Podcast — The Demise of the Third Party Cookie

In this podcast, Lori, still practicing social distancing, sits in the studio by herself talking with Head of Product at NaviStone, Jude Hoffner and NaviStone's Chief Technology Officer, Tom White, on the topic of the demise of the third party cookie and how it will impact marketing in the future. Hear this expert panel discuss the challenges and opportunities marketers are currently facing.

(Podcast Transcript)

Lori: Hi everyone like last quarter and the quarter before and the quarter before that I'm sitting in the studio alone recording the 2 Guys and Some Data podcast. But today is a very special edition of the podcast as I'm joined via phone by two of my favorite guys, Jude Hoffner, head of NaviStone product and Tom White NaviStone's CTO. Today, we're going to talk about the third-party cookie and the impact its demise will have on marketing. And as always, we'll talk not only about data, but how you can use data to make more money. Tom, Jude, I'm going to jump right in. We've been hearing about the demise of the third-party cookie for a long time. Consumers want a more personalized experience when they're browsing on the web, but they also want their privacy maintained. So my first question is simple. Is the demise of the third-party cookie, a good thing or a bad thing?

Jude: So I think the process of identity matching using third-party cookies has turned out to be, I think what we've learned recently is that that's turned out to be a bad thing. What's been missing is, or what's been violated has been this idea of consumer user trust. Buyers, users, consumers, out there who, now that the third-party cookie has gotten into the news and are learning about what that is, they're troubled by the idea that something was going on that they didn't know about. As a tool I think it's been reasonably effective, but I think that whenever as marketers, we lose the trust of the consumer buying community. Then that's a bad thing.

Tom: I think back to the purpose of the cookie, the cookie was added to browsers as ... It's a technical thing. It's a thing that exists to manage state, like Netscape originally put that in just to track whether people were coming back to their own website. In essence, it's supposed to track movement.

Jude: The part that I think is bad Tom, is actually the first thing you just said, which is that it's actually a technical piece. And so what you have is you have ... When things are technical, most people don't understand what's actually going on. And then that just becomes scary. That's my point on it being a bad thing. I think it's bad when at scale we've got 300 million people that don't understand a thing and then they're scared.

Tom: Yeah. The cookie itself is not a bad thing. The cookie is a tool specifically, for managing state. I mean, without the cookie, you couldn't have a shopping cart, you couldn't have any of the things that you normally want out of a website. You want people to remember what you've seen before and what you haven't. I think this issue of demonizing the third-party cookie, to me it actually creates a privacy issue. The fact that you can be tracked anonymously, in my opinion, is a good thing. You don't have to have your actual identity tied to the fact that you like shoes or you're interested in this particular hat. It may seem like it follows you everywhere, and that that's some kind of big invasion of privacy. But the third-party cookie actually allows that to happen in a completely anonymous way. It's a blip of understanding your preferences without it being tied to identity. The place that we're moving. I don't know. I don't know how you do that without actually even tying it to identity.

Lori: And Jude, you had actually brought up a good point when you and I were emailing back and forth. And that was just this whole notion of people feeling like their personal identity is being tracked. And so I think this really is to what Tom was saying, because that's not true. It's the device. And those two have become very synonymous with each other. But I do think there is a really strong argument to be made that the fact that the cookie allows for this anonymous tracking is actually quite good.

Jude: There's two use cases. There's two big picture use cases for the cookie. And Tom, what you're saying is that it's a really great tool for managing the experience ... For a user to have a good experience on a website. And then there's this other use case that emerged over the last 20 years, which was like, "Oh, by the way, we could use it to track people across the open web. So we could also present advertisements to them." That's where it starts to get a little ... People have decided that that has started to feel creepy.

Tom: The silly thing is that's not going to go away. Google knows who everyone is already. It's all tied in. The fact that they ... You sign actually into the browser itself. They're still going to track you across, that thing is going to still follow you. All of the creepiness will still be there.

Lori: Tom. That was one of the questions that I did have for you. I know we're jumping around a bit, but the question was, does getting rid of the third-party cookie increase consumer privacy?

