Our CEO, Andrew Fischer, on what we can expect after Google ends support for the advertising cookie.
If you’ve spent any time in the American southeast, you’ve likely noticed the prevalence of a green leafy vine blanketing everything from trees, to buildings, to power poles. It’s actually a non-native plant named Kudzu originally introduced to the US from Asia at the 1876 World’s Fair as a garden novelty. A few decades later the plant was aggressively marketed as an agricultural solution to combat soil erosion during the Great Depression. The efficacy in battling the Dust Bowl was mixed, but the introduction of 85 million seedlings laid the way for the “vine that ate the South.” Now, Kudzu is a horticultural phenomenon carpeting landscapes from North Carolina to Florida.
As part of Choozle’s 2020 kickoff, I presented to our annual State of the Choozle. To provide some context for the newer members of our team, I presented a quick history of advertising technology. It had become such a part of the fabric of ad technology, and wider internet experience, that I was surprised to (re)learn the HTTP Cookie was originally developed by Netscape in 1994 to identify “remember” repeat visitors to the browser to provide a better experience–no need to re-login, remembering what items are in your cart, etc.
Exactly the day after my team presentation, Google dropped the bomb regarding the deprecation of the third-party cookie in the Chrome browser which sent shockwaves throughout the entire internet industry. “The death of the third-party cookie has been bearing down on us like a freight train for years,” said Randall Rothenberg, CEO of the Internet Advertising Bureau (IAB). “How is it we tethered the future of marketing and media to such a slight and imperfect technology?”
What purpose did the advertising cookie serve to begin with?
Between 1994’s introduction of the cookie and Google’s recent announcement, this little snippet of code has inadvertently become one of the keystones of the entire digital advertising ecosystem. With its roots embedded into many core systems of performance and measurement, the cookie indeed became the Kudzu of digital advertising. And considering the consumer bargain between content and advertising (the content if free, but it comes with ads), the cookie was a linchpin of the entire rise of digital economy over the last 30 years.
During the latter half of that stretch, advertising technology also rose to prominence such that over 85 percent of display advertising is now programmatically executed, and search and social media are nearly exclusively powered by software automation. With a lens on the display ecosystem, which is most affected by advertising cookie deprecation, programmatic software modernized the industry and solved key problems/opportunities inherent in digital advertising: medium fragmentation, workflow efficiency, audience targeting, and measurement/attribution. These ad-technology enabled solutions propelled digital advertising into a global $300B juggernaut.
What would happen if the advertising cookie disappeared today?
If the advertising cookie disappeared today, advertisers would still be able to advertise at scale and realize great efficiencies driven by software automation. One would still be able to log into a buy-side platform and create a campaign to target to reach millions of consumers in minutes. However, their ability to target specific audiences and measure the effectiveness of their campaigns would be compromised if not impossible. It would be a bit of “back to the future” with advertisers utilizing content targeting as a proxy for known consumer behavior (via third-party cookie matching/targeting). Thus, as an example, an advertiser would be required to blanket all automotive sites to capture a meaningful share of car purchase intenders. And without the cookie, the attribution systems wouldn’t be able to effectively match conversions to specific campaigns and tactics.
Where do advertisers go from here?
First keep in mind that Google’s announcement is a similar move made previously by the other major browsers (Firefox, Safari). And Europe’s Global Privacy Data Regulation (GDPR) enacted in May of 2018 and the California Consumer Protection Act (CCPA) were also major regulation developments that paved the way for these seismic changes. Thus, no key industry players have been caught flat-footed and many have been building and testing out cookie-less targeting solutions for years.
The realities around protecting consumer privacy and data, however, may mean the open internet may never have an option with the fluidity and scale presented by the cookie. And inadvertently, the walled gardens may even gain more market power as they inherently have detailed identification and consent built into their platforms. That said, Google has openly stated their intent to collaborate with all industry stakeholders to co-develop fair solutions that benefit everyone at the table. If nothing else, a threat of anti-trust serves as a balance for Google to invest in maintaining a healthy and viable independent digital advertising ecosystem.
Thus, Google’s announcement provided a certain finality to the cookie technology as well as a two-year horizon on the sunset. And the industry has rightly reacted with a mix of anxiety and uncertainty and a mix of healthy optimism.
What big changes are the horizon for advertisers and the industry as a whole?
In the short-term, don’t expect many changes–especially for advertisers. Compromises in targeting and measurement may trigger minor reallocation of digital media budgets to more traditional mediums. But ultimately the dollars always follow the engagement. And consumers live more and more of their lives online and on their phones. We may see short-term adjustments, but radical redistribution of media pie is very unlikely. And also keep in mind that the cookie is a targeting/measurement solution primarily for desktop/website-based advertising. Thus, the fastest-growing automated mediums such as mobile, audio, and connected TV largely won’t be as impacted (some cross-medium attribution will naturally be affected).
Reading the tea leaves for the last several years, industry stalwarts and trade groups have already been busy building non-cookie based frameworks and methods of user identification. At an industry level, the IAB recently announced Project Rearc which “seeks to rearchitect digital marketing to drive our industry forward while aligning the interests of consumers, businesses, and governments.” And individual firms in parallel have been building out cookie-less targeting products (see LiveRamp and Criteo’s announcement on cookieless solutions). The realities of competing with the walled gardens make it probable that all key players will collaborate closely to build/provide solutions that solve for both performance and measurement–all at scale. Overall, it will be a bit of a waiting game as continued collaboration and innovation yields reliable solutions to reestablish the value from the retiring third-party cookie.
Like Kudzu was not intended to be a foliage fixture in the South, the underlying technology of the cookie wasn’t meant to be the backbone of the digital ecosystem. And unlike the futile attempts to stave off Kudzu, the advertising industry can and will build a better system for digital advertising targeting and measurement–one that balances the needs of advertisers while respecting the privacy and transparency of consumers. Big G’s announcement provides the certainty to collectively focus on designing and building a better system that balances the needs of the advertising industry (targeting and measurement) with the needs of the consumer (transparency and privacy).
