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Advertising’s Identity Crisis And The Demise of the Third-Party Cookie

by Michael Banham, December 15, 2021
Advertising's Identity Crisis And The Demise of the Third-Party Cookie

Full confession: I run an ad blocker in my browser. After 15 years in the ad tech business, the don’t-bite-the-hand-that-feeds-you irony has been pointed out to me many times. But, let’s face it, things have gotten out of hand. Some websites have so many flashing ads and popups I worry they could trigger a seizure. In the early days, circa 1994, web pages were primarily text content with some hyperlinks that led to even more content. Sweet. And it was getting better every day.

Then Netscape, the then-dominant browser, introduced cookies to give web publishers a means to persist data. Now you could save your preferences, persist your session, or even build Amazon.com and become a Zillionaire.

It also unleashed an online advertising “Beast.”

The Beast is the plethora of signals that traverse the internet every time you visit a digital property or app that is funded by advertising. Google, Facebook, Twitter, websites, ad-funded apps, and so on all use these signals to connect your activities across the digital properties you consume. That’s how digital advertising makes money. You visit zappos.com, and you immediately begin to see shoe ads everywhere you turn. At first blush, it seems like a mostly innocuous fair trade – shoe ads in exchange for free content – especially if you like shoes.

This all seemed fine until around 2001, when the New York Times published an article about “Web Bugs”, noting that nearly 20% of websites included them. These “bugs” are essentially the aforementioned signals, now known by a variety of alternate names, none of which uses the word “bugs.” The percentage of websites that use them today is, shall we say, considerably higher than 20%.

Prior to GDPR, the Beast was unleashed anytime you visited an ad-funded digital property, like it or not. Now, you agree to unleash the Beast every time a property pops up a menu that says, essentially, “click here to unleash the Beast” or instead, you can spend a minute or two navigating some menu choices to customize your interaction with the Beast, repeated for every property you visit. But, like me, you are in a hurry and click the former to save some time and accept the consequences. Or you create an account with Facebook or Google (and so many others) and accept their consequences terms.

For a long time, my own barely-considered view was that the Beast powered a lot of content, commerce, and growth for businesses large and small. Yes, the Beast knows a lot about me, including some information I’d rather keep private, but it is unlikely to be exposed and besides, I get a ton of content for “free”. But the imminent demise of the third-party cookie, and the existential threat it poses to much of the revenue generated by digital advertising, has prompted a second look.

When third-party cookies are eliminated, the signals that power much of the digital advertising ecosystem will also be eliminated. Without an alternate solution, advertisers will lose, publishers will lose, and ad tech companies will lose. Consumers will gain a modicum of privacy. But will they really? There will be a reckoning for sure or at least a tradeoff, and perhaps there will be less free content. Publishers don’t deliver content or services for free, and advertisers like behavioral targeting. As Newton discovered, for every action there is an equal and opposite reaction.

The ad tech industry, and especially big players like Google and Facebook, are scrambling to find an alternative to replace third-party cookies. FLoC, email hashes, logins, independent consortiums linking content using first-party cookies, IP addresses, fingerprinting, and more are all on the table. Yet each of these alternatives still suffer from the same privacy concerns, in one way or another, as third-party cookies. In some cases, they may be worse, in that they won’t have the same persistence issues that plague third-party cookies. Which, serendipitously, may ease some privacy concerns. Even if the ad tech industry agrees on and implements an alternative approach, the same chickens will likely come back to roost and the process will repeat itself.

From my vantage point as a consumer, it seems like the best option isn’t even on the table: default opt-in and let the consumer use their browser/device to define their audiences, selected from a predefined taxonomy. That is, no fancy AI-style inference to figure out what I like based on my online behaviors. I set my preferences, and that’s it. W3C and IAB could build a standardized audience taxonomy, which would be available online for automatic update to browsers and devices. When I need to buy a car, I update my ad preferences to include “new-car-buyer”, so I can see relevant ads. When the new car is mine, I remove it. I could also indicate an ongoing interest in musical instruments, so sweetwater.com will know I’m a good target and zappos.com knows I’m not. Why is this uber-simple consumer privacy nirvana not being discussed? Probably because opt-in rates are typically low, meaning most consumers will ignore all pleas to update their ad preferences. Great for consumers, but not so great for advertisers and publishers. Or, maybe not. Consumers will still get lots of ads and those zappos.com ads will be front and center for musicians like me. Perhaps publishers could incentivize consumers to set ad preferences by offering additional premium content when preferences are set. This approach gets my vote.

Given all this, I can’t help but wonder if concern over third-party cookies isn’t really just a convenient distraction from more pressing privacy concerns. Want to know where I live? Or my age? Or who is in my family? It’s all out there, either free or available for purchase. Credit scores, voter registration, property records, change of address records, birth certificates, marriage licenses – the list goes on, and much of this information is even supplied by government agencies. Credit card issuers, financial institutions, retailers, healthcare providers, and insurance companies, they have it all. Seems like PII to me. Did I agree to all of this somewhere along the line? And finally, what about the near daily drumbeat of inadvertent releases of our most private information? Something is deeply amiss here.  Perhaps the Beast isn’t third-party cookies after all, but rather our collective complacency, exchanging our privacy for some excellent cat videos.

Which leaves us, finally, with a question: What now? All eyes are on Google – with Chrome still dominating the browser landscape, they are clearly in the driver’s seat. Perhaps Google will continue to postpone the deprecation of third-party cookies and leave us in a continued, uneasy detente. Or perhaps they will push their Cohort solution, which seems unlikely to succeed, given the Pandora’s box of new privacy issues it is likely to open. More likely, we will see a host of different solutions, all coexisting side-by-side, vying for primacy..

The bottom line is that there are no easy answers and no one, not even Google, knows how this will all play out in the end. (If there is an end.) That’s why data scientists and engineers at Amobee have designed a hybrid identity solution that integrates all the leading identity technology candidates: LiveRamp, ID5 and The Trade Desk’s Unified ID, and more, plus probabilistic IDs, contextual targeting, and Cohorts, should they come into play. Our solution provides an integrated solution that links these various identities to help our customers hedge their bets by delivering a cohesive approach to identity and a path through this difficult transition.

The Beast will surely live on, in one form or another, and Amobee is committed to delivering a hybrid solution to make the transition as seamless as possible for all of our customers.

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