Digital Advertising

in the Cookieless World

 Digital Advertising in
the Cookieless World
The rules of digital advertising are being rewritten.

For years now, browsers and government regulators have been ringing the
death knell for third-party cookies (small pieces of code installed on a user’s
browser, by a domain they’ve never visited, to track behavior across websites).

Third-party cookies and data sharing have long been the backbone of digital
advertising. We’ve all seen them in action: we search for a pair of sneakers, and
suddenly sneaker ads are following us from site to site.

This type of retargeting has been increasingly off-putting to users; dredging up

questions of who, exactly, has access to this personal data and how is it being
used? It’s a dynamic that’s cast third-party cookies in a less than flattering light:
seen, at best, as a murky approach to data collection, and at worst, an invasion
of privacy. (One survey found that 75% of consumers distrust the way their data
is shared.)

In 2017, Apple implemented Intelligent Tracking Prevention for its browser,

Safari – an update that automatically blocked third-party cookies and limited
the lifespan of first-party cookies (set to expire after seven days). Mozilla
followed suit in 2019 with Enhanced Tracking Protection for Firefox, which also
blocks third-party cookies by default.

Then in 2020, Apple announced more privacy changes in its iOS 14 update:
users now had to explicitly grant app developers permission to share their
phone’s unique identifier (IDFA) for tracking and advertising purposes. While
users could opt out of sharing their IDFA previously, this release brought the
option to the forefront rather than burying it under Settings.

(You can read about how Segment is handling the iOS 14 update here.)

Digital Advertising in the Cookieless World 1

 "App" would like permission

to track you across apps
and websites owned by
other companies.

Allow Tracking

Ask App Not to Track

And recently, Google made its privacy stance clear when it announced that it
would be ending individual-based, cross-site tracking on Chrome (which
represents ~60% of the global market share among web browsers).

Google’s plan is to phase out third-party cookies by 2022 and use

“privacy-preserving APIs” in their place as part of its Privacy Sandbox. As one
part of the solution, Google’s Federated Learning of Cohorts (FLoC) aims to
move advertisers away from switching to another user-level identifier. Instead,
Google will group users based on common interests for ad targeting. According
to Google, early tests of FLoC show that “advertisers can expect to see at least
95% of the conversions per dollar spent when compared to cookie-based
advertising.”

The end of third-party cookies doesn’t automatically mean disaster for digital
advertisers. In fact, there’s a better, more ethical way forward with first-party
data.

In this guide, we cover how the ban of third-party cookies is a turning point for
digital advertising, the necessity of first-party data, and how a CDP will be
pivotal in this switch to a privacy-first digital advertising landscape.

Digital Advertising in the Cookieless World 2

 How browsers are handling
user privacy
Apple Safari released its version of Intelligent Tracking Protection
(ITP) in 2017 which blocks third-party cookies used for
cross-site tracking (and puts a limit on how long first-party
cookies can be stored and accessed).
In 2020, Apple announced its iOS 14 update will require app
developers to explicitly get permission from users to track
their IDFA (their phone’s unique identifier) with App Tracking
Transparency.
(Before users had to opt out of IDFA tracking, now they have
to opt in.)

Google Google announced that it will be phasing out third-party

cookies on Chrome by 2022.
Chrome will stop using user-level identifiers to track
individuals across sites.
Instead, they’ll be using “privacy-preserving APIs” and FLoC
(Federated Learning of Cohorts) to group users based on
shared interests.

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places website cookies in their own, distinct cookie ar to

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prevent cross-site tracking.

Digital Advertising in the Cookieless World 3

 Who’s impacted by the death of
third-party cookies?
The death of third-party cookies represents a fundamental shift in digital
advertising. Let’s break down the key players involved, and how they’re impacted.
Publishers
In digital advertising, there are two types of publishers to consider:
1. Media companies (like the New York Times, Vice, etc.)
2. Tech giants (like Google, Facebook, Amazon)
Put simply, publishers display ads on their digital space: whether it’s natively in
content, sponsored in social media feeds, a paid search result, and so on. This is
how most media publishers have monetized their content – relying on ad revenue
to stay alive.

