Mark Armstrong, Solicitor and Heidi Bruce, Principal

17 June 2021

Practically everyone from Oreo enthusiasts to blue, furry monsters love a delicious cookie.  “Third-party cookies” have been an extremely powerful tool for advertisers in collecting data to target advertising to the right audiences.  However, following their proliferation over the last few decades, we have seen a rise in consumer expectations of privacy and stronger privacy laws. Google announced in January 2020 that they intended to phase out support for third-party cookies in their web browser, Chrome, by 2022, as “the web ecosystem needs to evolve”. Google’s recently released blog post confirmed they were on track to meet this target and doubled down by stating that, “once third-party cookies are phased out, we will not build alternate identifiers to track individuals as they browse across the web, nor will we use them in our products.”  This major shift has caused a lot of buzz about how this will change the way advertisers do business online.  At first glance, this change appears to be a considerable blow to the advertising industry, but this is not strictly the case.  In this article we look at what the changes mean, what alternatives are emerging and things you can do to prepare for the cookie phase-out.

First off, what are third-party cookies?

You likely know that “cookies” (in an IT sense) are small files that are saved to a user’s computer, and they enable websites to monitor certain usage on that computer. A first-party cookie enables a website to learn about what a user did while using that website. This allows the website operator to, for example, tailor the website experience for its customers, such as an online store saving products in their cart when they revisit at a later time.  However, users are unable to see data related to their behaviour on other unrelated websites.

Third-party cookies, however, are placed on a web user’s computer by a third party (i.e. not the operator that uses ‘first-party cookies’), which then tracks the user by gathering information about browsing habits and in some instances other detailed information like the user’s age, location, prior browsing history, etc.  This information is gathered by advertisers and used to send targeted ads to particular consumers.   For example, if you have recently been searching online for new Prada sunnies, you might start seeing Facebook ads for deals on other sunglasses on other websites.  Or, if you share a computer and your kids have a taste for Bluey merchandise, you may be served Bluey-related ads on every website you visit for the next week. This is because of the following process:

• While searching for certain details (let’s say by using Google), advertisers send cookies to a user’s computer to gather information on the user and their browsing habits;
• other websites/platforms (like Facebook) sell advertising space to those advertisers that have already collected users’ information and display ads for products and services similar to those already explored in recent browsing history.

This is particularly useful for advertisers as it allows them to target ads to consumers who will hopefully purchase the same or a similar product/service that they may have been looking at before.

So, what are the recent changes?

Many have said that the ‘death’ of the third-party cookie was not a surprise. Other browsers have been obstructing the effectiveness of the Internet biscuit since the early 2010s.  As early as 2013, Firefox turned off automatic opt-in to third-party cookies, with users needing to actively consent to allow third-party cookies.  Further, after the EU’s highest Court ruled in 2019 that websites needed active consent to use third-party cookies for EU users, it was clear that third-party cookies were well and truly on the way out.  Now, both Firefox and Safari block all third-party cookies.  Google’s most recent announcement brings its Chrome browser in line with Firefox and Safari.  This is significant because the combined global desktop internet browser market share of these three browsers makes up 85.45% as of May 2021.  In other words, the future of third-party cookies is looking bleak and by 2022 will be as useful as a VHS tape.  To confirm, if you are just aiming to track your website visitors’ behaviours, preferences and demographics only while they are on your website, you probably will not be affected as first-party cookies can still be used.

What other alternatives are out there?

Google has recently announced its future strategy involves a switch to Federated Learning of Cohorts or ‘FLoC’ advertising, which will allow marketers to drive customer conversion online.  FLoC is a more generalised method of delivering specific ads to particular consumers and is virtually identical to a method already being used by Facebook.  Instead of tracking users’ individual online identities and habits, users are categorised into a ‘cohort’ of other similar users, in an attempt to slightly anonymise a user’s online presence.  Instead of being tracked as “Mark Armstrong, with an email of [email protected] and who recently shopped for Adidas Super Gazelle sneakers”, a user would be classified as someone who belongs to a collective group of people who are interested in Adidas sneakers.  Instead of having ads targeted based on one’s personal browsing history, ads shown are based on the behaviour of the cohort they are categorised into as a whole.  This method requires a slightly less personalised and more nuanced approach by marketers, but obviously this cohort information is still very important to advertisers.

Some commentators have also voiced concerns that Google could be looking to gain further strength in the ad market by forcing the adoption of Chrome’s own first-party cookie, which could drive money previously spent on third party platforms to Google.  However, various stakeholders in the advertising world are developing alternate methods to combat advertising monopolies and to continue to allow effective advertising to consumers.  These yet to be developed solutions will inevitably determine the new face of online marketing.

What does this mean for you?

Regardless of how effective any of these methods will be, this does mean that advertisers will need to devise new strategies that are non-reliant on third-party cookies or keep informed of new developments in this sphere, and update website terms and privacy policies now that the third-party cookie is set to crumble for good.

For regular web users, the impact of Google’s move to FLoC does mean that Internet habits will not be monitored as closely and information collected will not be as personally identifiable. However, as noted above, the benefits received by Google are likely to outweigh the benefits received by web users, as it allows Google to work more closely with entities already on a FLoC system (namely, Facebook).  Regular web users are unlikely to notice an obvious change to their online experience, as individuals will still be monitored and receive targeted advertising based on their online activity, only slightly less personalised.

For advertisers, you can continue to use first party cookies.  If you currently rely on robust data and targeted advertising strategies, you will need to stay on top of the latest in alternative strategies as the phase out of third-party cookies is complete and the online advertising industry remodels itself.  To bounce back, the advertising world will need to adapt to ensure marketing still reaches target audiences in the most effective way possible, while keeping up with the latest online trends.  In order to keep in step with new developments in this field, advertisers and website operators will need to do two things in the short to medium term:

1. Devise alternate advertising strategies that do not incorporate the use of third-party cookies.
2. Review and update privacy policies and website terms of use, and your cookie disclosures online, to ensure they are accurate and truly reflect the nature of how web users’ information is collected, handled, disclosed and used. It would be prudent to ensure they are consistent with the new method of capturing data, such as a FLoC system.  Further, references to third-party cookies would likely also be removed at that point, as they would no longer be used.

Regardless of how online advertising will progress from here, it is imperative that you keep informed about new developments in advertising strategies in this space.  For now, an updated review of your website-governing terms of use, and of relevant privacy policies, would be prudent.