How phasing out of third-party cookies will impact digital industry

BY ELO UMEH

In January 2020, Google announced that it would phase out third-party cookies on its chrome internet browser over the next two years, joining other internet platforms like (Safari by Apple, and Firefox by Mozilla) in this direction since 2013.

This development comes amidst the growing agitation for stronger user privacy and security on the internet. As quoted by Justin Schuh, Director of Chrome Engineering at Google, in a post, “Users are demanding greater privacy-including transparency, choice and control over how their data is used-and it’s clear the web ecosystem needs to evolve to meet these increasing demands.”

It is important to note that Google’s browser app – Chrome, constitutes 60%+ of the total users of internet browsers as of Q2-2020 (source StatCounter), making this the most impactful in the Digital Advertising space by any web browser. Marketers and advertisers alike have become weary as to what the future of targeted advertising holds for them given the domino effect this will have on their business.

“Cookies” were first introduced in 1994 by Lou Montulli, a founding Engineer at Netscape Communications. They are small pieces of data stored on the web user’s computer/device and enable the domain/webpage to store information and preferences about that user in order to facilitate smoother user interactions. Simply put – it helps the domain to remember the key information like your password, and what scope of attributes your interests are to keep the interaction up and relevant to you.

You might wonder why cookies? – Think of it this way; without cookies, the interaction between web users and web domains would be very inefficient, and every detail has to be repeated over and again for each page interaction. It simply means for example, that for every subpage within Facebook or Jumia that a user clicks after the initial log-in, you still have to re-enter your log-in credential to interact with the domain. – (this underlines the major inefficiency that exists without cookies), because there would be no identification information stored with which to interact with you. That being said, other useful information tailored to the user, like the kind of resources he visits, his preferred language settings, or his sectoral interest are also stored on the user’s system.

It is vital at this point, to note that there are two kinds of cookies – (the first-party cookies, and the third-party cookies). Although they are similar in terms of technicality – what they essentially do, they differ in terms of the deployment and usage. The first-party cookies are created by the domain/website to store user information for better interaction. It can only be used by that specific domain page based on the unique identification it has on the cookie. The third-party cookies on the other hand, are created by advertisers for the capability to learn about a user’s overall online behaviour, with the goal to advertise and re-target more to a more precise audience across multiple sites. This means it is capable of multi-domain utilization of users information, hence giving rise to questions around user privacy and data security.

Google claims that this big decision to phase out third-party cookies from its Chrome is driven by the increasing user demand to strengthen privacy protection, hence the need for the web ecosystem to also adapt to the market needs.

In today’s Ads ecosystem, marketers are inclined to depend on third-party cookies in order to design and execute marketing strategies for Ads-retargeting, Pop-up Advertising, and laser-focused user campaigns to enhance efficient marketing resource utilization of the advertisers.

We are led to wonder at this point how marketers who depend heavily on third-party cookies for Ads retargeting to drive their top-line would cope with the new development. This phase out is extremely significant in the digital advertising industry for all stakeholders especially because Google remains the overwhelming market leader in the web browser segment, hence, everyone from the advertisers who depend on the marketer’s ability to track and execute user-tailored Ads, to the publisher who enjoys the monetization of their platform, and the marketer who derive their major revenue sources will all have to adjust to the new reality.

Google has made it known that their alternative to the third-party cookies will be “Privacy Sandbox” – which it claims would enhance user privacy and actually be a fine balance between user privacy and tracking. The major element in the privacy sandbox is Google’s plan to migrate the user’s data into Google chrome where it will be stored and processed. – In essence, marketers and advertisers will inevitably become more dependent on Google for advertising, or find ways to better leverage the first-party cookies instead.

What next?
Right now, the key stakeholders in the digital advertising ecosystem will have to stay close to the coming updates with regards to this development as it unfolds. It protends a market that will be controlled by leading global technology platforms, such as Facebook, Google, Apple, Microsoft and a few others.

This is also a wake-up call, for marketers and advertisers locally, more specifically in Africa to be open to other innovative ways in knowing who their customer is, engaging with them, executing advertising initiatives, which make them less-dependent on third party cookies. There is now an urgent need to build internal capabilities to make them more agile/better responsive to the risk of regulatory/monopolistic policies that might radically affect their businesses like this in the future.

Conclusively, Covid-19 has enforced an acceleration of digital capabilities across several industries. The outcome will be an increasingly low touch business environment where brands will need to rely more heavily on digital channels.

Therefore, a number of questions; how can brands have more control over reaching their customers? Can the technology that enables communication be customizable to local market realities? In what ways can brands identify and segment audiences in ways that are compliant to privacy, security and also transparent?

Umeh is the chief executive OFFICER of Terragon