The Cookie Phaseout That Never Was: What’s Next for Marketers?

Background

Since 2020 the digital advertising industry has been bracing for a fundamental transformation: the demise of the third-party cookie, with Google at the center of the ongoing saga. This seismic shift had the potential for massive implications across the industry, as Chrome is the most popular web browser in the world, representing roughly 65% of the global market share. While the news sent marketers scrambling to find alternate data strategies, Google’s plans were continuously delayed and eventually canceled in July 2024. Rather than eliminating third-party cookies altogether Google pivoted, announcing plans  to introduce more privacy controls for Chrome users, leaving marketers grappling with uncertainty and reevaluating their data strategies.

Thought of as the  backbone of digital advertising, a third party cookie is a small data file placed on a users device by a domain other than the one they’re currently using. These cookies enable advertisers to track user behavior across the internet, deliver targeted ads, and measure campaign performance, and are  typically set when a website has integrated a third-party service, such as ad networks, social media plugins, or analytics tools. Once installed on a device, the user’s behavior can be tracked across multiple websites, often without full transparency or explicit consent.

The Cookie Phaseout that Never Was

Google’s decision was sparked by multiple marketplace factors. For one, privacy concerns were growing as consumers became increasingly savvy about how their personal data was being collected and leveraged. Secondly, tech companies were facing growing regulatory pressure, as laws like the EU’s General Data Protection Regulation (GDPR) required user consent for cookie tracking. Lastly, two of Google Chrome’s primary competitors – Apple Safari and Mozilla Firefox – had already eliminated third-party cookies. 

However, after four years of a shifting end date, advertisers began to question the likelihood that Google would follow through on their plans. In a 2024 survey from Forrester, 61% of marketers said that they do not believe that Google will deprecate the cookie. Perhaps marketers’ growing skepticism was part of the reason that many remained underprepared to handle the upcoming changes, despite the significantly extended timeline. As recently as Q1 2024, a survey from Epsilon indicated that 75% of U.S. marketers were still “very or moderately reliant” on third-party cookies, and only 44% felt “very prepared” for the changes. 

The Latest Plot Twist

In July 2024, following years of uncertainty and postponements, Google officially announced that they were canceling their plans to eliminate third-party cookies. Their recent blog post stated that “instead of deprecating third-party cookies, we would introduce a new experience in Chrome that lets people make an informed choice that applies across their web browsing.” While the details of this revised plan are yet to be seen, Google will essentially be giving Chrome users the power to decide if and how their browsing data will be captured, rather than unilaterally eliminating third-party cookies, as originally planned.

Despite Google’s change of heart, advertisers shouldn’t get too comfortable with the status quo, as the long-term viability of third-party cookies is far from guaranteed. Many of the initial reasons for Google’s original phaseout plans are still ongoing, namely user privacy concerns and regulatory pressures. In addition, Google’s recent announcement does not make it clear whether users will need to “opt-in” or “opt-out” of third-party cookies on Chrome, which leaves a major question mark regarding the portion of Chrome users that will remain trackable. For insight into how users might respond to increased privacy controls, we can look to Apple’s 2021 rollout of the App Tracking Transparency (ATT) framework, where under 25% of users opted-in to tracking. Since Chrome users will be making a browser-wide decision, rather than making a choice for individual apps, Chrome’s opt-in rates are expected to be even lower than Apple’s. If Google requires users to actively opt-in, expectations are that less than 10% will do so, resulting in a massive signal loss for advertisers.

The Growing Importance of First-Party Data

While Google’s reversal may have delayed the elimination of third-party cookies, marketers should maintain a sense of urgency when it comes to developing alternate data strategies. There’s still a significant amount of uncertainty surrounding the longevity of third-party cookies, and many consumers are already operating in cookie-less environments, such as Safari and Firefox. To set themselves up for success, marketers should prioritize first-party data strategies and proactively move away from a reliance on cookies.

Simply put, first-party data is information that a company collects directly from their consumers. Collection occurs only when there’s user consent, making first-party data more compliant and less vulnerable to regulatory changes. First-party data capture can occur in multiple ways, including website & app logins, email marketing, customer feedback platforms, loyalty programs, transactions, and more. A brand that’s looking to maximize their own first-party database should devise strategies to optimize these opportunities for data capture. Alternatively, brands can also partner with other companies, such as publishers or retailers, to leverage their first-party audience data for targeting. For example, a food brand might partner with a recipe website to target readers who frequently engage with their cooking content. Relative to third-party data, first-party data is generally considered more accurate, complete, persistent, and valuable. 

The Promise of Retail Media

In recent years retail media has emerged as one of the most promising first-party data solutions. It’s the fastest growing ad channel in the U.S., with total spend expected to reach $130 billion by 2028. At that rate, by 2028, retail media will represent nearly a quarter of all U.S. media spend. For marketers, retail media is an opportunity to leverage a retailer's first-party data for executing highly-targeted ad campaigns. In many cases, retailers are sitting on a treasure-trove of first-party shopper data, accumulated through loyalty programs, rewards systems, and store credit cards. This data contains rich insights on consumer shopping behaviors which can inform marketing efforts and enable brands to deliver ads close to the point of purchase. This is particularly valuable for brands with a limited first-party database of their own. 

Beyond audience building, first-party data can also enable closed loop measurement when advertising on retail media. Because retailers own both the audience targeting data and the sales data, there’s a direct link between ad exposure and sales, even if the purchase occurs in-store. In a survey conducted by McKinsey, 70% of marketers said that they’ve experienced better performance on retail media, compared to other media channels. For advertisers, retail media offers a strong first-party data solution, allowing brands to tap into valuable shopper data while respecting consumer privacy concerns.

Looking Ahead

While the third-party cookie may not be crumbling just yet, its future remains clouded with uncertainty. User privacy concerns and regulatory pressures aren’t going away, and the long-term impact of Google’s decision to give Chrome users more control over their browsing data is largely unknown. What is clear is that the advertising industry is moving in a more privacy-conscious direction, and that the eventual erosion of third-party cookies is guaranteed to cause significant signal loss for advertisers. The brands that recognize this moment as only a temporary lifeline for third-party cookies, and continue to pursue alternate data strategies, will emerge as the most resilient. Retail media is one of the most promising solutions for these efforts, as it allows brands to leverage the valuable first-party data of retailers.

If you’re interested in learning more about retail media, Sensor Tower’s Retail Media Insights provides complete visibility into retail media’s advertising ecosystem, helping marketers navigate the new and rapidly evolving marketplace. Click here to learn more.