The cookie: the history of online footprints

Lauralyn Lamarche
Thursday, August 27 2020

A quick update

It’s been almost one year since Google Chrome announced it’s Privacy Sandbox strategy aiming to remove the third party cookie. Since then, there has been more talk than action in the programmatic advertising industry as a whole. Privacy Sandbox is where Google Chrome plans to store the user-generated data they receive, while also allowing vendors to make an API call to the data which will become private. In other words, instead of targeting a specific user with their location and behaviour on the web, they will be able to target a group of users with similar interests. 

On another note, last month, Apple announced it is making changes to the IDFA (Identifier for Advertisers) with the release of IOS 14, which is scheduled to launch around mid-september 2020 (less than a month from now!). Users will now be asked to opt-in when the app opens. Just like the browser cookie, advertisers use IDFAs to track data so they can, in-turn, deliver customized advertising. This data can be used to track when users interact with a mobile advertising campaign. Apple’s decision has left publishers puzzled about their next steps. What will the opt-in rate be for apps? Will users deny to opt-in and will that impact how they use the app, or if they can use it at all? Many unanswered questions with a fast approaching deadline this fall.

Addressability, transparency and privacy weren’t always at the forefront of the industry. Let’s take a moment to go back in time to understand the history of the online footprint, and why it has brought us where we are today.

The history of the cookie

We can trace back the beginning of the cookie all the way to 1994 with computer services company Netscape Communications, also one of the very first internet browsers. Lou Montulli, a web-browser programmer at the company, came up with the idea of using text files to store information. This file would be able to store purchases on the user’s local computer, solving the problem of reliably implementing a virtual shopping cart. The very first time cookies were used was to check whether visitors to the Netscape website were returning customers.

Fun fact: The origin of the name, “cookie”, is derived from the term “magic cookie”, which is the package of data received and sent by a program. The term was coined by Lou Montulli himself and is still in use today.

Ever since the very beginning in 1994, there were many concerns voiced about cookies and their potential privacy implications. In fact, only in 1996 did cookies become known to the public when the Financial Times published an article about them. Fast forward to 2020, with privacy one of the most controversial and talked-about subjects in the industry, we are finally attempting to deal with the risks.

How do first-party and third-party cookies work?

The main function of the HTTP cookie is simple: remember the user’s browsing activity to improve their experience on the web. The cookie remembers the items added to the shopping cart as the user continues to browse on the website. It can also be used to remember data previously entered by the user such as their name, address, password and payment method.

  • First-party cookies are generated and stored by the website you are visiting directly. Website owners collect data to, in-turn, improve the user experience of their site.
  • Third-party cookies are created by websites outside of the ones you are visiting directly. They are used mainly for measurement and online advertising functions such as retargeting and ad-serving. Other third-party services provided to website owners also exist such as Chatbot, which also uses third-party data.

Why is this important for users, advertisers and publishers?

A healthy internet ecosystem revolves mainly around 3 dimensions: the users, publishers and advertisers. Users visit publisher websites to access valuable content, while publishers need to monetize their content through various revenue streams including showing ads to users. Advertisers are looking to reach specific users and therefore advertise on publisher websites to drive business outcomes.

Unfortunately, the industry has done a poor job with users to explain the role and mechanisms used to make the ecosystem work, leading to privacy concerns and lack of standardization to address these issues, hence the rise of regulations and frameworks we’re starting to see today.

Impact on the user

Users will appreciate getting more control over their digital privacy, but they also have come to expect convenient and personalized experiences. The changes to the industry coming up will likely impact this experience if they aren’t properly addressed. Frameworks will carry a secure and simple to understand consent mechanism to inform the users about the value exchange and provide them with a privacy stamp, as well as what information is being shared and how it’s being used. On the flip side, by having users opting out of the value exchange, it can also mean losing the democracy of free content, freedom of speech and neutrality that has been supported by publishers of the open web over the years. These are very important subjects for the world’s democracy and have serious implications for future generations. We must ask, how to balance users’ privacy needs with advertisers’ needs to generate business outcomes from ads? Does the industry need one-to-one targeting or is a cohort-based approach just as good? The reality is, publishers need to monetize their websites to produce content, and advertisers are expecting to drive business outcomes from the benefits of digital advertising, and solutions do exist!

Impact on advertisers

Advertisers, faced with less specific and targeted data, will have to find ways to personalize their campaigns to a group rather than to an individual. Other mechanisms on the rise are the use of Universal ID aiming to provide similar capabilities as the Walled Gardens. The death of the third-party cookie does not necessarily mean that advertisers will spend less on digital advertising. In fact, with the rise of Ad Blockers, a study revealed that 64% of cookies were blocked or deleted by browsers in Q4 of 2017. However, we did not see a decrease in ad spend in 2017, but rather, it has increased every year since.

Source: eMarketer

Impact on publishers

Publishers will need to find ways to improve the collection of data on their websites, generally through first-party data segments that can be put to use in the ecosystem through privacy compliant mechanisms. They will also need to keep monetizing their websites to, as mentioned before, generate free and neutral content for their many audiences. Not being able to perform this privacy transition is putting their future at risk, which ultimately can be a threat to future generations that won’t have access to quality and diverse content to support a healthy democracy.

The death of the cookie: a much needed change with big expectations

Let’s be honest: this update is well-deserved after 15 years of doing a poor job managing privacy across the web, mainly due to lack of regulations and standardisation. Users are now expecting solutions. On the flip side, the open web needs to thrive and be able to compete in a fair way with the Walled Gardens that are commanding an increasing share of users’ digital lives.

With the death of the cookie, new addressability and identity solutions will bring the ecosystem together again through a privacy compliant way. Ultimately, we must find a way to fix the communication between users, publishers and advertisers, all while keeping the democracy of the internet at bay.

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