How Does Strategy Change with the Deprecation of Third-Party Cookies?

John Tyreman:  Hi gang, welcome to The Digital Marketing Troop, where we talk about changes and trends shaping the world of digital marketing. I’m your host John Tyreman and I’m joined today by Louis Belpaire, Chief Operating Officer at Silverback Strategies, and we’re here to talk about the deprecation of third party cookies and the growing importance of first party data strategies. But before we get started, Louis, I’m curious, you seem like the kind of person who likes to travel. Where is the most interesting place you’ve been?

Louis Belpaire:  Hey John, well, what a great first question. I need to think on that for a second. Probably Vermont in the U.S., just because I’m thinking of this from a post-pandemic standpoint and I spent a little bit of time up there during the pandemic so maybe not that exotic or far away but from a regional travel perspective, it’s really an awesome state.

John Tyreman:  To each their own. I’ve always wanted to visit Vermont so that’s great. Well, let’s dive into the topic at hand here. For listeners who don’t know, could you describe third-party cookies? What are they and why are they going away?

Louis Belpaire:  I think with cookies, it’s really important to take a little bit of a step back and explain what they are and why they’re important. So, with cookies, there’s really two kinds of cookies. There are first-party cookies, and what are called third-party cookies. And to just take a trip down memory lane, that first-party cookie was really invented to solve an ecommerce problem because there was this guy named Lou, funny enough, who worked for net Netscape and, I had to read about this because I wasn’t familiar with the history of cookies, but essentially he was confronted to the problem of the shopping cart. Like, when the internet started and people had the idea of creating an ecommerce website, essentially, you’d go back to the website and it would never remember what was in your shopping cart. So this guy had the idea of the magic cookie, it was called the magic cookie at the time, where it would essentially store the information of what’s in your shopping cart, within your browser. So, a cookie is just a very small piece of code, a small piece of information that stores information about you as you visit websites and sort of what you’re doing on these websites so that when you go back, you get a little bit more of a customized experience. So that can mean a shopping cart that’s already filled with an ecommerce website. On Amazon, I’m sure you’ve seen this. It’s a customized list of products based on your search history for example, but that’s primarily why cookies were invented. Now, third-party cookies… You know the cookie idea was so brilliant. Like any brilliant idea, it’s brilliant because it’s simple. It was copied a lot, and it was copied to a point where ad tech started using it to track people across websites and it became sort of the backbone for the ad tech industry when really it wasn’t meant to be that in the first place. So, that’s kind of what cookies are and they’re important because, like I said, the backbone of ad tech relies on that sort of technology to deliver relevant ads. So we’re in an interesting, interesting time where essentially ad platforms are trying to find a new solution because cookies are going away and they’re going away for lots of different reasons that I’m not sure you want to get into right now.

John Tyreman:  Just at a high level, what are some of the driving forces for why these cookies are going away?

Louis Belpaire: That’s such an interesting question because I think there are many reasons. One of them is, obviously, from a privacy standpoint, I think people are really thirsty for ad experiences that are a lot more respectful of their privacy. You have the general public that has been a little bit miffed with some of the response from ad tech and ad players when it comes to privacy and there’s really a need for change. And at the same time you have companies like Apple or maybe the Mozilla Foundation with Firefox, that have privacy as part of their value-add, or their positioning that are trying to drive in a direction where cookies are being deprecated. I think, at the end of the day, cookies are being deprecated because they weren’t really intended to be used in tracking capacity, and as technology has progressed, and we see it with Facebook, like audiences are being modeled off of millions of data points based on your browser history. 

There’s just so much data about you that is being absorbed by third-party companies that artificial intelligence is modeling patterns based off of, that we’ve really lost control of where the data comes from, where it’s going and who it affects. And part of the reason it’s going away is I think a combination of some companies, but mostly people wanting to gain back a little bit of that privacy and a legal framework that is quite honestly, just starting to adapt to that desire from people. I think if you look back at the 19th century, this is the century that the railroad got regulated. In the 20th century, the automobile got regulated. And now the 21st century, for me it’s, I think it’s just going to be the century where tech, just like any other industry, finally gets regulated.

John Tyreman:  Wow. Well there’s a lot to unpack there. And, yes, these regulations, growing data privacy concerns by citizens is becoming more and more important. So you mentioned that the ad platforms themselves, they’re adjusting the way they do things. If third-party cookies were the backbone of these platforms, how are they adjusting? What can marketers expect from these platforms moving forward?

Louis Belpaire:  They can expect to see a lot of communication around the change and I think we’re seeing a lot of that. I think, from my perspective, like any marketer I subscribe to Google’s blog and Google’s news as well as Facebook Ad News and what I’ve seen pretty early on, as early as last year, is a lot of communication around either tracking features or targeting features that were getting deprecated. And at the time there wasn’t really a narrative around what was happening. But, you know, in reading industry news, you could kind of start lining it all up and realize that this is happening because, sort of in the backbone of these companies like ad tech infrastructure, they’re making changes to be more compliant with the current regulatory landscape and where things are headed. 

