Cookieless Future: Digital Advertising Transformation with Artificial Intelligence

Back in 2019, the Court of Justice of the European Union ruled that web identifiers like cookies require active user consent. This is followed by a five-year plan of Google banning third-party cookies in response to the user’s growing concerns about their privacy, phasing cookies out at the end of this new year.

What Are Cookies?

Cookies are simply small text files employed in online marketing that monitor the user’s activities, mainly on their preferences.

This helps both the consumer and the advertiser; consumers can see ads while surfing the web closely related to their personal preferences, and the advertisers can put ads efficiently on their target audience.

But third-party cookies’ difference is that they can track users across multiple websites, not limited to one, creating an online persona for each separate user.

The data for creating this online persona is collected on user interests and the content they engage with frequently. An example of this could be you searching for something as simple as “white shoe”, and end up coming across shoe ads all over the web, wherever you go.

This collected and stored data is valuable as advertisers can tailor ads to make them relevant to your persona, it knows that you are interested in white shoes once you search for them, and ads are placed accordingly personalized to you.

The Use and The Decline of Third-Party Cookies: Growing Privacy Concerns

There is no denying third-party cookies have been instrumental for online advertisers for audience targeting, personalization, and online advertisement:

• Your online experience will be tailored to you, relying on your previous visits.
• First visitors to the site may benefit from a more comprehensive introduction to the website they are visiting.
• Cookies know your location: news reports and weather, delivery estimates, nearest locations you may need, etc.
• Products you have recently looked at are stored, like the white shoe example giving you close recommendations on ads.

However, their usage has raised significant privacy concerns ending with EU’s highest court ruling that secured the consent of users, leading to a push for more transparent and ethical data practices.

Fast Company’s research with Pew Research Center reveals an increasing discomfort among users about tracking and their privacy. 72% of correspondents felt that what they do online is being tracked by advertisers or other companies.

Expert Insight from Google's David Temkin

David Temkin, Google’s Senior Director of Ads Privacy & User Trust, emphasizes the need for digital advertising inevitable evolution for the better. He advocates for approaches that respect user privacy without compromising efficiency and effectiveness in advertising’s near future:

“If digital advertising doesn’t evolve to address the growing concerns people have about their privacy and how their personal identity is being used, we risk the future of the free and open web.”

The balance between data collection for marketing purposes and user privacy is now more important than ever. It is the key to assuring a future Temkin talks about: “a future of free and open web.”.

The same study shows 81% of the same respondents think the potential risks of data collection by companies about them outweigh the benefits. Transparency in personalization becomes a vital aspect.

The Dawn of a New Advertising Era: A Cookieless World

The digital advertising world is nearing a shift. After Safari and Firefox, the biggest web browser Google is planning to phase out third-party cookies by the end of 2024 as well. Online marketers should be preparing for a new era of audience targeting, personalization, and engagement solutions.

Coming from issues rooted from privacy, this new advertising era is not a challenge for online marketers and advertisers but an opportunity. By ensuring that the users feel safe through rebuilding online marketing’s foundations on trust, transparency, and users’ needs; the change will be for the good of both sides.

Accenture reports the estimated effects of third-party cookies phasing out:

• Declining Marketing Efficiency: This phaseout could cause marketing efficiency to decline by between 10% and 30%.
• Lower Budget, Less Money: 74% of advertisers' budgets have been impacted negatively and 47% of advertisers stated they have been challenged with rising costs of campaigns, simply forced to do more with less.
• Underprepared Advertisers: 60% of US and UK advertisers are underprepared for this loss of cookies.

But how can we, without third-party cookies, still efficiently advertise?

A recent Gartner survey conducted in July 2023 found that 79% of correspondent Corporate Strategists see AI and analytics as critical to their success over the next two years addressing this inevitable change in advertising analytics with the upcoming cookie-ban.

AI for Efficiency: Audience Targeting and Personalization

The chart below from McKinsey shows that commercial leaders are highly optimistic in the usage of Gen AI in various areas including but not limited to audience targeting, and real-time analysis of customer trends.

It's a chance to rebuild digital advertising on the foundations of trust, transparency, and respect for privacy. As the industry moves forward, this is exactly where AI and machine learning can help: tools like Smart Audience Targeting utilize algorithms to help you reach your target audience efficiently.

As third-party cookies are phased out, AI can greatly assist in digital marketing through:

• Personalized Content and Experiences: Similar to the function of third-party cookies, AI can analyze user data to provide more relevant and engaging experiences for users, considering and respecting the privacy of users as top priority.
• Enhanced Data Analysis: Companies will need to utilize vast amount of data, and AI can do this fast and efficiently. This stands as a crucial step building the foundations for effective targeting and campaign optimization for online advertisers in the cookieless future to come.
• Transparent and Trustworthiness: Growing concerns for third-party cookies were privacy-related. AI can be the transparent and trustworthy solution in how advertisers use and protect user data, which is key to gaining user trust and preventing similar conflicts with privacy.

Also, it is crucial to keep in mind that only third-party cookies are being banned; first and second-party cookies are still relevant and highly useful for advertisers in the upcoming future.

Combined with AI’s power in enhancing efficiency, advertisers can maximize their returns and minimize their cost and effort in a world where they are expected to do more with less.

A small step for you, a giant leap for your company with Adin!

To stay ahead in 2024 and a cookieless future, stay empowered with AI ADvantage.

See you next week!