- We are approaching the cookieless future due to arrive by 2022. The cookieless future is disrupting the Digital Advertising Ecosystem with some players vanishing, others expanding but the majority adapting.
- Businesses are investing in data and Customer Data Platforms (CDPs) to identify both prospects and customers before 2022 arrives. These investments give them the ability to deliver highly targeted connected experiences across owned, earned, shared and paid media
- PE firms/consultants need to provide transformation programmes for their AdTech and MarTech companies operating within this Digital Advertising Ecosystem to help them to survive and thrive in a world without cookies and with stricter data privacy protections
This first article, in our series of three by Arbolus experts Michelle Bottomley and Steve Horne, outline why marketers will experience the “cookie-less future” by 2022. Our second article covers the Digital Advertising Ecosystem and how the players will be impacted by the cookie-less, data privacy world. Finally, we wrap up with article three focusing on what moves we are likely to see amidst the dynamics of a $200B industry growing at 10% per year while in flux. Our aim throughout these articles is to enable greater preparedness if not opportunistic moves that this disruption will enable.
Join in the conversation and post your views on our LinkedIn as we move from Article 1, 2 and 3 so we all emerge better able to take advantage of these opportunities and future proof our firms.
Digital Advertising is a Fast Moving, Constantly Evolving Ecosystem
New media, new tracking and new functionality of devices, apps and browsers have constantly changed the landscape of the digital marketplace and how marketers communicate with individuals within it.
Even Broadcast, with programmable set top boxes and the movement of print to digital have further driven changes in the behaviour of individuals and how they are influenced. The recent announcement by Google about removing cookies within the next two years has caused a significant disruption which will reshuffle the players and create both opportunities as well as losses.
The Evolution of Cookies
With Web 3.0, web pages are built and linked in a way that makes it easier for both humans and machines to understand the contents thus allowing machines to gather data from users’ interaction with the web, without explicitly supplying the data through the filling of forms etc. Cookies track user data; the collected data is analyzed and used to develop algorithms that can make predictions and systematic recommendations that personalize the user experience. We have all experienced these models on Amazon, who were the first to use Boolean logic to make product recommendations as part of their frictionless purchase experience.
Not all cookies are created equal. There are several types of cookies which, under normal circumstances, cannot transfer viruses or malware to your computer due to the unchanging nature when it travels back and forth. The common cookie types below will undergo changes.
The Cookies listed in the green box will need to transform while, the Cookies listed in the red box are bad and need to go away. Cookies play an important role in the Digital Advertising Ecosystem.
How Cookies Fuel Today’s Digital Advertising Ecosystem
There are several players between the advertiser and the individual receiving their ads as indicated below. Within this Digital Advertising Ecosystem, cookies allow the exchange between Demand Side Platforms (DSP) and Supply Side Platforms (SSP) at a personal level. We expect the emergence of “next gen Data Management Platforms” to bridge the buy and sell side using individual level 2nd party data in place of cookies.
Hundreds of companies engage in this buy/sell world, moving data through a process from the marketer (audience targeting process) to the publisher (The Ad Platform). This movement can be driven by people who buy media or through AI-based trading platforms that create ”programmatic buying” of this data and the ad placement on the various media that the publishers are making available for sale.
This “bazaar” has so many moving parts and with the removal of the cookie and the requirements for privacy much is being rethought. With the elimination of cookies able to capture every interaction on the web or a mobile device, marketers are looking for data alternatives. Many believe that the DMP will evolve to contain data able to serve digital advertising in a more targeted and measurable way.
PE, Professional Services/Consulting firms and Marketers in this space will find businesses developing cookie-less and privacy driven solutions at speed, with some not being able to adapt/have the economic model to compete in a world restricted by the new privacy and data management mandates.
How Did We Get Here? What Prompted the Cookieless Future?
In May 2018 the EU launched the most restrictive privacy initiative for consumer protection of personal information that had been initiated to date. This was known as the Global Data Protection Regulation (GDPR).
The GDPR was started as a method to ensure that Personally Identifiable Information (PII) and Sensitive Personal Information (SPI) are protected. It guarantees that this data would be the sole purview of the person who has been identified and that person could, at any point in time, tell a firm to stop using, storing or collecting that information. The requirement would then ensure that the firm completely removes the information regarding that person from their records or face incredibly steep fines from the EU for the inappropriate use and handling of that data.
This has cost Google hundreds of millions if not billions of dollars. One GDPR violation in France resulted in Google incurring a 50MM Euro fine; the initial act that drove Google to exit the cookie market. Google will join Safari and Firefox in blocking third-party cookies in its Chrome web browser. However, unlike those browsers (which have already started blocking them by default), Google intends to take a phased approach. Justin Schuh, the director at engineering for Chrome, writes that Google’s “intention is to do this within two years.” Cookies will cease to exist as tracking vehicles by 2022.
