Google Chrome's cookie shift: Navigating challenges and embracing first-party data

In the evolving digital era where visiting a website guarantees them asking for your permission to access your behavioral data as you scroll through the internet, Google Chrome is in the process of phasing out third-party cookies. 

On January 4, 2024, Google released a new browser feature called Tracking Protection, which cuts off a site’s access to third-party cookies when activated. The feature will be activated for 1% of a randomly selected group of Chrome users globally.

Third-party cookies have been a fundamental part of the web for nearly three decades, as per Anthony Chavez, VP, Privacy Sandbox at Google. While they can be used to track website activities, sites have also used them to support a range of online experiences, like helping you log in or showing you relevant ads.

Google has specified that participants for the feature are selected randomly, and if chosen, they get notified when they open Chrome on either desktop or Android.

Tracking Protection marks a step towards the company testing developers’ readiness for a web without third-party cookies. 

While it has been stated that cookies will be deprecated by the end of 2024, the larger problem lies for digital advertisers. 

During a survey carried out in late 2022, 75% of marketing and customer experience leaders stated that they heavily relied on third-party cookies. Additionally, 45% said that they were spending at least half of their marketing budgets on cookie-based activations and 64% said that they were planning to increase their spending on such activations in 2023.

Amid this push and pull for personalizing content for users and protecting user privacy, we attempt to understand the implications of the introduction of the feature and its way forward for digital advertising.

Transition from Third-Party to First-Party Data

According to Tanvi Bosmia, Account Director, SoCheers, the new feature signals a shift in programmatic advertising, but it's not a cause for alarm. 

“While third-party cookies have long been the mainstay, their deprecation presents an opportunity to embrace a more sustainable approach built on first-party data and contextual targeting.”

- Tanvi Bosmia

Bosmia highlights that while adapting to this will require addressing data fragmentation and limited reach, the benefits include enhanced user trust, relevant ad delivery, and, ultimately, stronger results for your campaigns. 

Shradha Agarwal, Co-founder and CEO, Grapes opines, that one major obstacle with this shift is the limited scale of first-party data compared to the extensive reach of third-party data, which, in turn, constrains audience outreach. 

Sharing the implications on marketers with this, she elaborates, “Marketers may grapple with getting explicit consumer consent for data collection. Bringing together different types of data from users can be tricky too. It will require robust strategies to manage data well and understand it properly for effective personalized targeting.”

This reduction in third-party cookie inventory is also anticipated to drive an uptick in Cost per thousand measurement (CPMs) as advertisers compete for a limited ad space. This intensified competition can lead to lower ad prices and sluggish page loading times, Agarwal mentions.

Programmatic measurement, in advertising, is founded on third-party cookies and this shift from third-party to first-party data can present several unexpected challenges.

In this context, Prashant Puri, Co-Founder and CEO, AdLift believes, “The accuracy of third-party data was always an issue in comparison to first-party data. Marketers will now see better ROI with first-party data targeting.”

Some marketers are planning to take action to make the most of the rise of privacy. As per the First Party Data Report Study Deloitte-Google 2022, 65% of survey respondents shared plans to increase their focus on first-party data to mitigate the loss of customer insight from the withdrawal of customer consent for data collection and of browser support for third-party cookies.

Adding to this, Puri states that the competition is going to be high, and brands may increase offerings while vying for first-party data. However, he warns it’s going to be a struggle for traditional businesses that are reliant on third-party data but do not have digital assets to capture first-party data. 

Dimpy Yadav, General Manager India, GroupM Solutions highlights the importance that first-party data presents. She mentions that first-party data allows for more direct and precise targeting of known audiences, reducing reliance on third-party cookie data; it also brings quality-driven media metrics specifically in measurement. 

Yadav remarks, “With First-Party Data activation, advertisers can focus heavily on the outcomes and objectives of the campaigns, moving away from the singular calculative approach of CPM. It's effective to evaluate campaigns basis Quality Cost per thousand measurement (qCPM) where first-party data plays a very vital role.”

As each data set brings along its benefits and constraints, she reveals that there is a need to adhere to the requirements for first-party data sets such as Reach and Scalability as it is limited to the audience directly engaged with the brand and it is small in scale compared to third party data which provided broader audience groups. 

Other parameters such as data quality and recency, data integration, consent management, and technical infrastructure will require advertisers to deploy additional resources and investment in technology. 

Vinay Tamboli, Sr. VP – Digital Analytics & Consulting Business, LS Digital maintains that small and medium-sized businesses may face challenges in competing with larger players, requiring strategic targeting approaches. He also asserts that advertisers will need to innovate in ad formats, prioritize privacy-compliant strategies, and adapt to changing user expectations.

Further, Tamboli points out, “It's important to note that while rising CPMs are a potential outcome, the actual impact will depend on various factors, including how quickly the industry adapts to alternative targeting methods, the effectiveness of new technologies, and the level of competition among advertisers for available inventory.”

The way forward for advertisers

Despite all the challenges, Shradha Agarwal of Grapes notes that there are viable solutions. 

“As cookies phase out, I would suggest advertisers level up their game by building and leveraging their first-party data, fostering direct relationships with users, and implementing consent-driven strategies. Advertisers should also stay updated with privacy regulations, collaborate with industry partners and stay adaptable to emerging solutions to navigate this evolving landscape effectively.”

GroupM Solutions’ Dimpy Yadav divulges that advertisers and marketers are exploring alternative methods and technologies for activation and measurement of media strategies. This includes first-party solutions built on privacy-preserving measurement techniques like federated learning and differential privacy to aggregate and process data in a privacy-conscious manner. 

“Industry is adapting to the changes in technology and automation-led media world to ensure accurate and privacy-compliant programmatic measurement. With increasing the use of server-to-server connections media ad exchanges, it provides a secured channel for ad buying and is helping the industry to move towards safety and security-oriented solutions for cookie deprecation plans.”

LS Digital’s Vinay Tamboli thinks that navigating challenges requires a strategic and holistic approach, involving not only technological solutions but also clear communication with users, compliance with privacy regulations, and ongoing efforts to build and maintain trust.

He reveals a few options the industry is working on:

1. Contextual Targeting: Adopt contextual targeting based on content rather than individual tracking.

2. Collaborative Initiatives: Engage in industry-wide collaborations like Privacy Sandbox for shared solutions.

3. Identity Alternatives: Investigate new identity solutions and privacy-preserving technologies.

4. Probabilistic Modeling: Use statistical models for predictions without direct user tracking.

5. AI/ ML Technologies: Leverage AI and ML for sophisticated measurement and optimization.

The loss of third-party cookies also means fewer personalized ads wherein publishers will need to find other ways to monetize their traffic if they can't monetize users based on their behaviour, says Prashant Puri of AdLift.

In this case, Puri mentions, “Advertisers should prioritize building a robust Customer Data Platform (CDP) to centralize and harness valuable customer information. Strategizing around first-party data becomes crucial, fostering direct relationships with users and obtaining insights that transcend the limitations of third-party cookies.” 

As the industry adapts to the changing landscape, there is a need to navigate challenges, explore alternative solutions, and stay abreast of legislative developments to ensure continued effectiveness in the dynamic world of data privacy.

AdLift’s Prashant Puri, however, notes that the first half of the year would not see any challenges due to the low volume of users. The real impact could be visible only after the second half of the year when more Google users will start using the service.