The Value of First Party Data in a Cookieless World

November 13, 2020

Consumer privacy is leading a wave of significant change in the digital advertising industry. This change is throwing the industry’s foundation into disarray, and the need for sophisticated solutions will put local advertisers at a major disadvantage. 

With $526 Billion in global digital ad spend (by 2024) in a state of flux, companies that have either built ad products to drive revenue, or that utilize ad products across their organization are all asking the same question; “What will the future of digital advertising look like?”

This article will provide a background on cookies, outline the key events that are leading to this change, explore the future of ad targeting, and explain how CRMs, Portals, Marketplaces, and Multi-location brands can capitalize on their first party data, an asset that many are calling the new gold standard for ad targeting

The Future is Cookieless

On a blog post on Chromium.org, Justin Schuh (Director of Chrome Engineering) explains that “Cookies allow websites to log your activity, and third-party cookies give that permission to sites other than the ones you're on.”

Cookies are text files stored in your web browser that store an identifier to track your internet usage data. These cookies help determine what ads you see, help personalize website experiences to you, help deliver usage and performance analytics back to advertisers and creators, and more.

Why Are Cookies The Focus of Privacy Concerns?

In the Chromium blog post, Schuh goes on to say, “Getting rid of them (cookies) will help internet users better protect their privacy. Users are demanding greater privacy — including transparency, choice and control over how their data is used — and it's clear the web ecosystem needs to evolve to meet these increasing demands." 

Digiday.com author Seb Joseph mentions,  “the third-party cookie served as the workhorse of the independent ad tech ecosystem. Cookies are how ad tech companies communicate with one another in order to trade programmatic ads.” This statement addresses a major privacy concern that users’ data is being exchanged in the ad tech ecosystem. Removing the cookie and preventing third parties from transferring user data will lead to higher levels of user privacy.

The Industry Moves Against Cookies, And Other Methods Of Personal Identification.

Here are just a few of the major changes that have been announced.

  • Google announces they will remove third party cookies from Chrome within 2-years. This announcement raises a big question. Why would the world's largest digital advertising company get rid of the third party cookie and change the digital advertising landscape forever? Won’t this hurt their advertising business? Google may have a vision for the future that does not involve cookies and strengthens their position as an industry leader.
  • Apple gets rid of IDAF: Similar to a cookie but exclusive to Apple, Apple created IDAF to give mobile app developers user information regarding how people use their app and what ads to display in apps. When users download an app that uses IDAF a pop-up will appear that requests the users’ permission. Kate Novatska with MarTechSeries.com believes that most users will take advantage of the opt-out option. This is another huge move in favor of user privacy that will have a profound impact on the digital advertising industry, mainly in mobile apps used on iOS devices. 

These are three major changes that will change the direction of the digital advertising industry. These moves, coupled with legislation like GDPR (General Data Protection Regulation) and CCPA (California Consumer Privacy Act), will create a new landscape that the entire digital advertising industry will need to adjust to.

3 Ways Removing Cookies Impact Digital Ad Targeting

These moves against cookies have a significant impact on the digital advertising industry. Here are a few examples.

  • Remarketing: Remarketing is the ability to serve ads to people who have visited your website. This targeting tactic will be greatly impacted by these privacy changes that rely on cookies that are placed in a website visitor’s browser when they visit a website. Without cookies, remarketing programs may be limited in their reach, with a reduction in  the ad personalization that ad viewers receive. 
  • Exclusions: Marketers’ ability to exclude audiences from ones they wish to target will be impacted. For example, a real estate brokerage may want to serve ads to everyone who visited their website, but exclude an audience of home buyers or sellers with whom they are already working. Another example of this could be an ecommerce company may want to exclude an audience of recent customers so they can reach just new customers with their budget.
  • Ad Targeting with Third Party Data: National marketers purchase third party data to use when targeting display ads. For example, Experian may sell anonymous customer information so advertisers can target ads to people with high credit scores. In fact, in 2019 $19.2 Billion was spent on 3rd party data sources to power ad campaigns similar to the one in this example. These “third party marketplaces” rely on cookies to layer data into traditional display advertising. Without cookies, national advertisers will be at a large disadvantage and a $19.2 Billion dollar market within the digital advertising industry can be uprooted.

The Future of Cookieless Ad Targeting

The Dominant Trio (Google, Facebook, and Amazon)

According to Marketing Land and eMarketer, 70% of all digital advertising spend goes to three companies, Google, Facebook, and Amazon, and each company in this trio is large enough to create their own advertising ecosystem. The future of these ecosystems may include their own unique method of identifying users and transferring user data, whereas the cookie depended on web browsers and third party ecosystems.

The innovations and standards that these companies create will pave the way for the future of digital advertising. This change may force advertisers to merge their first party data with publishers to have reliable ad targeting, thus adding to the already complex world of digital advertising.

Server-to-Server (S2S)

Channels, such as Facebook, have already started to move toward a server-to-server (S2S) method of exchanging user information. Cookies are known as a “client-side” technology because personal data is stored on the client’s (or user’s) browser. Server-to-server is a “server-side” technology, where the data is transmitted at the server-level directly.

Server-to-server offers a level of security that cookies can’t compete with because there is no data stored client-side. However, users still have the ability to opt-out of the use of server-to-server as required by GDPR and CCPA laws. Another benefit of server-to-server is it’s the most efficient way to transfer data because it eliminates any latency created from the user’s web browser. 

