First-Party Data, the End of Third-Party Cookies and the Future of Targeting

The NAB commissioned a study on the depreciation of cookies, suggesting that broadcasters could see annual losses of $2.1 billion. That's a number that would get anyone's attention. But is it inevitable? There's still much that has to play out and many unanswered questions.

With that in mind, Marketron recently interviewed Katy Sokolowski, lead associate account director at The Trade Desk, who gave us great insights into the history of cookies, the future of first-party data and what's next for targeting.

What Are Cookies, Where Did They Originate, and How Are They Used?

First, Katy gave us an important history lesson on third-party cookies. "The cookie was developed in the '90s by Lou Montulli for e-commerce use," she said. "If a customer went to a website and put products in their shopping cart, they could return to the website, and the items would still be there."

First-party cookies on websites still offer this convenience for online shoppers, but the cookie grew into something it was never intended for -- targeting for digital advertising. "The advertising ecosystem caught wind of this and started to leverage it in a much different format, which became third-party cookies," Katy explained.

The third-party cookie that Google plans to end (and other technology companies already have) is the script in a browser from a website that's not the one you're visiting, which includes third-party advertising platforms. "The way it's been used for advertising is two-fold," she noted. "Websites place a cookie on a browser and use that identifier to target you later, called retargeting, or to track whether you've created an action, which is called conversion tracking."

Why Is Google Ending Third-Party Cookies?

Google's main message about the deprecation focuses on consumer privacy. Katy expanded on possible intent. "There are benefits to cookies, but the technology is pretty archaic," she said. "A cookie, in general, is inefficient at understanding who a consumer is because different cookies are placed on each browser and device."

The advertising industry recognizes these issues. Katy noted that the industry should shift away from cookies for both reasons -- to be more consumer and privacy-centric and more effective and efficient in targeting.

With cookies soon fading from the ecosystem, the question now is what's next. Katy offered some key insights on this, focusing on an authenticated Internet.

Authenticated Identifiers: More Effective and Privacy-Centric

To prepare for what's next, The Trade Desk has developed Unified ID 2.0 (UID2). "Unified ID 2.0 is based on an email address or phone number converted into hashed, salted identifiers, which means anonymized and secured," Katy explained.

UID2 is an open source identifier, not owned by The Trade Desk, which seeks to benefit the entire ecosystem by making advertising more relevant and giving consumers transparency. Katy shared that The Trade Desk is creating a consumer privacy portal to give individuals more control.

So, how can innovations and approaches to targeting prevent the losses discussed in the NAB report?

Third-Party Cookie Death Consequences and How to Shift Forward

The concern for those lost billions is understandable, but every seller of digital advertising and company that uses it is in the same situation. The shift and how quickly sellers can pivot will matter.

"Some third-party data providers have only built their data segments off cookies," Katy said. "A lot of those data providers are now changing their data aggregation strategies to shift toward a futuristic identifier like UID2 that authenticates interaction with the consumer. They'll be able to track data assets and build audience profiles for targeting much more effectively."

The second part of the solution is first-party data, which is information a business collects directly from its customers and owns. Katy shared how this data can have tremendous value in the advertising ecosystem. "These data sets can be a starting point for advertising that you can onboard to a platform for retargeting consumers," she said. "You could also build a lookalike model to reach consumers like those customers."

Access to first-party data isn't plentiful for many advertisers, but it's not necessarily because consumers won't give it away. A global study found that 77% of consumers are willing to provide their email addresses for more personalized experiences. Businesses can start their first-party data collection simply by asking.

Advertisers may not be comfortable sharing this, but other opportunities exist. "You can build effective marketing strategies without first-party data by focusing on geolocation and contextual targeting, which will stay the same in a cookie-less future," Katy said. "Channels like connected TV are already not cookie-based."

The biggest takeaway from our discussion with Katy is that things are not as grim as some of the headlines. Advertising platforms are innovating and investing in a new era of targeting that will be much more accurate than cookies. Focusing on authenticated identifiers and first-party data will drive better experiences for media companies, advertisers and consumers.

The new direction loses the cookies, but the future looks much sweeter with an ecosystem that fosters privacy, effectiveness and authentication.

This column was written by Jenny Slade, Senior Product Marketing Manager, Marketron.

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