But for the top 500 publishers worldwide, disabling third-party cookies would
decrease programmatic ad revenue by a whopping 52%.

That’s why there’s been a push among media publishers (like the New York Times,
Washington Post, etc.) to strengthen other revenue streams outside of digital
advertising. Usually, by instituting paywalls to grow subscription rates.

But to future-proof their business, media publishers need to take control of their
own data.

This is why more forward-thinking media companies plan on (or have already
started) bolstering their first-party data collection to power their own revenue
stream.

Digital Advertising in the Cookieless World 4

 Daniel Newman
Principal Analyst at Futurum

Publishers and advertisers need to think about the post-cookie world. How
do we get people to choose to participate? We are seeing more publishers
move to subscription models. This isn't just about money, but it's about
having higher quality data that better understands the customer, the content
they consume, and the things that may interest them. This is only one of the
pivots, but any business in any industry needs to think about why someone
would want to expose their data – what real value is being created?

Tech giants
Google and Facebook have long been powerhouses in digital advertising
(representing 29.4% and 23.4% of ad revenues in the US, in 2020), with Amazon
quickly carving out a space for itself in this top tier.

Digital Advertising in the Cookieless World 5

 They’ve structured themselves as “walled gardens” or closed ecosystems –
collecting a wealth of first-party data from their massive user bases, which stays
within the confines of their organization.

For quick context: Facebook has roughly 2.8 billion daily active users, while Google
has 1.5 billion Gmail users worldwide (and more than 2 billion logged-in YouTube
users a month). Whenever those users are logged in to these platforms, they’re
generating first-party data (e.g. social media posts they engage with, search
history, etc.)

Then, there’s Amazon, which currently represents ~47% of the e-commerce market
share in the US. Consumers on Amazon have incredibly high intent, providing the
company with a not-so-secret ace in the hole of purchase data (which feeds the
company’s rapid experimentation and spot-on product recommendations). In a
recent survey of 52 senior ad buyers – who represent $15 billion in US ad spend –
Amazon was the business predicted to gain the most shares in the digital ad
market over the next two years.

So while these tech companies may feel an initial tremor following the
depreciation of third-party cookies and IDFA, they already have a solid
infrastructure for success with their droves of first-party data.

David Temkin
Director of Product Management Ads, Privacy and Trust at Google

Developing strong relationships with customers has always been critical for
brands to build a successful business, and this becomes even more vital in a
privacy-first world. We will continue to support first-party relationships on
our ad platforms for partners, in which they have direct connections with
their own customers. And we'll deepen our support for solutions that build
on these direct relationships between consumers and the brands and
publishers they engage with.
Source: Charting a course towards a more privacy-first web

Advertisers
For digital advertisers, the status quo has been to track site and app users by
allowing ad networks and Ad Tech companies to place third-party cookies on their
properties; essentially giving up control over their data.

Digital Advertising in the Cookieless World 6

 The ban on third-party cookies means that most advertisers will have to rework
entire strategies. But maybe it’s about time.

The programmatic ad supply chain has been notoriously fragmented and

non-transparent. One UK study found that half of what advertisers invest in
programmatic ads never reaches publishers, while 15% of ad spend seems to just
fall through the cracks (it can’t be attributed to any player).

Data from these campaigns can be just as opaque. There’s a lack of uniformity in
how different platforms format data, which creates inconsistencies and makes it
more difficult for advertisers to analyze performance.

Source

Focusing on first-party data collection brings more transparency to digital

advertising, and gives users more control over how their data is collected and
shared. This is a step in the right direction: programmatic advertising (that has
traditionally been steeped in third-party cookies) has felt more like surveillance
than personalization to many users recently. This has resulted in people installing
ad blockers, and ignoring campaigns entirely.

Digital Advertising in the Cookieless World 7

 Omer Minkara
VP & Principal Analyst, Aberdeen

It's no secret that some of the ways advertising programs work have been
borderline creepy. Having a conversation over dinner about a new TV when
your smartphone is 10 feet away, and then logging into your preferred online
news site or social network and seeing a TV advertisement has become
normal. Consumers are now pushing back, and they are more aware of
alternative tools they can use for more privacy. So, instead of secretly
monitoring or listening to consumer activities, publishers and advertisers
must provide their target audiences with more meaningful and relevant
content.

