July 15, 2023

Unleashing the Power of First-Party Cookies: Digital Advertising

By Trip Foster · 4 minute read

Introduction:
We are witnessing a monumental shift in the world of digital advertising. all about the increasing importance of first-party cookies in the wake of third-party cookies’ demise. This post is designed to offer a look at how first-party cookies are defining the future of precision-targeted advertising. We'll dissect the fallout of the cookie’s extinction, the dominance of first-party cookies, evolving alternatives, and the methods to navigate through challenges in the ever-evolving ad tech landscape.

The Sunset of Cookies:
The golden age of cookies is waning, demanding advertisers to recalibrate their strategies and forcing publishers to respond. According to a recent article in ExchangeWire, in most geographies, the market addressable by third party cookies has slipped to a mere 30%+, a significant drop compared to the past. APAC is an outlier with an estimated 43% addressable, but this is purely due to the higher market share of Chrome in APAC.

Yet, less than a third of the global market remains accessible. After factoring in match rates and targeting goals, the real addressable market for any given campaign is probably closer to 20%. This shrinkage presents huge issues for advertisers aiming to effectively reach their preferred audiences. The sizable presence of iPhones in the US, and their over-representation of high-income consumers, further stresses the urgency for alternative targeting techniques.

Meanwhile, publishers continue to feel the most impact in the form of more dollars shifting to platforms with effective targeting (think Facebook), and lower CPMs for the remaining budgets.

Harnessing First-Party Cookies:

Amid the decline of third-party cookies, first-party cookies have evolved to be the game-changing factor in digital advertising. Unlike third-party cookies, first-party cookies aren’t deprecating and their usefulness is continuing to increase. This movement towards first-party cookies creates the opportunity for publishers to reclaim their own data and prevent it being used rent free to target high value users off of the publisher’s properties. However, with the exception of the largest publishers, few publishers have the resources to adapt and leverage a first-party cookie strategy – even fewer have the scale necessary to make it work.

To add to the challenge for independent publishers, advertisers are better positioned to leverage their first-party data when partnering with the walled gardens. Tools provided by the walled gardens (think Facebook's tracking tools and clean rooms), enable advertisers to utilize their own customer relationship management (CRM) or Customer Data Platform (CDP) data. This permits them to acquire priceless insights into user preferences, behaviors, and interactions on their digital properties. With this valuable data, advertisers can craft personalized experiences that drive higher engagement and conversions. First-party data can be linked to platforms like Facebook and others, giving advertisers access to an expansive ecosystem rich in user information. Utilizing this data, advertisers can boost the efficiency of their campaigns, thus elevating their return on investment (ROI). However, the walled gardens are in no rush to share their insights to exactly what is working and why –only that it is working. For many advertisers, that is sufficient, particularly given the difficulty in reaching scale with the alternatives.

Navigating the Open Web Challenge:

As the targetable market contracts, the constraints of relying on third-party cookies alone become apparent. One noteworthy development is Google's insistence that third-party cookies will be fully deprecated by Q3 2023. This step has fast-tracked the need for ingenious strategies that can fill the void left by the receding reliance on third-party data. The industry is consequently seeking alternative solutions to uphold effective targeting capabilities. Advertisers and tech providers are collaborating to conceive fresh approaches that respect user privacy while still enabling tailored advertising experiences.

The Rise of First-Party Cookies and Novel Alternatives:

The upsurge of first-party cookies signals a critical transition in the advertising ecosystem. Advertisers gain enhanced control and precision in their targeting efforts by employing their data against these cookies. The use of CRM data allows advertisers to comprehend their customers' preferences, behaviors, and purchase patterns deeply. This vital data aids in devising custom ad campaigns that resonate with target audiences, creating stronger bonds and yielding better outcomes. However, leveraging these insights requires publishers to provide complimentary tools that leverage their own first-party data and allow advertisers to “sync” against such data.

Alongside first-party cookies, alternative identity solutions are sprouting to tackle the changing landscape. Universal IDs and browser-based local storage are emerging as viable substitutes for third-party cookies – whether these prove to be transitional or more permanent is still to be determined. Universal IDs offer a standard identifier that can be used across various platforms and publishers, enabling improved targeting while maintaining user privacy. Browser-based local storage, is a suitable option for many IDs, facilitating ongoing tracking and engagement without third-party cookie dependence. These novel solutions and the strength of first-party cookies provide advertisers with a spectrum of options to continue delivering personalized user experiences.

Addressing Challenges and Seizing Opportunities:

The ascension of first-party cookies opens new horizons for advertisers, but navigating the changing landscape isn't without its hurdles. Creating consistent audience segments can be tricky, especially for mid and long-tail publishers. Publishers might classify users in different ways, making it tough for advertisers to keep a unified targeting approach. However, the industry is adjusting to this challenge. Aggregating data signals under broader labels is becoming popular, allowing intermediaries to curate inventory based on these signals in order to provide scale. This practice provides advertisers with an accurate, unified solution for audience targeting, simplifying their campaigns, and delivering superior results.

"Curation as a service" is an emerging trend showing potential. It enables intermediaries to curate inventory based on extensive data signals and apply a consistent curation methodology. With this service, advertisers can ensure their campaigns reach the most relevant and engaged audiences, leading to enhanced conversion rates and campaign performance – without the 3rd party cookie.

Conclusion:

The digital advertising ecosystem is experiencing a major transition with the phase-out of third-party cookies. However, this change is opening up new avenues for advertisers. The prominence of first-party cookies lets advertisers utilize their CRM data, offering highly personalized experiences to their target audiences. By embracing alternatives like universal IDs and browser-based local storage, advertisers can maintain efficient targeting in the new reality of a privacy-first era.

Despite challenges such as audience segmentation, the industry is tirelessly devising solutions. Strategies like data signal aggregation under broader labels and using curation as a service are proving helpful in precise and efficient audience targeting.

As we adapt to the post-cookie era, embracing first-party cookies, exploring alternative solutions, and partnering with industry colleagues to tackle challenges is paramount. By staying on top of these trends and adopting innovative strategies, advertisers can fully tap into the potential of targeted advertising and forge meaningful connections with their audiences in a constantly evolving digital landscape