Alternatives to third-party cookies: The state of play

“I’m actually shocked because I really just thought they were going to be regulated away, but yes, they started out with 32 million folks, so it’s happening.”

Tara DeZao, product marketing director for adtech and martech at Pega, was reacting to the news that Google had finally begun phasing out third-party cookies. After multiple delays.

Are marketers finally ready for this?

“I don’t think they’re prepared because there isn’t a like-for-like replacement,” said DeZao. “I was reading a study from YouGov. Something around 53% of marketers said they weren’t ready, and another 57% said they’re not fully aware of what the solutions are yet. I think that speaks to the convoluted nature of all the solutions that are available to try to piece together something that can replace that efficacy.”

What’s more, there’s an impression going around that brand marketers want to leave solutions to the agencies. “I think brand marketers are sort of biding their time — let’s not panic until we need to,” DeZao agreed. “But I think we’re in the panic stage now.”

Alternatives to panic

Although there seem to be countless proposed alternatives to cookies out there, they generally fall into one of the following categories: reliance on first-party (and zero-party) data, contextual advertising, identity resolution (including data clean rooms) or purported like-to-like replacements like Google Topics.

“I think there are going to be lots of different tactics to get through this,” said DeZao. “Brands that don’t have a lot of first-party data — say, for example, CPG brands — are going to rely on their retail media partners, the Targets and the Walmarts, to get them the reach that they need. In terms of other industries, there are lots of first-party data options available. We know first-party data is the most accurate.”

Conversely, Google Topics threatens to be a scattergun approach. “And the new solution proposed by Google, the Topics categories, those are going to go back to the days of soap opera advertising,” DeZao said. “We’re going to see a lot of consumers getting irrelevant messages because you’re only allowed to target folks on a couple of categories.”

First-party (and zero-party) data

“Consumers are amenable to giving you their data as long as there’s a value exchange there,” said DeZao. “I think brands haven’t cracked that code 100% on what the value exchange is going to be.”

Closely associated with first-party data is zero-party data, data that is not personally identifying but which is offered up by the consumer through engagements like quizzes. One example we wrote about was an online temporary tattoo brand that collected information about a visitor’s style preferences and showed them relevant products; collecting first-party data could wait.

“Retail brands are doing a good job with that and it’s been a tactic for a while,” said DeZao. “Brooks, the running shoe company, has a really good activation of that. When you go to their website they ask how you run, where you run and how often. Zero-party data collected by the brand in a first-party way is really valuable, but we also have third-party-collected zero-party data — sometimes folks are just trying to get through the questions.”

Dig deeper: How to extract value from zero-party data

Contextual advertising

In a sense, contextual advertising goes back to the days of soap opera when Madison Avenue confidently identified the demographic watching daytime television dramas as the demographic responsible for buying soap powder. But there are new forms of contextual advertising out there.

“Context is going to be huge,” said DeZao. “As someone working for an AI company, we know that consumers are moving so rapidly through all their channels and devices, so you need real-time data and information. Context is one of those categories where you can get the freshest take on what your consumer is doing in the moment.” In other words, regardless of identity, consumers scrolling through camping websites might like to see ads for tents.

Identity resolution

There are many vendors today offering identity resolution solutions that — largely probabilistically — stitch identifiers like postal or email address to transaction activity or other trackable behaviors. Some of these solutions are interoperable — for example, The Trade Desk’s UID is interoperable with LiveRamp’s RampID. Does that bring benefits?

“If you look at our marketing stacks today they’re so, so bloated,” said DeZao. “We’re actually using less of the stack than we ever did, but we’re continuing to add things into it. So I think, when a brand is looking for new solutions — and it’s going to be multiple, because there’s not one solution to replace this functionality — they need to be reducing the number of vendors they have versus adding. Consider technologies that are interoperable with each other.”

Google Topics

The winning alternative to cookies that has emerged from Google’s Privacy Sandbox is Google Topics, a browser-based approach that assigns a rotating and limited number of topics to a browser based on activity.

“It’s a seven-day cadence,” DeZao explained, “and I think there’s something like 460 or 470 categories, and they’re not super granular. Criteo is a Google partner; they’ve been testing topics and a year ago they found that Topics was five times less effective than cookies. They have added a hundred or so categories since then but the granularity is not there.”

Of course, there are also drawbacks with the browser-based approach. “If my wife came into the room and used my browser, then I came back and used it after her, I’m going to start getting a lot of ads for Sephora. That’s a wasted impression,” laughed DeZao.

First-party data can generate demographic information. “Topics is not going to have demographic information or categories,” she said. “Your first-party data is your best bet. If you’re in industries like finance, telecoms and potentially arts and entertainment, you’re going to want that demographic info.”

It’s time for new success metrics

Some KPIs are so bound up with the way third-party cookies work, we have to understand they’re going to be much less useful in a post-cookie environment.

“KPIs like click-thru rate are going to provide no information that’s going to be valuable moving forward,” she said. “We need to get together as an industry and identify the five new KPIs we’re going to align to. Customer lifetime value is especially important for many brands — to understand that a short-term sale is not the goal; the goal is to have lots of sales over time.”

With identity resolution,” she continued, “I think one of the core goals is not just to connect the consumer experience but to close the loop on someone having an interaction over here — and did they purchase because of that? Did they go to another part of our ecosystem and then make a purchase?”

The smart money

The bad news? “We might see a lot of gut feelings coming back on what’s a good message rather than data-driven results.”

But if DeZao had to place a dollar on which solution will ultimately win out? It sounds like she’s bet on contextual advertising. “Contextuality and real-time data — like, the freshest possible data.”