Ad Tech players
Third-party cookies have been instrumental to Ad Tech players in two ways:
1. Ad targeting on the open network (outside of closed systems like Google,
YouTube, Facebook, etc.)
2. Advertising attribution
As we know, third-party cookies have been able to track individuals from site to
site, which has given an explosive number of vendors the opportunity to provide
advertisers with retargeting services based on traditional cookie-based identifiers.

Without cookies, the value of cookie-based identifiers degrades significantly.

However, many ad networks have been preparing for the post-cookie transition for
a while now.

One initiative that’s being spearheaded by The Trade Desk is Unified ID 2.0, an
open-source industry initiative to achieve identity resolution across the open web.
With several partners on board, including LiveRamp, Criteo, and Nielsen, Unified
ID 2.0 aims to bring addressability in the open network without cookies.

Digital Advertising in the Cookieless World 8

 Rory Mitchell
Executive Managing Director, Americas, at Criteo

As an industry, we have always put consumers front and center, innovating to

meet them where they are and where they want to interact. That will not
change with the erosion of third-party cookies. In fact, it will provide
consumers with an additional level of control. Moving forward, access to
first-party data will be critical for marketers to continue to reach these
consumers in a privacy-friendly way while providing a valuable and
personalized experience.

The absence of third-party cookies also means that ad networks and advertisers
need to rethink their attribution models, and how to instrument their analytics
stack to effectively measure the customer journey and maintain accurate
reporting.

Alex Bauer
Head of Product Marketing at Branch

It’s hard to overstate the magnitude of what’s coming: if you run mobile ad
campaigns and haven’t taken some basic steps before it gets here, your
mobile marketing stack is about to blow up. As of March, few ad networks
and advertisers have taken the steps needed to leverage Apple's
SKAdNetwork. Without this, they remain completely reliant on traditional
methods of attribution, which iOS 14.5 makes virtually impossible. For mobile
measurement partners (MMPs) like Branch, we find that as basic app installs
and ad attribution become more commoditized, it's more important than
ever before to create incredible user experiences organically.

Digital Advertising in the Cookieless World 9

 The different types of data
There’s a lot of uncertainty among advertisers about what a “cookie-less” world will
look like. And while browser updates and privacy changes are still evolving, the one
thing we do know – without question – is that first-party data is your best
investment.

Think of the companies that deliver top-notch customer experiences. How does
Amazon know exactly what products to recommend so you click ‘add to cart’? How
does Netflix keep you watching for hours? It comes down to first-party data.

This is why businesses have been shifting away from Data Management Platforms
(DMPs) toward CDPs. While both platforms are used to build audiences for
marketers, CDPs have the advantage of relying on first-party data (and DMPs
typically use second- and third- party data).

We’ll dive deeper into the differences between a CDP and DMP below, but first, it’s
helpful to have a clear understanding of how first-, second-, and third-party data
differ.

1st, 2nd & 3rd party data

1st party data

This data is collected directly by your company (e.g., gathering an

email address from a user that subscribed to your newsletter).

It’s generally seen as the most valuable data for understanding the
customer experience, and the safest to collect. You can prove
exactly where it came from and why it was collected.

Digital Advertising in the Cookieless World 10

 2nd party data

This is first-party data collected by another company and shared

with, or sold to, a non-competitive partner.

(E.g. partnering with a company to create an ebook, and then

sharing email lists for distribution). Since this type of data comes
from a partner, it's not as high quality or as safe as first-party data.
3rd party data
?

This is data that’s collected by a data-collection company and then

shared with anyone who wants to purchase it. Data-collection
companies typically don't verify, or even guarantee, its accuracy.

On top of that, it's hard to prove that this data was collected
ethically. Also, the fact that third-party data is available to anyone
makes it less valuable: You and your competitors could be using the
exact same third-party data to run your marketing campaigns.

