ushered in the new remote working culture, the end of third-party cookies could be a positive push towards more sustainable & user-friendly marketing effectiveness measurement.

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