The Challenge of 3rd Party Cookies
For years, third-party cookies have powered digital advertising, fuelling platforms like Google and Meta. These tiny tags, combined with vast amounts of first- and third-party data, have allowed advertisers to create hyper-targeted audience segments, delivering highly personalised ads on a global scale.
This has been brilliant for the platforms that sell online advertising because it has increased the effectiveness of campaigns while also reducing the costs of those campaigns due to less wastage in each audience segment.
Cookies were great, and targeting worked. Life was good for all …or was it?
You see, the end of third-party cookies isn’t a sudden development. Many of the major browsers have been moving away from third-party cookies for longer than you might realise.
Safari stopped supporting them back in 2017, with Firefox following suit in 2019.
Check out this white paper from Apple, which was published in November 2019.
In that White Paper, Apple emphasised their commitment to protecting user data with a new Safari browser designed with privacy at its core. Features like Intelligent Tracking Prevention (ITP) that block cross-site tracking are no longer an ‘opt-in’ function. Instead, it comes as the default option already turned on.
This means that about a third of the world’s internet browsing activity has been cookie-free for some time now.
But in recent years, all of us have become increasingly aware of the massive overreach in privacy that these platforms have now created. Off the back of this public sentiment, governments around the world are quickly changing their regulations.
In this article, we’ll break down what third-party cookies are, why they’re disappearing, and—most importantly—how this change will affect your business.
We’ll also explore alternatives and offer actionable strategies to help you navigate this new landscape.
What are Third-Party Cookies?
To understand the magnitude of their disappearance, let’s start with what third-party cookies are. Cookies are small files that websites store within your browser. First-party cookies are generated by the website your visiting at the time, mainly to remember your user preferences, login information, or what’s in your shopping cart, etc. These are not going anywhere and are vital for a smooth user experience.
On the other hand, third-party cookies are created by domains other than the one you’re visiting. They allow advertisers to track you across different sites, build a profile based on your online behaviour, and serve targeted ads tailored to your interests. They’ve been a vital tool for marketers to understand audiences, improve campaign effectiveness, and optimise ROI.
Why are They Being Phased Out?
High-profile data breaches here in Australia like the ones we saw with Optus and Medibank have increased scrutiny of online tracking practices and the importance of cyber-security in general.
In response, governments have rolled out new privacy laws, starting with the General Data Protection Regulation (GDPR) in Europe and more recently the California Consumer Privacy Act (CCPA) in the U.S. Australia’s own Federal Government has now ordered a review into the Privacy Act (cth 1988) to make it harder for businesses to collect and use personal data without consent.
The other major global force in this equation is Apple.
In 2020 Apple released iOS 14, which had an abundance of new privacy features, including the new App Tracking Transparency framework (ATT), which suddenly prompted its users to actively opt-out (or opt-in) to sharing their Identifier of Advertisers tag (IDFA), or what is commonly known as your “device ID”.
This single software update resulted in 50% of iPhone users worldwide opting out of sharing their information, making it much harder to gather data via mobile devices.
Source: https://www.appsflyer.com/company/newsroom/pr/att-data-findings/
So, what’s happening today?
Well, the other 65% of browser market share worldwide is held by just one company.
You guessed it, Google. (Source: https://gs.statcounter.com/browser-market-share)
And, until now, Google, and their browser, Chrome, have been dragging their feet on this issue. Understandably so, as they make quite a bit of money out of online advertising.
Here’s look at Google’s Ad Revenue over the past 20 years;
Still, Chrome’s sheer dominance means this is a massive shift in the digital advertising world.
Then, in July 2024, Google backflipped, and announced that it would no longer seek to deprecate third-party cookies.
Instead, they are building a new path called – Privacy Sandbox. Source: https://privacysandbox.com/news/privacy-sandbox-update/
The Privacy Sandbox project from Google, is aimed at developing new web standards that allow websites to access limited user information while safeguarding privacy. Their stated goal is to support online advertising by sharing only essential user data—without relying on third-party cookies.
Deciphered, Google is using the market power of its Chrome browser (with 65% global market share) to maintain control over its ~240B worth of Ad Revenue, which currently may be at risk from the depreciation of third-party cookies.
The Privacy Sandbox approach shifts control of user privacy to the web browser, bringing data collection and processing for advertising directly onto the user’s device.
There are three focuses within the Privacy Sandbox initiative:
- Replacing the functionality of cross-site tracking
- Removing third-party cookies
- Mitigating the risk of device fingerprinting
Critics have called the model anti-competitive, sparking antitrust concerns. While their current proposal restricts traditional tracking methods (and moves away from third-party cookies), it forces advertisers to rely on Google as a gatekeeper for delivering their ads.
What Does This Mean for Your Business?
Start preparing for Google’s Privacy Sandbox now.
Google is working on alternatives to third-party cookies through its Privacy Sandbox initiative. This aims to allow advertisers to target users in a privacy-friendly way by using technologies like Federated Learning of Cohorts (FLoC). While still in development, staying informed on these initiatives can help your business prepare for what’s next. Also, understanding the laws around consent and how consent banners presently work will help you grasp what Google are planning next with Privacy Sandbox and Chrome.
Want to learn more? Contact Us.