Last month, Pivotal Research Senior Analyst Michael Levine downgraded Facebook’s stock citing concerns about the disappearance of third-party cookies and the declining demand for direct-to-consumer brands.
This so-called “cookie-pocalypse” has been looming over the heads of marketers ever since Google announced in May of 2019 that they will phase out third-party cookies over the course of the next two years.
If the industry’s most sophisticated analysts are questioning the social platform’s role in advertising, what does this mean for the 7 million advertisers who run ads on the platform every single day?
While it’s still quite unclear what the impact will be for advertisers who use the native platforms — Google Ads and Facebook Ads — this is going to have a significant effect on those who leverage retargeting platforms or DSPs that heavily rely on third-party cookies.
I spoke with Silverback’s Louis Belpaire to get to the bottom of it.
Q: Are DSPs doomed?
A: Many experts are saying that DSPs are on borrowed time.
To review, DSPs (demand-side platforms) are third-party software commonly used by advertisers to access ad inventory from a marketplace on which publishers list their supply. DSPs enable programmatic advertising, meaning the ads are purchased programmatically through real-time bidding and direct deals.
The algorithms used in programmatic advertising are fueled by third-party data — taking information like user browser history, IP address, and online behavior into account. Third-party data publishers will struggle significantly once Google phases out third-party cookie support from Chrome, which is why many experts are saying that DSPs are doomed.
Think of it this way: Why would an advertiser pay for space on a publisher’s website if the audience isn’t guaranteed? They wouldn’t. DSPs will have to begin looking into alternative solutions to make up for that loss of revenue.
Experts predict that new cookie-less identifiers will appear. In fact, Merkle recently announced a new ID standard that lets advertisers reach online audiences sans third-party cookies. The solution, called Merkury, leverages a first-party publisher tag that enables audience retargeting on social platforms (like Facebook) and over email by matching hashed email addresses.
Q: If third-party cookies are going away, what is Google’s solution?
A. Google is expected to communicate more on the new standard they are building (Google Sandbox) for cookie-less tracking.
If Google does offer a browser-based ID, and if it can recognize a visitor based on ad exposure, multi-touch attribution and view-through will still be possible.
But if advertisers cannot measure granularly at scale, it seems likely that we’ll retreat back to last-click attribution models and surveys.
It’s in Google’s interest to make this type of tracking work, so we’ll have to see where this goes.
Q: What are advertisers’ options in a cookie-less world?
A. The absence of third-party cookies presents marketers with a few key challenges:
- DSPs will be way less effective
- Data transfer across platforms will be difficult
- Retargeting could become a less efficient tactic
Until we know more about the Sandbox solution and whether or not marketers will be graced by cookie-less identifiers, here’s what you can do right now.
1. Hone Your First-Party Data Strategy
The data you own — customer information collected from form fills, call centers, etc. — will be vital in a cookie-less world. Whether you use this data to create Lookalike Audiences on Facebook or build a robust, personalized email strategy to keep customers coming back, it will play a significant role in reaching current and prospective audiences. Of course, this is naturally easier for e-commerce and DTC brands, but businesses of varying models must find a way to exchange value for consumer information.
In addition to the data you own, platforms with logged-in data — especially Google and Facebook — are now more powerful than ever. Using these native platforms and their built-in first-party data collection capabilities still gives marketers access to audiences with a higher propensity to convert.
If you’re wondering what a solid first-party data strategy actually looks like, contact our Paid Media team — we can audit your existing strategy and make recommendations for how to move forward.
2. Contextual Targeting
In addition to implementing robust first-party data solutions, marketers will see a growing reliance on contextual data and content strategy.
Although this may seem like a blast from the past, many advertisers will flock here, considering the future of other popular advertising alternatives remains uncertain.
With this approach, you’re able to meet users where they are and provide them with contextually relevant ads. For example, if a user is browsing an airfare website, they may be shown ads for car rental agencies, hotels, or tours in their destination city.
Q: So, should you sell your Facebook stock?
A. While how you trade the stock certainly might be influenced by the disappearance of third-party cookies, any buy/sell decision is of course predicated on your view of whether equity shares are over- or under-priced in the market today.
I will say Levine’s claim that Facebook’s exposure to DTC brands is a reason for downgrading seems like a bit of a stretch.
Retail (the majority of which is not DTC) might account for 20% of Facebook ad spend, but very steady spending in verticals such as automotive, finance, and telecom all represent over 10% each and have increased their Facebook investments equally as fast as retail over the last few years. That alone doesn’t seem like a strong enough argument to panic and sell, but there’s surely a lot to keep our eye on as the advertising landscape changes.
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