Cookies are small pieces of data that are sent to the server by the browser, automatically, with every request. This data can also be used for various purposes such as tracking the shopping cart, tracking the user across multiple websites, tracking user preferences, etc.
Imagine you are on a website and it offers a choice of viewing the website in white mode or dark mode. You as a user would like to make this choice once and would prefer the website to remember this for future interactions with the website. This preference is recorded by the browser and set on the server using cookies. The next time the user lands on the webpage, this setting is sent to the server automatically using cookies and the user sees the website in dark mode.
What are first-party cookies?
The cookies set by the server from the same domain that you visit are called first-party cookies.
This domain name is what you see in the browser URL.
What are third-party cookies?
Third-party cookies are the cookies set by third parties like ad networks. The server or the domain of these networks is not seen in the browser URL.
How are Third-party cookies used for ad recommendations?
Let’s assume that you are visiting a website called mynews.com and they have integrated with an online advertising service called fancy-ads.com. As soon as you land on a webpage of mynews.com, there are 2 types of cookies that are set. A first-party cookie set by mynews.com and a third-party cookie set by fancy-ads.com. This network also assigns you a userId to identify you. Now every time you read the news, your userId and the news page that you visited are sent to fancy-ads.com. This way, the ad network knows that you have visited mynews.com and also what pages you have read via third-party cookies.
After the news, let’s say you visit an e-commerce website like Amazon, which has also integrated with fancy-ads.com. Again another third-party cookie is set, which records your amazon page URL, but uses the same userId. Now the ad network knows what news you have read and what items you have viewed on amazon. This way the ad network starts building your profile as you visit different sites. Armed with this information, the ad agency is able to provide you with highly personalized ads. This is why you start seeing the ads for shoes on every website, in case you have recently viewed shoes on an e-commerce site.
End of Third-party Cookies
Third-party cookie tracking is a very powerful technology but its working is usually hidden from the end users. Data is often collected without their knowledge and sometimes the users are also forced to share data since that’s the only way they can use a particular website. This has earned the 3rd party tracking methods a bad reputation and users are beginning to think of this more like a surveillance tool than a personalization tool. That has resulted in various regulations and measures to protect the privacy of users online. One such measure is phasing out of 3rd party cookies completely. What this would mean is that the ad agencies will no longer be able to build a user profile since they won’t know if a user who visited mynews is the same as the one who visited amazon.com.
Google has announced that it will phase out third-party cookies on Chrome browser by end of 2024. Safari and firefox have already started blocking third-party cookies by default.
Preparing for the Third-party cookie phase-out
The death of third-party cookies will definitely have an impact on publishers who are relying heavily on ad revenues. Industry experts recommend that publishers have their first-party data strategies in place to prepare for the world without third-party cookies. This could be expensive at first but should be considered as an investment in a more long-term strategy.
Another approach is moving away from behavioural targeting (as done by 3p cookies) and adopting contextual targeting. With this strategy, the ads are ranked based on factors such as the content of the page, topics, location, keywords and language rather than user history. This way it doesn’t rely on cookies or other personal information of the user. It’s also more cost-effective than behavioral targeting.
In addition to these, publishers should also consider moving towards a subscription-based model to reduce the reliance on ad revenues.
At WRU.ai we can provide a complete end-to-end suite for publishers for implementing subscription management, identity management, user engagement, user segmentation and targeting, 360-degree analytics, and more. We also provide consulting services with Industry experts to help you figure out the right solution for your goals.