Five Point Summary:
- The absence of third-party cookies will impact programmatic media buying, limiting capabilities to identify audiences and serve targeted ads
- Programmatic guaranteed deals will be relatively unscathed since they can use first-party data for ad targeting and contextual placements
- Previous methods of programmatically targeting multicultural audiences will likely not work in the near future since user identification is based on third-party cookies
- Eastward Media offers programmatic guaranteed deals for brands and agencies to reach Chinese audiences living in Canada and the United States
- Publishers should invest in their first-party data strategy; agencies and brands should invest in publisher alliances or securing programmatic guaranteed deals
For the better part of twenty years, third-party cookies have been the technological foundation of digital advertising. But today, this is swiftly changing.
A quick refresher on cookies…
Cookies are small, randomly encoded, text files generated by websites to record a user’s activities and remember their site settings. Cookies are typically stored on the user’s device and automatically processed by the internet browser to create convenient and personalized web experiences for the user. Websites can generate multiple cookies, with temporary or long term (called “persistent”) life spans.
The “good” kind of cookies are typically first-party cookies. They’re only used by the websites from which they originate, and can be helpful for the user with website navigation, remembering login information, and populating form fields.
Third-party cookies get a bad rap. The simple difference is that third-party cookies are generated by a website the user is not visiting, and so can record that user’s online activities as they browse across multiple sites.
The “bad” kind of cookies talked about in the news are usually third-party persistent cookies, also known as tracking cookies. These third-party cookies can be used by marketers to compile audience data and record online activities and behaviors for the use in advertising.
In reality, there are no “good” or “bad” cookies, but only bad actors and unclear rules of engagement: how should third-party cookies be used in marketing? Do they violate our privacy? Should we be allowed to use third-party cookies for political campaigns?
Bidding farewell to the third-party cookie…
Mounting pressures from consumer protection groups over the past decade have led governments around the world to create regulations that restrict the use of third-party persistent cookies. Europe has its GDPR (implemented in 2018) that allow some cookies but require the user to first opt-in, and California has its CCPA (enacted into law in 2019) which also allow some cookies but the user is presented with options to opt-out anytime.
While these regulations have worked to limit the functions of third-party cookies by advertisers, the real blow was dealt by the world’s major internet browsers. As of this writing, Safari, Firefox, Internet Explorer, and Chrome are blocking, limiting, or phasing out support for third-party cookies. Google’s recent announcement on January 14 that no third-party cookies will work in Chrome by 2022 could be regarded as the ‘nail in the coffin.’
So without third-party persistent cookies, will highly personalized and specifically-targeted ad campaigns ago away?
The answer is yes. Sort of.
What happens to programmatic advertising when third-party cookies go away?
Programmatic advertising – the automated buying and selling of online ads – relies heavily on third-party cookies to identify target audiences and deliver ads based on their interests.
As explained earlier, these third-party cookies track a user’s online behaviors and activities, but they also transmit data and requests to various servers. Data management platforms (DMPs) and demand-side platforms (DSPs) receive these transmissions and process them in conjunction – called cookie synching – to qualify a user for an advertiser and request ad units. This automated process is completed in fractions of a second and is built primarily on the availability of third-party cookies.
So as internet browsers and government regulations force away the third-party cookie, most programmatic advertising companies will have a reduced ability to track audiences and execute targeted ad campaigns.
This is especially true for highly automated programmatic buying methods that access the open marketplace and auction inventories, since these methods rely heavily on third-party cookies to determine where on the millions upon millions of websites to serve ads.
The death of the third-party cookie has major implications for marketers and businesses. Last year, advertisers in Canada and the United States spent $2 billion and $58 billion, respectively, on programmatic advertising. It’s a major revenue stream for media agencies, and a highly effective tool for brands. So will programmatic advertising go away completely with the death of the third-party cookie?
The return of programmatic guaranteed deals and first-party data
First-party cookies are mostly unaffected by the changes impacting third-party cookies. In fact, first-party data from publishers are increasingly valuable, and among the narrowing selection of permissible and actionable sources for ad targeting.
Programmatic guaranteed deals are relatively unscathed. In this method, advertisers buy ad impressions on a single site or network, and targeting is primarily driven by first-party data since the user’s activities is only tracked on the same site she is using.
Savvy publishers who activate their first-party audience data can provide advertisers with similarly powerful ad targeting and highly contextual or relevant ad placements.
This is why agencies and brands are starting to court publishers for their impression inventories, executing programmatic guaranteed buys through direct orders or private marketplaces. In addition to having the highest ad serving priority, programmatic guaranteed buys can also offer better brand safety as there are fewer variables in motion.
So instead of an advertiser’s campaign appearing across millions upon millions of websites in an open marketplace deal, an advertiser’s message will only appear on the sites or networks available through that programmatic guaranteed deal.
What about ethnic targeting or multicultural media buying?
Multicultural advertising is a growing focus for many brands and agencies, as demographics in Canada and the United States continue to evolve. Brand marketers understand more that Chinese, Korean, Indian, Black, South Asian and Latinx consumers have different purchasing needs, shopper values, brand assumptions, and media habits.
Many savvy digital marketers used a two-step method to reach multicultural audiences online: identification and inventory. Through third-party persistent cookies, cultural audiences could be identified by their predicted online activities – usually informed by some form of panel research or survey. Ads could then be delivered to these cultural audiences via the websites they use if they happen to be available through the inventories that the programmatic ad platform buys.
This will likely all change with the forcing away of the third-party cookie, too.
The above method to reach multicultural audiences programmatically worked well for years, for all cultural audiences in North America except Chinese. This is because many Chinese websites are disconnected from mainstream DSPs and unavailable through ad exchanges due to censorship regulations. So there is insufficient inventory available to DSPs.
For example, a Chinese female web user between the ages of 25 – 34 living in New York could be watching Story of Yanxi Palace on iQIYI – one of China’s largest video streaming sites – but an advertiser like Chanel or Tory Burch could never reach that user through that popular platform.
Or a Chinese male web user between 35 – 44 living in Vancouver could be reading news on Caijing – a major business and political news publisher popular with executives – but an advertiser like Rolex or Wells Fargo could never reach that user.
This is actually the problem that Eastward Media solves with our managed programmatic guaranteed advertising solutions. And since we exclusively use first-party cookies for targeting across Chinese media networks, we’re also unaffected by the current and looming changes to third-party cookies.
Eastward Media has access to enormous walled gardens of premium Chinese ad inventories. We can reach millions of Chinese consumers across North America every day. We work with some of the largest media agencies and brands to supply them with programmatic guaranteed deals to reach their target Chinese audiences in Canada and the US.
So what’s next for the advertising industry after the third-party cookie disappears into history?
No one really knows what’s coming next, but everyone seems to be working on it. Which is a great thing.
In preparation for our cookie-less future, ad tech companies are working collaboratively with regulators and marketing trade associations to develop technologies that will replace the functions of third-party marketing cookies. This might look like a universal ID, shared first-party ID solutions, or another method to identify audiences.
Whatever the innovation, it will likely take some time for adoption so brands and agencies should look for viable alternatives in the lengthy interim. But with marketing trade organizations like the IAB Tech Lab, ANA, 4AS and W3C collaborating on how advertisers can morally technologize personal data within the bounds of regulation, I think we can be optimistic that what is coming is better than what is gone.
Interested in learning more about Eastward Media and our programmatic guaranteed solutions to reach Chinese audiences across North America? Get in touch today.