The End of Third-Party Cookies is (Finally) Near, as First-Party Data Becomes the 'Holy Grail'

I recently was reading an article about the phase-out and impending end of third-party cookies — and the far-reaching implications on digital advertising — when it struck me. 

While this is going to be a massively challenging shift for many, the end of cookies is a good thing. The right thing. For everyone. 

Not just because privacy matters — that’s obvious. But because these third-party cookies give our industry access to data that’s not really ours to begin with. And losing this cookie “addiction” will force us into better practices. 

And these better practices, data suggests, will prove to deliver more ROI than third-party cookie-driven ads. Especially long-term. 

These better practices start by emphasizing user experience, building trust, and giving customers a good reason to voluntarily share their data with us. Specifically, retailers need to make it easy to create accounts and sign in – and offer value in exchange for them sharing their data. 

Then, once our customers “authenticate,” we can use this first-party data to deliver the kinds of experiences that foster long-term customer loyalty and, ultimately, more sales.  
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No more taking from other people’s cookie jars

Growing up, I recall the feeling of taking cookies at friends’ homes. The cookies were always delicious, but it always felt a little uncomfortable — even when I was told to “help yourself.”

As a career-long marketer, that uneasy feeling rings familiar with certain practices. One example: email marketing. In the early days of digital marketing, it was common practice to purchase third-party email lists and blast promotions with little regard to user preferences. These purchased lists had names and user data that didn’t really belong to us. 

Thankfully, email marketing matured, and regulations such as CAN-SPAM took hold. Now, most brands and marketers steadfastly follow the philosophy of permission-based marketing, only mass emailing customers and users who’ve opted-in to receive those emails. 

Which brings me back to cookies. When Google recently published it would fully restrict third-party cookies in Chrome by the end of 2024 (and had started testing restrictions in 1% of users), it wasn’t exactly a surprise to those in the industry. The company first announced it would eventually be phasing out these cookies in 2020. Google, along with many of the tech titans, has since been facing increasing scrutiny regarding its data practices. Meanwhile, regulations such as GDPR are gaining traction — and digital privacy concerns among consumers are mounting. 

At the crux of this movement is data ownership. The third-party cookie data that drives many forms of digital advertising comes from external sources. The data doesn’t really belong to the brands that use it. Just like the email lists that early email marketers purchased. And a bit like that extra cookie I snuck from a friend’s cookie jar — it wasn’t really mine to eat.
 

A quick explainer of third-party cookies

If you’re trying to gain more than a surface-level understanding of how third-party cookies work and the deeper impact on the industry, I highly recommend reading Digiday’s series, Life Beyond the Cookie (Note: There is a paywall, but you can read up to three of the articles for free). It’s a thorough overview of the important transition that’s happening.   

To briefly summarize it, third-party cookies attach to a user’s browser when they visit a site. And they track users across multiple websites, building a profile of their browsing behavior, interests, and demographics. Without these cookies, marketers lose the ability to retarget users outside of their own sites — and they won’t be able to personalize experiences on their own sites based on user behavior on the global web.    

“Much of the ad tech industry — which is a trillion-dollar business — has been built around the reliance of third-party cookies,” Ben Jackson, OwnID’s chief revenue officer, recently told me. “This is huge for businesses all over the world, and especially retailers and online retail.”

It seems dire to some. But the end of third-party cookies doesn’t mean brands won’t have any data. Companies still can capture and build customer profiles using data from their websites — via first-party cookies and sales data — along with other owned digital properties (e.g. apps), and traditional retail. In other words, Amazon will still know all about which products you browsed and purchased on its site and in its app. But without third-party cookies, Amazon won’t know what you did at Walmart.com. 

So, when a trillion-dollar industry loses the ability to perform some of its core practices, resources and money will be invested elsewhere. Which is where things start to get interesting. In a good way.
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Investing in first-party data & less-creepy personalization

We’ve probably all had that experience of being served up an ad on some website or in an app that was both surprising and creepy. How did it know? You also may have had the experience of seeing an ad that was completely wrong for you — and immediately horrified by how you were digitally and wrongfully profiled.  

It’s hard to quantify, but too many of those creepy experiences can have a negative long-term effect on a brand’s most valuable customers. Many of those advertising levers supported by third-party cookies can drive short-term business rewards in the form of sales. 

But as thinking about digital user experience advances, cloak-and-dagger practices like buying email lists and borrowing third-party data will be left behind. 

And as transparency wins, customers are more likely to support their favorite brands with their loyalty over the long term. That’s why investing in first-party data — and personalization tech based on this data — is a win-win for customers and their favorite brands. As Colin Eastman, OwnID’s VP of sales, recently told me, “That first-party data collection is the holy grail.” 

First-party data can come from a variety of activities across a company’s online and offline channels. And there’s even a certain amount of profiling companies can do when anonymous users browse their sites. A dynamic site could showcase content related to that anonymous user’s journey on that site — but if anonymous users never purchase or register, that data becomes mostly irrelevant.

As Colin told me, “Most retailers have thousands and thousands of anonymous profiles that they cannot reconcile nor use to drive personalized experiences, offers, content, and products.

“Brands get very diminished value from these technologies.”

So, when it comes to the transition from third-party cookies to first-party data, incenting users to authenticate is and will continue to be a huge point of emphasis. 
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The path forward: Biometric authentication and incentives  

As third-party cookies become a thing of the past, the cost of new customer acquisition is expected to skyrocket – an upward trend that’s been underway for several years. One recent study found that acquisition costs have risen by as much as 60% in the past five years, driven by privacy regulation and new data security features on mobile devices. 

The increasing cost has already spurred many online retailers to more deeply invest in their own first-party data — starting with authentication tech like fingerprint and facial recognition that removes much of the friction of on-boarding. As we wrote recently, this shift also marks a deeper focus on the entire customer journey. By removing unnecessary onboarding friction, brands can convert more anonymous visitors to their websites to customers. And they can focus more of their efforts on nurturing those repeat buyers — knowing that one dollar spent on marketing to past customers yields a much better return than one spent trying to acquire new customers.  

“Without third-party cookies and data, brands need to start thinking about how to engage with consumers directly and create a value exchange proposition that encourages them to identify themselves directly with the brand,” Ben Jackson said. “This could take the form of loyalty programs or just incentivizing them to authenticate earlier in their user journey.”

At a recent dinner, several digital experience leaders told us they want to do more when it comes to personalization, using their own first-party data. Many believe that loyalty programs — and offering discounts to join those programs — will help convert anonymous visitors to known customers. But they admit they are still in the early days of exploring how to capture that data — via authentication — and turn it into personalized experiences. 

Those first-party data explorations will evolve from investigatory to mandatory, as third-party cookies are obsoleted. And as new customer acquisition costs continue to rise. And as continued scrutiny, rightfully, is placed on our industry’s practices around user privacy. 

And it’s a good thing for everyone. Our gut feeling reminds us of this. We know third-party data isn’t ours to begin with. 

As a user, I’m comfortable sharing my data with the companies but very uncomfortable knowing someone who I don’t know is gathering and using information about me. 

As a marketer, it feels better when we know our customers choose to share their data with us. Just as I’m still more comfortable eating my own cookies than sneaking one from someone else’s house. And when our customers do opt-in, we also know our first-party data is worth a lot more — and is more accurate — than when we borrow data from someone else. 

Though even if we successfully transition our focus toward first-party data, a new set of data challenges will emerge. Especially when it comes to data security and governance.  

“This first-party data is still our customers’ data,” Colin Eastman said. “We need to be good custodians of their data to maintain their trust.” 

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