Additionally, server-to-server allows advertisers to pass data, such as lead or click quality information, back to the ad server. Cookies are limited to data that is immediately available from actions taken on the website or mobile app and won’t be able to match the sophistication that server-to-server makes available.

The Login Advantage

Cookies help identify users across the websites that they browse and through the applications that they use. But for the trio dominating digital advertising (Google, Facebook, Amazon) this is not necessary due to the massive amount of people who login to their apps every day. 

For example, if you are one of the 1.8 billion people who use Gmail, odds are you stay logged into your account as you surf the net with Chrome. Or, if you're one of the 2.7 Billion people that use a Facebook product once a month (Facebook, Instagram, Whats App), then Facebook won’t need to rely on a cookie to ensure you see the right ad, or customize your experience within their websites and applications, because you're logged into their platform and the ads and experiences are happening within their domain.

Related Read: The massive opportunity found in traditional media’s dominance in local advertising. 

Another Disadvantage for Local Advertisers

The more sophisticated digital advertising becomes, the wider the adoption gap is for local businesses. National advertisers, for example, will have an easier time taking advantage of techniques created by innovations such as server-to-server. 

Due to national advertisers' supremacy in digital advertising, local businesses will find it harder to connect with their customers and audiences through digital advertising channels. Local advertisers will continue to turn to their more advanced technology partners or corporate offices for help competing for local customer acquisition.

The First Party Data Advantage for CRMs, Portals, Marketplaces, and Multi-location brands

As the cookie and alternative forms of user identification become obsolete, popular ad targeting capabilities that use third party data will be greatly affected. Companies harnessing the power of first party data through sophisticated advertising programs will have an extreme competitive advantage. Also, the companies that create these sophisticated advertising programs, powered with first party data, will create attractive revenue opportunities.

What’s The Difference Between First Party Data And Third Party Data

First party data refers to data that you collect directly from your customers or users. For example, if someone fills out your contact us form on your website and sends you their email address and full name, this is considered first party data. Your website audience is also considered First party data.

Third party data is data that you purchase or acquire from, you guessed it, a third party. In the world of email marketing, if you purchased an email list from a vendor, the email list would be considered third party data.

Why CRMs, Portals, Marketplaces, And Multi-location brands Are In Prime Position

Use case for CRMs

CRMs are treasure chests full of first party data. Not only do CRMs have thousands of users that input first party data into the system (in the form of lead and customer contact info), they also organize the data into categories, pipelines, and industry lists. Using this type of data input, a sophisticated digital marketing system can automatically create local and global digital advertising audiences to share with their users. A feature like this can be used to enable users with powerful digital advertising tools. In doing so, giving the CRM a new feature to attract new business, and increase the lifetime value of its users. 

We have also seen a trend that CRMs and Marketing Automation Software providers (take BoomTownRoi.com for example) enable users with website builders. This gives the provider access to another powerful form of first party data, website audiences.

CRMs, Marketing Automation Software Providers, and Website Builders all have an extreme advantage in digital advertising’s cookieless future.

Use case for Portals and Marketplaces

Portals and Marketplaces attract first party data by their ability to bring buyers and sellers together in the same website or application. First party data from website signals, orders, and user-generated content create the perfect environment to build a unique ad product. 

Local and national advertisers who take advantage of these unique offerings will have a leg up on their competition. In addition, Portals and Marketplaces that make their first party data available through offsite ad programs will become an indispensable resource for sellers and advertisers. 

Market Reach, a product offered by Realtor.com, is a perfect example of this type of offering. Realtor.com gives Real Estate agents the ability to reach home buyers in their local market by accessing the exclusive audience created by Realtor.com’s first party data. Agents gain a powerful advertising tool, and home buyers and sellers are exposed to local experts to help them in their real estate journeys, it’s a win-win-win!

Use case for Multi-location brands

For Multi-location brands, capitalizing on their first party data advantage means enabling local offices to launch campaigns with localized versions of national audiences. However, local offices are at a disadvantage due to the expertise, technology, and resources needed to execute programs with this level of sophistication.

The right technology platform can reduce the complexity of launching programs and enable local offices to quickly and efficiently launch these types of campaigns.

Related:  National-to-local marketing: How can the implementation of an operating model make or break your distributed marketing strategy 

Exit Realty’s “Ad Center” (highlighted in Facebook’s 2020 Real Estate Best Practices Guide) is a great example of how a multi-location brand can capitalize on first party data. Using the Ad Center, EXIT’s corporate team shares first party data with over 550 offices and 20,000 agents. Real Estate agents simply click a few buttons then capitalize on the sophisticated digital marketing program.

Summary

The Digital Advertising industry's move toward a cookieless future will have a substantial impact on the status quo. This move positions first party data as the preferred method to use in ad targeting. This shift will create another major disadvantage for local advertisers, but organizations that can find ways to enable local businesses with sophisticated tools will emerge as leaders.

Across industries, Evocalize’s technology has helped CRMs, Portals, Marketplaces, and Multi-location brands capitalize on these exact scenarios. Through our Embedded Platform and Developer Platform, we have helped organizations run over 650,000 localized programs powered by first party data.

Contact us if you’d like to enable local offices with sophisticated marketing tools that are button click simple, or expand the capabilities of your CRM, Portal or Marketplace with sophisticated digital marketing tools.


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