On July 22, Google announced that it would abandon its plan to phase out third-party cookies in Chrome, instead proposing an alternative approach. This new approach allows users to make informed choices about their web browsing and to adjust those choices at any time. This policy shift was revealed by Anthony Chavez, Vice President of Privacy Sandbox, in a blog post. He also emphasized that "it is still important for developers to have privacy-preserving alternatives, so we will continue to provide and invest in the Privacy Sandbox API to further enhance privacy and usability."
In response to this major shift by Google, many speculate that the reason lies in the fact that Google's solution, the "Privacy Sandbox," is not yet ready. Privacy Sandbox, introduced by Google four years ago as an alternative to cookies, uses APIs to group users based on their browsing behavior and interests, creating "cohorts." Advertisers can then target these cohorts rather than individual users, thus protecting their privacy. Google previously shared test results for the Privacy Sandbox: when cookies were removed without Privacy Sandbox, advertisers saw a 34% reduction in revenue, but with Privacy Sandbox, advertisers experienced a 13% growth. Google had hoped that by enhancing Privacy Sandbox, it could minimize the impact of phasing out cookies from the market. A premature removal of cookies could harm Google’s core business, which derives nearly 80% of its revenue from advertising. Clearly, cookies are still needed in the short term to fulfill their original role.
With Google shelving the cookie phase-out and the Privacy Sandbox not yet fully launched, will the ad tech industry return to the era of third-party cookies? The answer is, No. We can reference Apple’s release of Intelligent Tracking Prevention (ITP) 2.3 on Safari in 2019, which allowed users to decide whether to accept cookies. According to a survey conducted in June 2021 by Statista in the U.S., only 32% of users accepted cookies. Using this data, we can estimate that when trying to build a complete consumer profile across multiple websites for precise audience targeting, the tracking rate drops to 0.32 x 0.32… resulting in less than 10% of users, if not fewer. This creates significant data gaps, making it difficult to support most advertising applications. With the arrival of the “low-cookie world,” combined with the technical challenges and uncertainty of Privacy Sandbox, various ad tech and marketing industries have already started implementing solutions to reduce their reliance on cookies. Some brands have begun using Data Exchange Platforms to compensate for the loss of information caused by the reduction in cookies. This allows them to continue executing precise targeting, personalized marketing, and campaign measurement and attribution, previously enabled by third-party cookies. Data Exchange Platforms serve as centralized hubs, supporting a wide range of data sources and industries. They offer services such as data cleaning, enrichment, and analytics. Data consumers can discover and access curated datasets from various providers, and securely share data and insights across organizational boundaries using strong privacy and security frameworks. Currently, there are many different Data Exchange Platforms available in the market, each specializing in different functionalities. Companies can choose a platform based on their specific data needs. Here are some categories of Data Exchange Platforms: Platform Providers: These are infrastructure providers set up specifically for data exchanges. They offer secure environments for data consumers, including servers, storage, networks, and other computing resources. They assist businesses that need to exchange data by ensuring data isolation and security controls while meeting the needs of different users and scenarios. They also offer a range of data management features, including data collection, cleansing, transformation, storage, querying, and visualization. Some features overlap with Data Clean Room technologies, but in practice, Data Exchange Platforms focus on large-scale data sharing across organizational boundaries, while Data Clean Rooms emphasize data privacy and security. Data Exchange Platforms: These are integrated platforms for various data exchange and sharing needs. Companies can share, access, and monetize data assets with other organizations while maintaining control over their data privacy and security. Examples include Nielsen Marketing Cloud, Dun & Bradstreet, and Experian. These platforms offer a wide range of data types, including demographic and psychographic information, consumer behavior and preferences, purchasing history, and credit data. They also provide value-added services like data enrichment and analysis, helping companies gain deeper insights and optimize their operations. Often, these companies also offer data trading services, where data vendors can sell their datasets to buyers, thus monetizing their data assets. Some service providers that offer Data Exchange Platforms provide both types of services. For example, Snowflake serves as both a platform provider and offers data exchange services. As the “low-cookie world” approaches, leveraging Data Exchange Platforms to enhance data accuracy will replace the broad data coverage of the cookie era, boosting marketing outcomes.