Nirish Parsad
Marketing Technologist, Tinuiti

More privacy for consumers means marketers will need to unlock the power
of their first-party data to stay ahead. Building trust and delivering better
experiences, powered by data, will give smart marketers a competitive
advantage.

Digital Advertising in the Cookieless World 11

 CDPs vs. DMPs
Data Management Platforms (DMPs) help advertisers manage anonymous cookie
IDs for their site visitors and create audience segments for online advertising. They
also provide third-party insights for these audiences via large, anonymized data
sets.

DMPs get their data either by purchasing it from a data seller, or by having such a
large number of clients that the DMP can aggregate and anonymize its own data.

Here’s how it works: DMPs use third-party cookies (created by an external domain)
on all the websites in its service. When a user clicks on an advertisement, the
cookie is loaded onto their computer, and then tracks their behavior across sites.
The customer could visit 50 sites, with each dropping cookies to collect the
browser ID, device ID, IP address, etc., so that the DMP can recognize a specific
individual (even if they remain anonymous).

So, what will happen when third-party cookies are blocked?

First, this type of user-specific, cross-site tracking will stop. While users can,
theoretically, opt in to allow third-party cookies on their browsers, we wouldn’t bet
on it. This means that DMPs will only have access to previously collected user data.
Audiences won’t be updated, and new users will not be tracked.

CDP DMP

1st 2nd 3rd

party party party
data data data

CDPs, on the other hand, collect and organize first-party data from cookies that
customers share directly with a brand to create a holistic, consented view of their
customers. A CDP can then take that data and share it with other tools within the
company’s tech stack to deliver customer-first experiences.

Digital Advertising in the Cookieless World 12

 By making the shift from DMPs to CDPs, brands can activate on a reliable single
view of the customer without the need for cookie tracking or other nefarious
third-party data. Customer data platforms, like Segment, help businesses collect,
clean, and control their customer data, and include first-party identity graphs at its
core to merge user activity into a single profile in real time.

Without first-party identity resolution, businesses wouldn’t be able to recognize

duplicate profiles on their properties, understand the full context of user journeys,
or achieve reliable personalization.

(You can learn more about the nuts and bolts of identity resolution here.)

Omer Minkara
VP & Principal Analyst, Aberdeen

Publishers and advertisers should only collect the types of data needed from
consumers to engage them in a meaningful manner. Providing consumers
with a simple and clear understanding of the types of first-party data the
company collects, and how it's beneficial for the consumer, is a good starting
point to establish greater transparency and trust between the brand and
consumers.

Digital Advertising in the Cookieless World 13

 The benefits of first-party data
for advertisers
Improved accuracy
First-party data is typically more accurate than third-party data, because it reflects
actual customer behavior from your own channels (web, mobile, in-store, etc.).
This data begins and ends with your business; it’s not filtered through some kind of
intermediary or agency, as is the case with second- and third-party data.

A 2020 study from Boston Consulting Group (commissioned by Google) found that
the incremental revenue from a single ad placement doubled when marketers
leveraged their company’s first-party data.

First-party data Third-party data

Direct customer relationship

Indirect customer relationship

Individual insights
Aggregated insights

Collected with consent

Not typically collected with consent

High accuracy Low accuracy

On trend with eliminating third-party data practices is the increased focus on

tracking users via server-side (instead of relying on client-side pixels on business
websites).

Server-to-server tracking gives brands complete control over the data they share
with advertising platforms. It’s also a more accurate method of data collection:
with ad blockers and browser crashes, pixels aren’t always reliable at catching
every user event.

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 Facebook launched its Conversions API in 2020 to offer a new, privacy-forward way
for advertisers to track and connect consumers to their KPIs. With a server-side
method, businesses can send data and events from their servers back to
Facebook’s servers, rather than placing a Facebook-owned pixel on their site.

Chelsea McClure
Director of Engagement Marketing, Redbubble

At Redbubble, we've gotten ahead of the coming changes in third-party

tracking by leveraging first-party data and server-side tracking methods to
enrich our understanding of our customers in a responsible way. It's
comforting to know that we are better prepared for the coming changes, and
it wouldn't have been possible without Segment.

