Why cookie deprecation is deflating performance and inflating costs for advertisers

With the full deprecation of third-party cookies on the horizon, advertisers and publishers are navigating a challenging and quickly evolving landscape. The sunset of the third-party cookie continues as usage and lifetimes fall. Their deprecation is preventing brands from effectively measuring the effectiveness of media campaigns in real-time at highly granular levels.

As the industry searches for alternative ways to get the data gleaned from third-party cookies, mass adoption of first-party IDs is accelerating. According to research from Adform, the adoption of first-party IDs across the top 1,000 publishers in major markets passed the 50% threshold in September 2021.

In this Q&A, Adform’s John Piccone, Regional President, Americas, spoke with the Custom in-house agency at Digiday Media to spotlight how advertisers are formulating strategies in response. They’re seeking to maximize revenue through media, technology and advertising services, and Piccone’s focus on impacts and marketers’ next steps highlight essential changes teams are putting into place for 2023.

Custom (Digiday): How would you frame the state of third-party cookies for advertisers right now?

John Piccone: First of all, we need to stop thinking that there is a deadline on the horizon to deprecate cookies set by unregulated overlords when in fact, the people have already spoken. Time and time again, promises have been made about the need to clean up our ad tech ecosystem. The deprecation of the cookie was just one stop along the tracks that gave consumers more control. But its impact on a few oligopolists prevented that from happening as quickly as consumers wanted it to, So the people took matters into their own hands. 

Today, roughly 40% of consumers surf the internet without cookies. Whether they use Safari or Firefox or tweak their setting to not accept cookies, marketers’ ad dollars are being hurt by cookie deflation. Why? Because most ad tech providers are taking too long to update their platforms and miss all the consumers who have opted out of cookies or use Firefox and Safari.

Custom (Digiday): In that same vein, what are the most important questions advertisers are asking about their advertising campaigns, going into 2023?

John Piccone: Advertisers are scratching their heads and saying to themselves, why have I, the marketer, the entity who supports free media, lost control of my relationship with my customers? Why do these walled gardens exist in a way that I can’t see my reach across platforms and thereby understand my effective frequency of my marketing objectives? 

The other question they are asking is, with privacy becoming a critical part of my relationship with my consumers, do I have the right ad tech stack that will prevent me from being sued by California for illegal data sales or wire-tapping by the state of Pennsylvania because I have third-party pixels on my website?

At the crux of these two questions is the role advertising technology platforms play today and tomorrow to protect the three key principles of advertising: publishers, advertisers and consumers.

Custom (Digiday):  What’s at stake for the marketing team, in this case?

John Piccone: Whether they like it or not, marketers need to have their hands on the wheel of the ad tech stack that they or their agency have selected. This requires that they take the time to engage and educate themselves so they can be accountable for the impact of their ad tech decisions.

Secondly, marketers need to peel back the layers of their advertising technology to understand why most of their reach is only on those browsers that supported cookies. When they do, they’ll quickly learn that cookie deprecation is driving up their costs and decreasing the impact of their purchasing power.

Custom: It seems as if the industry has been in a start-stop cycle around adapting to the loss of third-party cookies for years. What’s the reality of the timeframe they need to match?

John Piccone: In reality, consumers don’t care about ad tech business models when they are checking their email or surfing the news. But they do care about how their data is being used, hence the steady increase in the use of browsers where cookies are not a thing. So the industry has adopted a much-needed transition to first-party IDs. 

But the bottom line is that no first-party ID provider will win the war of being the ubiquitous ID solution. So this continues to create consumer fragmentation for certain marketers who rely on only one ID player. This, in turn, causes them to miss key audience prospects and understand their effective reach and frequency goals.

Custom (Digiday): How are brands and advertisers leveraging the first-party data that’s emerging from those online experiences?

John Piccone: There’s a direct correlation between the value an advertiser and/or a publisher gives consumers in exchange for the data they receive. Over time, with more and more lawsuits from the state attorneys, publishers and advertisers will all be leveraging first-party IDs to build stronger and longer-lasting relationships with prospects and customers. As a result, we will see either a consolidation of ID providers or a way to help marketers aggregate all the ID providers in a privacy-safe way like Adform has done. My bet is that due to our innovative marketplace and the headwinds of privacy regulation, consumers will come out as the big winner.

Sponsored by Adform


More from Digiday

Why gaming venture capital funding is down in Q2 2024

After a resurgent first quarter of 2024 that saw VC firms pump $601 million into gaming, venture capital funding of gaming start-ups has come back to the ground in the second quarter, decreasing to $492 million

Future of TV Briefing: A look at Netflix’s streaming bundle playbook

This week’s Future of TV Briefing looks at how Netflix is going about bundling subscriptions to its streaming service.