And some of that communication has been really interesting because I believe that Google was, in a way, a little bit better positioned for this change of the cookie deprecation in many ways, than Facebook was. And I think it transpired in their communication. I’m sure you’ve seen this, but Facebook bought a lot of ad space to criticize Google’s decision of what they were doing with iOS 14 and seeking consent from people from a tracking perspective. They criticized that a lot in their communication to marketers. There was a lot regarding how the change would affect small businesses, so I think Facebook took more of that hard stance of this is not right, while Google was focusing their narrative on cookies are going away, privacy is impacting ad tech and we’re building solutions based on automation to support marketers. So that’s sort of what I have observed. 

Now in terms of the solutions that are being put in place, Google has what’s called that Privacy Sandbox. So it’s based on a framework called FLoC.  We’re hearing about FLoC a little bit everywhere these days, but the federated learning of cohorts is a methodology that allows Google to model audiences, and track behavior without doing that on a one to one basis. So essentially, to know that you John, for example, purchased a pair of shoes this morning, it’s not based on a tracking pixel that says, John purchased that pair of shoes and that’s John Tyerman. It’s actually, the reporting is based on John, you’re a part of a cohort of people that is very likely to have purchased a pair of shoes this morning and there’s strong statistical significance that you in fact did that, and while we can prove it, the model shows that it’s very likely that you did. And so that’s from a tracking perspective. It’s the same sort of concept from an audience modeling perspective. 

So Google is replacing a lot of audiences and tracking to do it based on what’s called this like algorithmic based modeling and I think they have a lot of experience in that through what they learned with the in-stores visit capability. So for the last few years, marketers have been able to track the impact of their campaigns online in retail stores, for example. And that’s already a system that’s based on modeling data from anonymous location data from people. So, to my earlier point, I think Google has been sort of ready to do that change from a technical standpoint for a little longer, but also Google owns a lot more properties where they collect first party data. 

I’m sure you use Google Maps a lot, and probably have Gmail, and might or might not have an Android phone, but all of these properties are, just like YouTube, are owned by Google in places where Google is going to be able to capture a lot of information still about users. Whereas Facebook, while the app is used by, I’m not sure, hits over one or two or three billion people, about half the planet, if not more – with Instagram it’s probably like two thirds of the planet. The issue there is that the intent, and some of the data around what you do on the internet has been captured by Facebook historically through their audience network. And the deprecation of cookies, is sort of going to block a little bit of that signal, just like the change with iOS 14. 

So, Facebook is moving towards an aggregated event measurement model that is also based on extrapolating insights. But based on the deprecation of certain features, including attribution windows that are very lengthy in time, I believe that there’s quite an impact to be seen on the Facebook side. So in a nutshell, that’s how the platforms have been adapting, from what we can see.

John Tyreman:  Gosh, that is a lot to take in. And I see the communication from Google, I see the communication from Facebook, and it sounds like what you’re telling me is that revenue attribution won’t be as precise on these platforms in the future, and some of these targeting capabilities are going to go away, and there’s so much information being communicated to these marketers. I see that as a big challenge, where these marketers, these technical marketers need to distill all this information and communicate it up to their leadership teams about, here’s what the impact is going to look like. And if they’re not able to do that effectively, there’s going to be a time that’s going to come where it’s going to be, well, why didn’t we do anything about this sooner? Why are we not in a good position? So, what are some examples of some things that marketers can do today that they won’t be able to do after these third party cookies are gone away? Maybe that’ll make it a little more real for them.

Louis Belpaire:  So, I think the first thing to remember and I’ve heard someone say this, is the party’s not over until it’s over. As of today, all of these tactics still work and so it’s important to sort of capitalize on what still works to capture a lot of first party data. Now if you’re a marketer that’s being sort of hooked on the lookalike audience feature and that’s most of your Facebook strategy, you will probably be very impacted. So, what’s important is to really use the second, I mean, we’re almost halfway through 2021 at this point. I think what marketers need to do to adapt is to really think about the second half of this year as an opportunity to maybe redefine a little bit of the consumer journey, add some more touch points where the company’s providing some value. We’re really in like a value exchange economy when it comes to digital. And so making sure that there was a little bit of value exchange for some PII, so that that data can be used to fuel the lookalike model, because that’s important, but also to target some of these consumers who are opting into marketing communications through tactics like email. So I think it’s an opportunity but also a necessity to redefine the consumer journey, and make sure that there’s a strong strategy to collect first party data. So that can mean a lot of different things depending on the industry but I sort of refuse to hear the argument that it’s not possible because I’m in a vertical where people don’t download content, or I don’t have values you provide. I think every brand in a way, has some value and can sort of create that value exchange. You might have to think within the realm of offering value that’s a little bit outside of your comfort zone, whether it’s a PDF asset or avery interesting video that’s gated, it’s gonna require a lot of brainstorming and investment in content marketing but I strongly believe that any company out there can put together content that is going to be valuable to someone somewhere. 