Improved ROAS
Many see the end of third-party cookies as ushering in a personalization-privacy
paradox. How are businesses supposed to deliver relevant experiences without the
behavioral data of third-party cookies?

But here’s the thing: this “personalization paradox” doesn’t exist. First-party data
can power highly personalized customer experiences, while also acting as a
unique differentiator: no other business has access to this data.

This not only gives businesses complete control over their data, but it establishes a
more trusting and transparent relationship with customers.

of consumers said they need to

81% trust a brand to buy from them.

Source: 2019 Edelman Trust Barometer Report.

Digital Advertising in the Cookieless World 15

 For advertisers specifically, you can leverage your first-party data to retarget
known customers, or even power more efficient lookalike targeting in platforms
like Google, Facebook, Snapchat, or Pinterest.

Without an integrated CDP, marketers have had to manually upload a CSV of their
customers into advertising platforms when creating lookalike audiences. This
means, from the gate, they’re using outdated data. But a CDP can automate
audience creation and synchronization to help businesses understand and target
users in real-time.

(Here’s a step-by-step guide on how to create lookalike audiences in Facebook

using Segment Personas, to increase advertising efficiency.)

Christian Rocha Castillo

Deputy Director Ecommerce/Digital Media, Domino’s Pizza

Having Segment has not only helped us to do the personalization work we’ve
always wanted to do, but we can now improve on the effectiveness of our ad
campaigns and feed into that feedback loop.

Complete view of customer activity across channels

Many marketers don’t have the data infrastructure in place to work with a
complete view of the customer. Instead, they have to rely on a partial view, based
on breadcrumbs collected from disconnected interactions.

They don’t know that Device ID 6954 is already a customer, or that Desktop User X
is actually the same person as Mobile User Y. The result? Untargeted, poor
performing advertising that eats up your valuable marketing budget. In fact, 21
cents of every dollar spent on advertising is wasted due to poor data quality.

Digital Advertising in the Cookieless World 16

 Data quality impact on media effectiveness per dollar spent

$0.21

$0.79

Wasted media Working media

Source: Marketing Evolution online survey cunducte by Forrester Consulting.

Base = 409 respondents

A customer data platform, like Segment, collects, cleans, and consolidates

first-party data within an organization. It breaks down the data silos that can exist
between product, marketing, and customer support teams. It provides a complete
view of every customer interaction, across social channels and the businesses’
owned properties (e.g. email, in-app, on-site, SMS, etc.).

Omer Minkara
VP & Principal Analyst, Aberdeen

The ability to monitor customer journeys through connected views of

first-party data will help brands understand which activities produce more
desirable business results so the company can repeat them, while also
enabling pivots for activities that are associated with sub-par performance
results.

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Why CDPs are pivotal in
a privacy-first world
The pivot to “privacy-first” digital advertising has been a long time
coming. But recently it’s gained momentum.

Just last month, Virginia signed consumer privacy legislation that follows
in the footsteps of the California Consumer Privacy Act (CCPA) and the
European Union’s General Data Protection Regulation (GDPR) – which
allows users to request the deletion of their personal data collected by
businesses (among other privacy measures).

CDPs have become pivotal for businesses to adapt to these regulations

and stay compliant. This goes beyond first-party data collection to
include data management: like the ability to delete and suppress end
user data (should they request this) and store data in accordance with
regional privacy laws.

Segment has championed first-party data from the start, and is in

support of these recent privacy initiatives.

In fact, to help companies reduce long-term data exposure and easily

route events to regional infrastructure, Segment has introduced Local
Data Ingestion and Local Data Storage, both in public beta as of March
2021. These capabilities are available in APAC, EMEA, or the US and
around the globe.

We’ve also re-engineered the library that started it all: analytics.js. Our
latest version, Analytics.js 2.0, upgrades our most popular and beloved
API to offer developers more control over their first-party data collection,
including adding privacy and consent controls before an event occurs.

To learn more about Segment’s capabilities
with first-party data collection, and how it
can help future-proof your digital strategy,
schedule a demo today.

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