The Basics
– First of all, what is Cookie?
Cookie is a kind of ID stored in a web browser such as Safari or Chrome. It allows computers to remember user behavior on a website temporarily. It is used in many websites we use daily, such as e-commerce and social networking services. For example, Cookies are used when you log into a website. The reason you can continue browsing the website without entering your ID every time you move to a different page is that Cookies store your ID information in your browser. Cookie is an important technology used in various ways, including targeting and measuring digital ads.
– First-party Cookies and Third-party Cookies
Cookies are divided into two types: First-party Cookies and Third-party Cookies.
If the location where the Cookie is written and the entity writing the Cookie are the same, it is a “First-party Cookie,” and if they are different, it is a “Third-party Cookie.” So as for the above example of a Cookie for logging into a website, it is a First-party Cookie because the place where the Cookie is written and the entity to which it is written are the same.
On the other hand, most Cookies used for ad distribution and tracking are Third-party Cookies. Ad Networks and Demand-Side Platforms (DSPs), such as Google Display Network, are Third-party Cookies because the place (www.example.com) and entity (www.yahoo.co.jp, www.google.com, etc.) are different. Third-party cookies are used for two main purposes in ad distribution: (1) Conversion measurement and (2) Targeting. We will not explain the detailed mechanism in this post, but by utilizing cookies, you can measure conversions and deliver ads more efficiently through retargeting.
– The “Cookie-less” trend
In recent years, there has been a shift to a Cookie-less environment, limiting the use of Third-party Cookies. There are two regulations that are causing this trend.
- Legal regulation
Recently, there has been a spotlight on the problem of data being collected and provided to third parties without consumers’ knowledge. And in response, Europe, California in the U.S., and Japan, have strengthened regulations on the use of third-party data by structuring laws regarding personal information. These laws protect users from the risk of their web behavior being passed on to third parties without their consent. - Proprietary regulations by the web browser and operating system providers, such as Apple.
Following such regulations, now many browsers restrict the use of Third-party Cookies, and advertisers and platforms are forced to comply with the regulations set by the browser. Google has announced that Google Chrome will also deploy restrictions by 2024.
– The impact of the Cookie-less trend on digital ad distributions
As mentioned, Third-party Cookies play an important role in measuring the effectiveness of ads and maximizing ad results by improving targeting accuracy. Therefore, restrictions on the use of Third-party Cookies lead to the inability to properly evaluate ads due to no conversion measurement and low ad effectiveness due to poor targeting accuracy. In addition to Safari, it will also be restricted in Google Chrome from 2024. This means that soon, Third-party Cookies will no longer be available in most web browsers, impacting the accuracy of ad delivery and the ad effectiveness measurements.
Current Situations
– Impact on digital ads as seen in numbers
Restrictions on Third-party Cookies make it difficult to detect retargeting signals and reduce the volume of users to whom retargeting ads are delivered. Figure 2 shows the cost ratio of retargeting in actual cases. The figure shows that not only does the volume decrease before and after the ITP*1 release, but the CPM (Cost Per Mille) has also skyrocketed.
*1 ITP: Intelligent Tracking Prevention. A feature by Apple that prevents tracking personal information by restricting how Cookies work to protect user privacy.
We have drawn our average CPMs for retargeting in display ads from January 2019 to June 2021 (Figure 3). As you can see, the approximate curve shows a gradual increase in CPM. The average CPM for June 2021 is about 140% compared to March 2020, the month when the full restriction of all Third-party Cookies began. These figures show that Third-party Cookie restrictions have an impact on ad distributions.
What is Coming Up?
– Third-party Cookie restrictions in Google Chrome
As we have mentioned, Google has announced that they will regulate the use of Third-party Cookies in Google Chrome by 2023. It was originally scheduled to begin by January 2022 but was announced on June 24 that it had been postponed to late 2023.
According to the announcement, the restrictions will start in late 2022, gradually eliminating Third-party Cookies in Google Chrome by late 2023. This is expected to affect ad distributions more than ever. Looking at the web browser share in Japan, Safari, Edge, and Firefox, which already have restrictions in place, account for 47% of the total. And with the restrictions being placed on Google Chrome, the use of Third-party Cookies will be restricted in more than 90% of all browsers. This basically means that Third-party Cookies will no longer be available in the majority of web browsers used in Japan.
What is required of a digital marketer
As explained so far, in two to three years, Third-party Cookies will no longer be available in most web browsers. This will significantly impact conversion measurement and targeting accuracy in ad distributions. The conventional digital marketing methods will lose their power on advertisements, and those in charge of digital advertising must properly understand Third-party Cookie restrictions and take appropriate measures.
In the next post, we will explain what digital marketers are expected to do in the Cookie-less era, explaining the actions recommended by each platform and distribution methods independent from Cookies.
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Irep Inc. is an award-winning global digital marketing agency based in the San Francisco Bay Area. Our headquarters are in Tokyo and our network spans more than 20 countries. In Japan, we are ranked No. 1 for performance-based marketing. We also offer highly specialized market entry, as well as integrated marketing and localization services. Since 1997, our data-driven solutions have effectively led our diverse international clientele to continuous success in Japan, Asia, and beyond.
Irep Inc.
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