John Tyreman:  I think, even in the business to consumer space, I was doing some research on this, actually yesterday, and I wanted to use an example of a consumer facing business that wanted to capture first party data in exchange for some sort of discount or a coupon or something like that. So I’m in the market for a guitar and I went to a vendor’s website, and lo and behold I was browsing their inventory and a pop up said, “Hey, save $50 off”, or it was free shipping on orders of $50 and more. So I’m like, alright, what the heck, let’s see what this all about. I ended up purchasing my dream guitar then because I was doing research and wanted to find an example but it spurred me to action. So it can absolutely work but now they know who I am and that I’m interested in guitars and that I’m a purchaser. So I see it from the data perspective as well. 

Louis Belpaire:  I guess it works, then. 

John Tyreman:  Exactly. So you mentioned first party data as a way that businesses should adapt their marketing strategy, starting to collect that instead of outsourcing data insights and audience insights, in-sourcing that, start to get a better understanding of how to collect and manage your own first party data. Should businesses really start to get serious about that now? Is that something where… are they going to be really late to the party in 2022? How critical is starting to get serious about that right now?

Louis Belpaire:  I want to say mission critical, probably having something that needs to be on the top three lists for the second half of this year, definitely. Like I said, the party’s not over until it’s over, but we’re going to see – we’re in an interesting time actually, a week from the iOS 14 release. I think a lot of the impact of some of these changes is still to be understood and we’re going to understand a lot of that over the next few weeks. So, to answer your question, I think it should absolutely be one of the main priorities, especially if there’s currently not a real strategy from a value exchange perspective. There are a lot of startups and companies that have been built around this value exchange that actually offer pop up tools, SMS texting tools, lead nurture tools, marketing automation that can help do that. So I’d start with mapping out the customer journey, understanding if the tech stack is the proper one to deliver on this value exchange, and then a lot of iteration rinse and repeat trying different messages, different approaches on different audiences and seeing what works and just going from there. The good news is that everyone’s in the same boat, and so it’s a little bit of an opportunity to reset, and maybe get ahead of competitors who aren’t doing things as well. The other side of this is from a creative standpoint, we keep seeing this, with something like automation, pulling levers within something like Facebook ads, has been becoming less and less important over time. And that’s true of Google’s platform as well and the Google Marketing Cloud. So, what truly matters is creative and creative almost matters most and it’s going to matter more than ever after this change. If you were able to target 100 people that you knew needed your services, if it’s going to take targeting 1,000 or 2,000 because the signals are not as strong anymore and the targeting is broader. We’re kind of just back to the days of offline media, where it’s just all about the creative so that would be my just kind of second point here. Doubling down on creative, and making sure it’s impactful.

John Tyreman:  Yeah, I totally see how that’s going to become more and more impactful. I think it was a study by Nielsen that showed that creative accounted for what was it – like 50% of an ad’s performance? Is that right?

Louis Belpaire:  Yeah, I think it was over 50%. And that was the study from a theme that’s quoted before, it’s from a few years ago so I wouldn’t be surprised if it’s already much higher than that.

John Tyreman:  Well, if it’s not right now, it sounds like it’s heading that way so investing in that creative… but I guess it’s not just the creative but it’s the rapid iteration of testing that creative and how quickly you can coordinate with your creative teams and your paid media teams and then analyzing it on the back end. So that just sounds like, whoever has the best operation set up is positioned for success. Would you say that?

Louis Belpaire:  Oh, absolutely. And to your point, it’s really coming down to collaboration because a fantastic Facebook ads strategist and an awesome designer in their silos can’t make this happen. It’s a matter of collaboration from the beginning of ideating to reporting and making sure the insights of what’s working, what’s not working is being shared with the creative team. So more than ever I think collaboration is what’s going to drive success in this new world.

John Tyreman:  Well, speaking of insights, if our listeners wanted to connect with you to hear more of your insights, where can they go to reach you?

Louis Belpaire:  On LinkedIn, probably. I’m there quite often. And otherwise I’m on Twitter as well. I think my username is B_Louis. So you can find me on Twitter as well.

John Tyreman:  Very good. Well, Louis, thank you so much for taking the time. This is a topic that I’m sure we’ll dig into layer by layer, deeper and deeper into these different platform updates as they happen. So thanks for taking the time to chat with me today. 

Louis Belpaire:  Hey, it’s a lot of fun. Thanks for having me, John. 

John Tyreman:  If you found this podcast episode insightful, please subscribe, tell a friend and leave a rating and review. And to learn more, head on over to silverbackstrategies.com where we have a wealth of digital marketing insights on our blog and Resource Center. We’ll see you next time on The Digital Marketing Troop.