Third-Party Cookies and The State of Digital Advertising

third-party cookies

By Dmitri Kazanski, Head of Product at MGID, North America

The last 18 months have dramatically rearranged priorities for the digital advertising industry. Top of the agenda is the demise of third-party cookies and mobile device IDs, which are accelerating key trends and reshaping the ecosystem. Much like the impacts of climate change globally, third-party cookie and MAID removal or restrictions will affect each corner of the industry differently.

From seismic shifts in ad spend to the rising tide of interest in first-party data, advertisers and publishers are looking to adapt for a new digital landscape. Combined with a high degree of consumer reluctance when sharing their data for advertising purposes, the roadmap for navigating this time of change remains unclear.

Diversifying Revenue Streams

Following the deprecation of third-party cookies, half of the publishers intend to build out their non-advertising sources of revenue, for instance, subscriptions or affiliate commerce. Users have likely seen and will continue to see a rise in paywalls, as 76% of publishers consider subscriptions their most important revenue stream. However, the aggressive promotion of subscriptions — typically through intrusive pop-ups and interstitials — poses a risk to the user experience, so publishers must carry out a careful balancing act between revenue streams to maintain their bottom lines.

Global forecasts estimate digital media spend has reached almost $442 billion, marking a 31.3% increase year-over-year, so publishers won’t be dismissing the value of digital advertising any time soon. Around two-thirds (66%) of media leaders consider display advertising to be important or very important to their business, while 61% believe the same for native advertising. This makes it likely that publishers will continue to lean into optimising their advertising offerings through more privacy-friendly and sustainable targeting methods, including contextual.

Privacy-Centric Alternatives to Third-Party Cookies are Paramount

According to research, over two-fifths (44%) of internet users believe brands leveraging consumer data in advertising strategies is invasive. In response, advertisers and publishers must prioritise 100% privacy-friendly targeting methods as they move beyond the third-party cookie.

Advanced contextual solutions are effective options for reaching and engaging target audiences in a privacy-safe manner. As they rely on the contextual analysis of publishers’ web pages instead of users’ personal information, they safeguard data privacy better than traditional behavioural targeting.

Furthermore, contextual targeting technologies have progressed to use techniques powered by artificial intelligence (AI), such as natural language processing and semantic analysis. As a result, contextual tools now provide a deeper understanding of the words and phrases on a web page. Alongside deciphering their true meaning, these techniques determine what emotion or sentiment content creates among audiences.

Advanced contextual capabilities allow advertisers to make more informed decisions when selecting ad placements, ensuring strong brand suitability. Delivering engaging ads that reflect user intent and page content, without relying on personal information, will help to rebuild trust between advertisers and consumers.

Trust is as vital to publishers as it is to advertisers. Being responsible for the user experience, publishers must ensure that readers are not bombarded by subscription promotions and ads placed within or beside their content are relevant to their audiences. Contextual targeting enhances the user experience by aligning digital ads with audience interests, as determined by the page content they engage with. This boosts a publisher’s reputation, the quality of its offerings, and user loyalty, which is central to maintaining all revenue streams. As such, publishers know that their first-party data is key to creating engaging experiences for their audiences.

Can Advertisers Also Move Forward with First-Party Data?

Publishers aren’t the only businesses recognising the value of first-party data in a post-cookie world. Advertisers are using incentives to build their own pools of first-party data, from encouraging user registrations through discounts and free trials to learning more about consumers in offline environments by deploying QR codes on physical displays. Although this will help engage known audiences, advertisers currently rely on third-party cookies to use this data outside their own domains.

When a brand wants to leverage audience data and create targeted campaigns, at present, it can partner with a DMP and/or a DSP and define audiences using cookies. The DSP then syncs with major ad exchanges, which have third-party cookies on publisher pages, and allows advertisers to reach the target audience segment in these environments. Removing third-party cookies will prevent advertisers from connecting their data with these publishers’ sites. While there are several proposed alternatives to cookies, many of these ‘solutions’ are experimental, and the jury is still out on their effectiveness.

Both advertisers and publishers are trying to harness first-party data, develop new solutions, and leverage alternative user targeting methods to help restore trust among sceptical digital consumers. While this intent is commendable, the ecosystem has a long way to go to develop a credible solution for the loss of third-party cookies and MAIDs.

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