In June 2018, following much of the guidance that was established in the GDPR, the California Consumer Privacy Act (CCPA) was introduced into law as the first state in the US to enact a similar data protection provision for consumer information. It is expected that other States will follow California as consumer data privacy is a major issue across the country, as well as globally
The most controversial articles in the final directive of CCPA are article 15, which forces search engines and aggregated news platforms to pay for the snippets they use from other publications, and article 17, which makes internet giants including Google and YouTube responsible for material they publish without copyright permission, imposing penalties on them if they fail to block content that infringes copyright.
Given how prolific Cookies are within much of the content we consume on the web, , Google will institute a new set of technical solutions for various things that cookies are currently used for. These solutions may be less invasive and annoying but keep in mind that Google has its own interests of maintaining and protecting its property in mind.
The US DOJ has brought a suit arguing that Google has a monopoly on search and the ad content processes both of which generate the majority of their revenues. These suits against the largest players will continue to push against the efficiency of having a one stop place for consumers to utilize vs. the total command of the market that these T. Rex’s of the internet world dominate. The T.Rex’s of the marketplace - Facebook, Twitter, Amazon, Google, Apple, Microsoft and a few others - will establish “Walled Gardens” to create proprietary marketplaces where they can control both costs and access.
With Google, Apple, Amazon and the other “Walled gardens”, creating their own technical solutions the individual identifiers within one “Walled Garden” will differ from another. This means marketers will need to replicate their buys across each of the “Walled Garden”, driving up the cost and complexity of digital advertising as we know it today. That said, marketers may find that they are better able to target and measure more precisely with the level and types of data that will come into the picture as part of the “Walled Garden” technical solutions.
In addition, data companies will attempt to create individual level information that can work across multiple digital destinations in an effort to simplify and amplify the impact of media buys. One thing is for sure, 2nd party permissioned data will play a vital role in the post-cookies Digital Advertising Ecosystem whether it comes from one of the T-Rex’s or third party providers.
Implementing the cookie-less future isn’t a matter of “if” but “when”. Each T.Rex is taking a different approach; with Google wanting to wait a bit on the contrary to Apple and Firefox, who believe that the crisis is already too big and have started blocking third-party cookies.
What is the Impact on Broader Customer Data Management?
On the corporate side, the GDPR or CCPA requirement of the “right to be forgotten” requires companies to delete data from across their systems raising significant challenges for those companies that have not already built “one source of the truth”. These requests, known as Data Subject Access Requests (DSARs), require an organization with data on an individual to produce that information and allow for remediation (deletion, archiving, etc.).
Given all of the moving parts required—technology, manpower, and workflow processes, to name a few—fulfilling these requests will be challenging and yet essential. While estimates suggest that less than 2% of the individuals opt out and wish to be forgotten or removed from company databases, the capability must be in place to accommodate any number if your company is of a certain size.
This puts pressure on businesses that use their customer and prospect databases for marketing, as well as companies such as Google who currently holds around 88% of the total search engine market share in the United States.
Marketers are Implementing 3 Changes in Anticipation of the Cookieless Future
1. Opt-out cookie policies on their websites allowing consumers to be forgotten if they opt-out
2. CDP builds integrating prospect and customer data (1st party data) overlayed with digital signals and 2nd party data (data that is permissioned for use, but has not necessarily collected directly by the marketer). These early moves provide marketers with a source of data to reach prospects and customers in a more targeted way using their own channels along with paid media.
3. Media plans testing results generation using the new data.
These three changes will also enable Marketers to deliver end-to-end personalized experiences across multiple touchpoints as part of their growth strategy - a positive evolution.
We are approaching the cookieless future with much at risk for the key players within the digital advertising ecosystem. Marketers are preparing for this eventuality by investing in CDPs and media tests that will allow them to target prospect and customer populations with more personalized connected experiences. With disruption comes opportunity for greater efficiency and impact. PE firms and consultants are planning for how these changes will impact their investments in the AdTech and MarTech spaces.
In article two, we look at who we expect to be the winners and losers within the Digital Advertising Ecosystem as this space sees evolution and in some cases revolution over the next few years.
How can Arbolus Help you Thrive in the Cookieless Future?
Arbolus connects clients with the expertise to navigate new spaces, source deals, and conduct due diligence.
Questions to be asked in your preparedness plan:
- Are your portfolio companies able to utilize data that can exist in both a cookieless and privacy driven world?
- Are you clients investing in technologies or processes that will become obsolete because of new cookies regulations?
- Do your companies have a plan to survive and thrive in the cookie-less future?
Click here to connect with world class experts in this space, including Michelle Bottomley and Steve Horne.