‘Cookie Apocalypse’ Drives Deep Changes in Online Advertising


Complex, unloved and often too intrusive: Few people mourn the disappearance of the third-party cookie – cross-site trackers that Apple has banned and that Google will phase out by 2022.

But the so-called “cookie apocalypse” is forcing sweeping changes in digital advertising and ad technology, which have relied on these bits of data to fuel the delivery of targeted ads within seconds of opening a business. website by a user.

While the screw has long turned on the way the industry works, the recent attack on cookies by privacy regulators and browsers like Apple’s Safari and Google’s Chrome has been a ruthless lesson in business upheaval. .

“The advertising ecosystem we see today wouldn’t exist without cookies. That’s how fundamental they are, ”says Ratko Vidakovic, founder of the consultancy firm AdProfs. “Losing them is extremely disruptive from a technical standpoint, as they are used by industry at every stage: planning, targeting, measurement and attribution. [of sales]. “

The trauma of cookie-dependent businesses has been vividly described by Jean-Baptiste Rudelle, founder of Criteo, a French adtech group whose market capitalization fell from a high of $ 3.5 billion in 2017 to less than $ 1. billion dollars.

“The first time we were caught off guard, we didn’t really think it would be a risk,” he told analysts in November, referring to regulatory assaults and cookie bans by Apple and Mozilla. “We were kinda in panic mode because, wow. . . these guys overnight can push a button and hurt us a lot.

His argument was that the attack was now “part of our business”, forcing adtech groups to reinvent their operations and business model to survive without cookies, which were invented almost 25 years ago.

But which adtech groups will be able to adapt quickly enough remains unclear. Criteo shares fell nearly a quarter in January after Google announced that Chrome, the dominant product in desktop browsing, with more than 60% of the market, would stop using third-party cookies within two year.

Investors have been more patient with some of the other large listed players in the industry – such as The Trade Desk and the Rubicon Project – due to the combination of their businesses. But the race to find ways to thrive in a post-cookie world is still in its early stages.

A crucial point is that not all cookies go away. First-party cookies – created by the domain a user visits so that they can remember shopping carts or usernames – are unaffected by the tracker bonfire. Indeed, their value has increased as a source of data to tailor ads to individuals.

Within the advertising market, this can lead to a new shift in power. This would shift from the open Internet, where adtech once thrived – and cookies tracked user activity between sites – to more closed domains that contain detailed data about their direct users.

This closed world extends from small retailers or publishers, which can require users to sign up or pay for subscriptions, to large platforms such as Facebook or Google, which hold large amounts of data about their users.

Some ad executives and analysts see eliminating cookies strengthening Google’s market power, making Chrome an almost indispensable middleman for advertisers who need data to accurately target ads and track their effectiveness.

“What’s the end of the Google game?” Macquarie investment bank analysts Tim Nollen and Sean Kumar asked. “While Google depends on online advertising for the vast majority of its revenue, it seems naive to say that Google’s initiatives are designed to ensure a healthy online advertising ecosystem for all parties. Google increasingly owns the cards, and unless there are antitrust regulations, Google can reshape the industry to help it meet its needs. ”

Independent adtech operators have various options to reduce their reliance on cookies, but all of them carry some degree of risk.

The most obvious is to establish other systems to reproduce the functions of a cookie. But the countless attempts to standardize user identity tracking – either to make cookies more effective or to replace them – testify to the difficulty of achieving the goal.

To make matters worse, some effective alternatives rely on techniques like fingerprinting devices which are frowned upon by browser operators and regulators who killed the cookie in the first place.

The UK Information Commissioner noted in a report last year that new device-based online tracking capabilities “were becoming more common and posing much greater risks in terms of surveillance. and systematic tracking of individuals, including online behavioral advertising “.

A second approach is for advertising companies to focus on serving segments of the advertising market that do not use cookies, such as mobile devices and smart TVs. But creeping privacy restrictions could hit those areas as well.

The magnitude of the challenge was recently exposed by the Interactive Advertising Bureau, a global trade body for digital advertising, when it launched its own attempt to establish harmonized industry standards to deal with a post-cookie world.

“With the loss of third-party cookies and potentially mobile advertising identifiers thereafter, the future default state of digital media will be 100% anonymous, non-addressable by third-party vendors who support ad-supported media and services. today, ”writes Dennis Buchheim and Jordan Mitchell of the IAB Tech Lab.

The IAB’s Rearc project recognizes that the solution will depend on a consent-based system to identify consumers. The most obvious basis would be encrypted login details or email addresses. But it could prove to be an expensive system to operate, with its own privacy concerns.

AdProfs’ Vidakovic said companies “would likely find ways to technically continue to operate,” adding that “the big question is whether advertisers will accept the alternative way of working or simply look to big platforms like Google, Facebook and Amazon “. .