The demise of the third-party cookie, along with other market hurdles, has brought us to an inflection point in our industry. High-value features that advertisers are accustomed to receiving — customer journey tracking, multi-touch attribution, and customer lifetime value — will become more and more difficult for technology companies to provide. However, as complexity increases, so does opportunity. Ultimately, a solution will rise to the top.
For quite some time, the online advertising industry has been preparing for the sunset of third-party cookies. Apple’s Safari and Mozilla’s Firefox browsers led the way, and Google sealed the deal in January 2020 by announcing that Chrome will block third party cookies in a phased approach over the next two years. Had these industry goliaths not taken this direction, they may have ultimately been forced into doing so.
Europe’s GDPR privacy regulation made its way to the United States via the CCPA — California Consumer Privacy Act of 2020, the first comprehensive legislation of its kind. The CCPA compels companies to provide a “do not sell my data” option to consumers, which is typically implemented by a cookie-blocking mechanism. Clearly, if the advertising ecosystem doesn’t kill cookies, regulators will, as more states adopt similar legislation and consumers become savvier about how their data is being used. The colossal Equifax data breach of 2017, although it did not involve advertising data, led to the consumer perception that the government could and should do more to protect consumer privacy. In addition, Apple and Google, along with Facebook and Twitter, are now facing the very real possibility that regulators will consider breaking these companies up based on anti-trust concerns. Google and Apple may hasten to look like good corporate citizens by taking extra measures to protect consumers’ private information. Each one of these factors erodes the value of cookies — they become less and less persistent as they vanish.
The cookie’s demise presents a myriad of diverse challenges for the advertising industry.
Advertisers still want what they’ve always wanted from modern advertising — aside from the obvious “drive more sales” imperative — namely, to build a lasting relationship with their customers by understanding what factors drives consumers to purchase. Yet, in the future we are facing — in which there is less data about consumers — our ability to perform tried-and-true, cookie-based practices such as customer journey tracking, along with its cousins multi-touch attribution and customer lifetime value, is in jeopardy.
The customer journey was one of the most cherished technological promises going back to the birth of online advertising. The notion was that an advertiser could see the path a consumer took as they became exposed to an ad (awareness, upper funnel), and then researched (via search) the product before making a purchase or completing an action on a website (conversion). I was fortunate to be a product manager at DoubleClick in the few years directly proceeding the acquisition by Google in 2008. The prospect of combining DoubleClick’s robust ad exposure data with search results from Google and then tying it all together with conversion data from DoubleClick’s Floodlight and Spotlight tags created a fever pitch of excitement across the two companies and served as one of the primary use cases for the much-ballyhooed merger. DoubleClick’s ubiquitous cookie held the whole thing together. The cookie was king.
With the rapid rise of the smartphone and the prevalence of in-app advertising, the cookie faced its first real challenge to its dominance, namely that a significant portion of digital advertising spend was driving awareness in a channel where cookies don’t persist well or don’t exist at all. Google’s entry into the smartphone game prompted Apple to introduce its proprietary tracking ID, the IDFA. Over the last decade or so, the number of addressable devices per consumer ballooned across our smartphones, tablets, multiple laptops (work, home) and, now connected televisions. Riding sidecar with the multiplication of devices has been the proliferation of tracking IDs, some of which, such as the IP address, are less than perfect for tracking consumer behavior relevant to advertising. This, in turn, prompted a new breed of companies in our space to emerge, hawking device graphs, some deterministic, some probabilistic, under the promise that they could connect all of the various IDs belonging to a consumer or household into one. Device graphs have always seemed to me to be a bridge solution — a workaround at best. These solutions have a fundamental flaw — each one is owned by a specific company with its own interests and customer base. The companies that provide device graphs have no incentive to play nicely together, so no solution completely addresses the fragmented universe of available IDs.
As if to prove that the move away from capturing trackable consumer data for advertising purposes was not just about cookies, Apple declared in mid-2020 that the IDFA will henceforth be opt-in by default rather than opt-out, which will greatly reduce ability of advertising technology companies to perform techniques such as customer journey tracking, multi-touch attribution, and customer lifetime value. When a consumer becomes less trackable and less measurable, then the consumer becomes less valuable to marketers. Until the next generation of tracking solutions emerge, it appears that online marketers will have to resort to techniques from the days before data: creative optimization and contextual advertising, for example. One line of speculation goes that, absent of data, advertising will return to being more of an art and less of a science.
Customer journey and other ways to assess customer value will continue to be important to marketers — after all, dollars are at stake. And whenever there is significant money to be made, someone will come along with an innovative solution. Market hurdles — privacy regulation, platform fragmentation, potential breakups of industry goliaths — will ultimately lead to a challenge that a few bright people at some as-yet-unnamed company will overcome. When that happens, the next wave will arrive, which we will all ride for some period until the next set of challenges arise, and it becomes necessary for a subsequent wave of innovation. The customer journey never ends, but sometimes the road ahead isn’t exactly clear until you take a few more steps.