Picture of cookie monster eating cookies

What happens to advertising when the cookie crumbles?

With Google phasing out cookies, how will advertisers cope?

Marty Drill

23 February 2023

8 minute read

You book your hotel for your upcoming trip to Bali and then every advert you see on Facebook, Instagram or a random site, is for a hotel in Bali. Unlike when you buy a new car and you see that car everywhere reinforcing your smart decision, seeing an advertisement for something you have already purchased is irritating and irrelevant. 

Why do advertisers show you ads after you have purchased from them? Simply they retarget someone who has been on their site whether they have purchased from them or not. This happens to many users after visiting a site, they are followed around the internet, particularly on Facebook and Instagram with items they have recently viewed or purchased. 

For marketers, cookies are awesome. For users, they can be both helpful (don’t have to log in every time, or something is saved in your cart) and intrusive (constant reminders to buy things you have looked at can be annoying, while the selling of your data can be infuriating). 

Picture of a screenshot of a meme

Attracting and converting customers can be difficult and for many customers, their path to purchase can be long and winding. Targeted advertising via the third-party cookie (e.g Facebook watching you on Booking.com, then showing you ads for that site or the specific hotel you were looking at), can be highly effective when attempting to convert a user who has shown interest and is yet to purchase. The challenge is that sometimes they have already purchased and the advert is expensive and potentially annoying. However, it's a numbers game for advertisers. Apart from the inconvenience, many users are worried about what happens to their data and how much advertisers, and potentially bad actors, know about them. 

How do online ads work?

Cookies were designed to improve the user experience by remembering who they are, whether they are authenticated and what they are interested in. This piece of data is unique to each user and is what the website uses to identify you for all future requests. This essentially allows for a personalised experience for each user, such as their preferred language. However, it is also the reason why sites can retarget you, or other advertisers have the ability to leverage customer data to target the customers who are most likely to convert.

Advertising in the past was only for large businesses that could afford TV, radio and brochure ads. Cookies changed this drastically, allowing small (and large) businesses to take advantage of the ability of Facebook, Google, Instagram and others to target a specific customer based on their activity. The browser and social sites use cookies to track what you are doing online and serve you up ads based on your browsing history or what they know about you. They do this under the premise of being able to serve you the most relevant information. However, they also do it to serve you the most relevant ads. 

Restricting advertisers

Apple sought to address privacy concerns and in April 2021, made tracking opt-in on iPhone. Many users have opted out of being tracked, making it harder for advertisers to target users on Safari on their iPhones. This was seen as a huge step forward for many people who were worried about privacy. 

In addition to privacy concerns, cookies are also becoming less effective as users become savvier about ad-blockers and privacy tools. Ad-blockers, which prevent advertisements from being displayed, are becoming more popular, making it harder for advertisers to reach their target audience.

Google is phasing out the third-party cookie

First-party cookies are created by the website you are visiting, while third-party cookies are created by a domain other than the one you are visiting.

Google initially announced in January 2020 that it was phasing out third-party cookies by the end of that year. The advertising industry pushed back and Google subsequently announced it would kill off the third-party cookie by the end of 2024, to give advertisers more time to adjust. 

Google's decision to turn off third-party cookies is a result of growing concerns around user privacy. Third-party cookies have been criticised for their role in enabling targeted advertising and for collecting data without users' explicit consent. By removing them, Google aims to give users greater control over their data and provide a more transparent online experience.

This will mean that Facebook and Instagram will not be able to track you on other websites. For many, this will be a welcome relief. But for marketers, this gives up a goldmine of targeted customers. Google will still track you, however, there will be a privacy sandbox that removes access specifically to you. 

Future of online advertising

If third-party cookies are no longer used, the future of advertising will look very different. It will not stop the requirement for users to consent to be tracked by a cookie on a hotel site, it simply means that Facebook, for example, can’t track that you have been to that hotel site and as such show you ads for your hotel in Bali. Booking.com will still be able to send you emails asking if you want to go to Bali, however, a specific advertisement on Facebook for the hotel in Bali you were looking at on Booking.com will no longer be possible. 

