The cookie crumbles
The cookie crumbles
#236 - The final death blow for 3rd-party cookies might bring more value to SEO
Google is phasing out 3rd party cookies, which causes another wave in a sea of issues for publishers and affiliates. SEO could be a viable way to source more 1st-party data and at least somewhat remedy the impact.
Death of a cookie
On January 4th, 2024, Google started blocking 3rd party cookies for 1% of Chrome users (~30 million people). The plan is to ramp up to 99% by the end of 2024.
The new feature, called Tracking Protection, is part of Privacy Sandbox, an initiative that aims to strengthen privacy for users on the web. For advertisers, Google offers the Topics API, which is based on interest-based targeting (IBA). IBA gathers interests based on visited sites and anonymizes users through a complicated hoop of filters.
How it works: Google groups user interest into a long list of topics (see the list1) and collects the top 5 interests over the last 3 weeks. Then, it provides the number one topic over the course of one week via the API so advertisers can run ads against them. Compared to 3rd party cookies, which track the exact sites users visited over a longer time, Topics are much less granular.
IBAllistic
The $600 billion advertising industry had 5 years to prepare for the death of cookies:
2017: Apple started working on ITP (Intelligent Tracking Prevention)
2018: GDPR comes into effect
2019: Mozilla blocks 3rd-party cookies
2020: Safari blocks 3rd-party cookies
2020: CCPA comes into effect
2022: only 29% of open web traffic was accessible to 3rd party cookies
But only 27% of broadcasters said to work on a workaround for the death of 3rd-party cookies. Whether one in four advertisers struggles to adapt to the new world due to complexity or a lack of options is hard to say. What is easy to say, though, is that the change will cause harm and destruction.
CPMs are 2-3x more expensive due to 3rd-party cookie blocking:
multiple publishing executives lamented seeing ad prices for impressions on cookieless browsers like Safari be half the rate of third-party cookie-enabled impressions.2
We found that a small percentage of people on iPad are still using the older version of Safari that allows for third-party cookie tracking. This version of Safari had a CPM 3x higher than the CPM for users with Safari 13 that does not allow for third-party cookies on the same device. Similarly, for iPhone Safari users, the pre-third party cookie blocking browsers generated a CPM that was 2.5x higher than the CPM by Safari 13.3
Criteo came to an even starker result: the company ran a test on 1 million users and found that IBA is 5x worse than 3rd party cookies.4
McKinsey estimated publishers will lose $10 billion in ad revenue.5
NAB found that the broadcast radio and television industry would lose $2.1 billion in digital advertising revenue annually, representing 6.3% of the industry’s total advertising revenue, if third-party cookies were eliminated today with no privacy-preserving alternatives.6
IBA comes with a fresh list of problems:
The effectiveness of IBA depends on the taxonomy. If, for example, Google doesn't add "shoes" as a topic, advertisers can't track users who want to buy shoes. In November 2022, the list reached 349 topics. In June 2023, it expanded to 629.
Most users are interested in entertainment, news and shopping, which causes general interests to overpower specific ones. As a result, advertisers have a harder time serving ads outside of broad topics.
Topics only considers the hostname (including domain and subdomain) of the website for its classification, not subdirectories or URLs. The result: interests are very course.
Bottom line: we're gaining more data than ever while our user understanding has never been worse.
Privacy as a moat
Google and Apple have distinctly different operating systems. But one thing Mountain View learned from Cupertino is how to leverage privacy to deepen moats.
Apple's ATT (App Tracking Transparency) shipped in April 2021 and blew a $10 billion hole into Meta's revenue. A significant amount of app install ads migrated from Meta properties to Apple.7
From The 5 big tech trends of 2022:
In April 2021, Apple started asking users whether they wanted to be tracked. Of course, the majority of users decline. Fast forward to December 2022: Meta, Youtube, Snapchat and TikTok suffered billion-dollar losses. Experts estimate Meta lost at least $10b in 2022 just from ATT while Apple’s ad revenue increased. Privacy and agency over data are very important, but Apple hasn’t gotten rid of tracking per se. Apple defines “3rd party tracking” as “any app tracking user behavior that’s not Apple”.
Tracking Protection makes Google look good and strengthens its business. Providing more privacy for users is a positive argument in the many lawsuits and trials against Google, claiming the company tracked more than it should have.
At the same time, a higher dependency on 1st-party data solidifies the walls of Google's walled garden:
Chrome is the largest browser on the web and gets 65% of web traffic - 3x as much as Safari.
Alphabet owns massive platforms like Android, Gmail, Youtube, Maps and more - all of which provide 1st party data.
Google also owns Ad X, one of the largest ad marketplaces.
From The web moves from cookies to browser tracking:
To summarize, Google and Apple - the two biggest (only?) players on the smart device operating system market - replace 3rd-party tracking with inhouse solutions that group users by behavior and provide cohort-based data to advertisers. Instead of websites tracking users with cookies, Google and Apple record and aggregate user behavior with the help of machine learning. This shift fits into the privacy-conscious zeitgeist but is also an indicator for the technology that seems to be ripe for broad tracking and clustering.
As a consequence, big advertising platforms gain more control and power, advertisers become more dependent on G and A. Ironically, we see the same trend in Google Ads, where Google took away targeting capability in February 2021 by incorporating broad match modifiers into phrase match.
SEO as a lifeline to 1st-party data
A critical response to the death of 3rd-party cookies is a stronger focus on 1st-party data.
Any company, but publishers especially, needs to invest in 1st-party data to understand user behavior and serve relevant ads. In plain words, marketers rely more on data from their own site / app. If you are already a destination users come to directly, you're in a good place.
First, SEO is a strong and cost-efficient channel to get more 1st-party data. The death of 3rd-party cookies could be an opportunity to give SEO more value besides being a performance and brand channel.
To make the most out of it, companies need to drive more users to create accounts so they can track interests and preferences, use look-alike audiences from 1st-party data to bring more suitable users on board and make better offers at the right time. For example, publishers can serve logged-in users better affiliate content.
Second, budgets could shift from advertising to SEO as a result of lower ROAS and growing CAC. Search is based on intent instead of behavior. When behavior becomes harder to understand, intent becomes more interesting.
From The 5 big tech trends of 2022:
SEO likely benefits from fuzzier marketing attribution** because search keywords inherently convey an intent, and paid channels either become too expensive or lose attraction. You don’t need to track users for intent when they reveal it through a search (or even a series of searches).
Third, advertising is one of the main ways of building a brand, which is important for SEO. When banner and display ads become more expensive, the question arises whether it will be harder to build a brand in the future.
On one hand, the largest web platforms, Amazon, Alphabet and Meta, are end-to-end ecosystems. In plain words, you can collect data and advertise against it on the same platform. Since it qualifies as 1st-party, browser blocking doesn’t apply.
On the other hand, a higher reliance on end-to-end platforms means more competition and less pricing transparency.
"CPMs are 2-3x more expensive due to 3rd-party cookie blocking" this contradicts to the following paragraphs. "This version of Safari had a CPM 3x higher than the CPM for users with Safari 13 that does not allow for third-party cookies on the same device." or did I miss something?