A Ticking Clock for Digital Ads: Exploring the Potential Effects of the Next Cookie Phase-out
Earlier this year, Google announced that a plan to make third-party cookies obsolete on the Chrome browser was underway.
According to the company, the goal of this decision is to:
“Make the web more private and secure for users, while also supporting publishers”.
The cookie phase-out belongs to the Privacy Sandbox initiative, whose core objectives have been outlined by Justin Schuh, Director of Chrome Engineering over a year ago. But what is this all about?
Important Challenges Ahead
Cookies are nearly as old as the modern internet and have been thoroughly used since the late 1990s.
As you probably know, cookies are embedded on websites for a number of reasons, such as:
- Remembering user data like usernames, passwords, and credit card numbers
- Recording user activity
- Serving relevant ads (and other information) to users
With this in mind, it’s not hard to see why the phase-out represents a major shift in the rules of the game.
If not properly addressed, the change can lead countless companies to a dead-end in their regular ad-serving activities, and ultimately, to less revenue.
But before we jump into hard evidence, let’s stop for a minute and take a look at the bigger picture.
The Big Drop
In light of privacy-related occurrences like leaks of sensitive data, ransomware attacks, and spam, the promise of a more private web has a powerful resonance.
However, there’s a leap between phasing-out third-party cookies and solving the problems mentioned above. Will this initiative translate into fewer data leaks, a reduction in ransomware attacks, or even less spam? It’s hard to tell.
On the other hand, it would be naive to overlook the potential effects this can have on the larger online ecosystem, where countless businesses rely on cookies to accurately advertise their products and services to a multiplicity of audiences.
This is why the upcoming cookie ban is so important. If left unchecked, some of the consequences will include:
- More irrelevant ads for users
- Reduced return on ad investments for advertisers
- Less revenue for publishers
Since cookies are mostly used for targeting purposes, an overall drop in ad engagement rates will be observed across the board.
As told above, I’d like to move on to what is perhaps the most worrying evidence regarding this initiative: a piece of empirical research that quantifies the effect of disabling third-party cookies on publishers’ ad revenue.
The research was conducted by senior Google staffers, and published in parallel with the announcement of the Privacy Sandbox project.
Now, feel free to grab a chair if you happen to manage or own an e-commerce store, a digital marketing agency, or a site that depends on ad revenue. Yes, what you are about to read is that bad.
Data Gatekeepers vs Data Enablers
On August 27, 2019, two senior Google staffers published a research paper titled “Effect of disabling third-party cookies on publisher revenue”.
The paper exposed the results of a series of A/B tests run on major sites that generate income by serving ads to its visitors.
This required a series of experiments to compare the revenue levels of sites serving personalized ads (generated, or influenced by data collected by third-party cookies) with those of sites serving non-personalized ads.
Here are the results, quoted straight from the paper:
“We observed that for the top 500 global publishers, average revenue in the treatment group decreased by 52%, with a median per-publisher decline of 64%.”
As you can see, the figures are pretty conclusive: when you take away the personalization factor that third-party cookies enable in ads, revenue takes a nosedive.
Furthermore, the research observes the following:
- A steep increase in user dissatisfaction with non-personalized ads
- Lower returns of investment on ads
- Increased overhead costs due to adjusting business models and variables
All of this makes the decision of banning third-party cookies even more puzzling.
Does the upcoming major cookie ban answer to Google’s concerns about user privacy, or will it just make publishers more dependent on the company’s ad services and networks?
Once again, there are no clear answers to these questions, although the dangers do appear to be quite concerning, and demand immediate action from publishers and advertisers.
Act Now, Before Things Go South
The looming ban on cookies has already produced a number of alternatives to help advertisers maintain their levels of ad personalization. Among these, one of the most notorious efforts is being led by Facebook and its Conversions API.
The Facebook Conversions API allows you to send web events directly from your servers to Facebook servers. It catches specific user actions in your site and provides cutting-edge data for your future Facebook ad campaigns.
Most businesses rely on the Facebook Pixel to achieve this, but the benefits of switching to the Conversions API can’t be overlooked since it provides:
- More control over the data
- Increased levels of security and data protection
- More flexibility
Taking into account that 2 out of 3 digital ad dollars are spent either on Google or Facebook, the Conversions API should easily top the list of priorities for digital advertisers, publishers, and e-commerce site owners.
Next Steps: the How and the When
The initiative of phasing out third-party cookies is basically being forced upon everyone, and it’s time to act. The most pressing issues at the moment are:
- Implementing the necessary changes
- Defining a timeline for the switch
As for the Facebook Conversions API, there are currently two paths you can follow towards a successful implementation: you either manually deploy it on your site or else use Integromat to do it.
Since the Facebook Conversions API is already available on Integromat, quick, codeless deployments are a reality – but this is material for another post.
Right now, it’s time to consider alternatives, define priorities, and act upon the actionable. What else, if not?