Google’s Privacy Sandbox 

So what is the alternative for marketers? Essentially, marketers will have to be satisfied with targeting customers in a category rather than an individual. 

Google Privacy Sandbox is essentially a new proposal for cookie tracking. The algorithm works within a user’s browser and classifies them within a set of high-level interest groups, such as fashion, food or travel. This broad grouping can then be used for targeting.

This means that the advert may be less relevant to a user, however, it will mean that they retain their privacy, which is the intention of the change. 

Advertisers will increase their focus on Search ads. Google Search ads for example are faster to set up and are related to keywords/phrases that users type into Google to conduct a search. Google Search Ads will be less affected by Google killing off the cookie as advertisers can still target the keywords users search for and display relevant ads to those keywords. However, advertisers using Google Search Ads currently use demographic data (such as age and gender) to refine targeting - which requires third-party cookies. 

Another possible solution to the cookie problem is the use of contextual advertising. Contextual advertising uses the content of a website to determine the advertisements that are displayed, rather than tracking users' behaviour. For example, if a user visits a website about travel, advertisements for travel-related products or services would be displayed. This type of advertising is less invasive, as it does not require access to users' personal data, and it is less likely to be blocked by ad-blockers.

Influencer marketing may see an uplift, where advertisers partner with popular social media personalities to promote their products or services. Influencer marketing has already become a popular way for advertisers to reach younger audiences, and with Millennials now Australia’s largest generation, this trend is likely to continue.

However, this has seen a decline in recent times with influencers needing to indicate that they are promoting a product along with marketers finding it difficult to attribute sales conversions to influencers. Influencers are likely to continue to be utilised for brand awareness rather than a strategy for leads. 

So, what now?

While marketers will want to continue to target the most relevant users, they are going to have to work harder than simply placing targeted ads and relying on third-party cookies. As third-party cookie tracking will continue to be phased out, advertisers will opt to focus on categories of people and their interests, rather than individuals. If advertisers want to continue to target a particular age demographic, they may need to develop strategies such as choosing keywords more likely to be used by that age demographic and developing ad copy more compelling to that age group. Engaging a UX researcher to qualify in terms of language/terms a certain cohort might commonly use, could help an advert's success. 

You will still be able to track users' behaviour on your own site with a first-party cookie and as such implement engaging personalisation strategies that improve their experience (providing the users enable your site’s cookie). Simply, you will not be able to follow the user around the internet and instead target them as a group of people interested in a topic related to your product or service. Search Ads, retargeting on your own site/app, abandoned cart reminders, brand content on social channels and broad context advertising are the future. 

Essentially Google is upholding the privacy of the user and is at last putting privacy first. Marketers are going to have to work harder to earn the interest of consumers as the audience will become more generic and less interested. There has to be some value exchange, something for the consumers to engage with your brand. What’s in it for the user? 

The future of advertising is in the value exchange that the user receives from interacting with your brand. 

Here's what value-driven ads look like: 

  • Information about running techniques, rather than a picture of your latest runners. 
  • Tips on how to build storage cabinets rather than a product photo of a drill. 
  • Recipe for healthy eating, rather than just flogging protein shakes. 
  • How to automate your home, rather than selling electrical switches. 

There has to be some value for the user, beyond a traditional advert. Marketers will need to create more content rather than just focusing on targeted ads. The advert may create awareness, but your content will be the only thing that creates interest. 

As third-party cookies are phased out, marketers need to redevelop their advertising strategy to focus on connecting with customers. Ultimately the power is now with the user who will have more control over their privacy/data and will decide with their clicks/purchases whether your advertising and content strategy is successful. 

What is a cookie?

  • A cookie stores information about your visit to a site
  • They are most useful when it comes to remembering your log-in details on a site that you visit frequently
  • They also keep you logged in as you visit different pages on the site
  • The downside is that they can track all of your movements across a site and that information can be sold to third parties
  • Advertisers find this information highly valuable as they can target people who have a higher chance of being more interested in their product, based on their browsing history.

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