Tom: I don't think so. I think that it changes the way advertisers are going to have to make those connections. They're going to have to do it using something else to tie, to stitch the activity together. Because advertising is not going to stop. It's still a thing that funds the internet. So it has to be done with something else. And the idea is that they're going to use, going forward are going to be your hashed email address, or your mobile ad ID, or your IP address. And those are the things that are getting actually closer to identity than this third-party cookie. Which is a technical thing that originally, the whole point of it was to manage state, so that you could have your preferences move with you as you go through different pages, different sites.

Lori: I think when all of this discussion came up about the demise of the cookie, there were some skeptics that thought is this really self-serving on the part of Google? I have just recently read some articles about their solution or a potential solution to this. And I don't know if you guys are familiar with FLoC, that's the acronym for the federated learning of cohorts method. And essentially what that said to me was, that they are going to look at all of the users and they're going to aggregate them by cohorts. And then they'll have a single ID associated with each of those cohorts that would enable this same type of activity to still happen. But I am kind of curious, Jude, maybe again, as the longterm marketer, what impact do you think that would have on the ability to precisely target within marketing when we shift from something that can be very personalized to something that's managed more at the cohort level?

Jude: Before I answer that question, I want to hold for a second on what you just said there about Google and their intentions. Google's really brilliant. They started out with it and I think they're still known for this tagline of do no evil, but when you've got a company that's big doing something like this, it's at least fun if not useful to ask the question, well, why would they do that? And as I've thought about this, what has emerged is this concept of a so-called Open Web and then Walled Gardens. So people know Walled Gardens, now it's Facebook, which is pretty young. Apple. These sites where just by virtue of going to the site, these gigantic at scale systems know who you are because you're logging in and Google was never that.

Jude: But they are gigantic and at scale and own 90% of essentially the digital advertising ecosystem. So in other words, Google's the open web in this construct. And, Facebook is the closed web. And my hypothesis here, is that basically Google looked out and was like, "Well we want to be the closed web too." And so this idea of the demise of the third-party cookie was essentially Google looking out and being like, "Well, we're the biggest part of that ecosystem. If we just stopped supporting it, then effectively they've taken a big part of the open web and closed it." That's the strategy. They're doing it for business, and so everybody's got the question of, "All right, well, if they do that, then what's going to replace it? Which is a reasonable question to ask. Because, Tom, to your point, advertising is not going to stop.

Jude: Certainly advertisers are not going to stop advertising and Google sure as hell is not going to stop advertising. That's 80, what? 85%, 90% of their revenue is still coming from that. So, they need a way to do it. And I've read some of the same stuff that you did, Lori, or maybe similar things the last week or two, the emergence of this, this FLoC product. Let's call it a solution to fix it. And I think it makes a lot of sense.

Jude: Right now what they're saying, is it's 95% as effective. I have no way to judge that. I don't have any reason to not believe that that's true. I think we'll find out in a couple of years when this really rolls out. But the idea that they would have a solution that allows users to be aggregated anonymously into groups that are still effective for advertisers to do their targeting. It seems very sensible to me. And if anybody can figure out how to make it effective, Google, certainly can. On the back end of that, again, I keep coming back to this, how the public feels about it. If the messaging around FLoC enables the public to feel better about this scary space that they don't understand. Then frankly, that's good for all of us.

Lori: I've heard others talk about creating some type of universal standard ID. Do you think that this universal standard is something that is going to be necessary or the cohort option could really accomplish the same thing?

Tom: The thing about creating a universal standard is that it seems a little more open-sourced to me. The FLoC standard is, you've got to buy it from Google. That's in essence, the issue, it somewhat stifles innovation in a way, because it's like this is your box that you get to build with and that's the size of the box. And you can't think of any other shape, or you can't do something outside of that. Whereas some standard universal ID might still allow for any use case.

Lori: I don't know how easy or hard it would be to get the industry all to agree on what that new standard is. And I also think, going back to the cookie, I feel like the cookie was that universal standard. 

Lori: So in many ways, it feels like if that is where we end up, we're ending up in a very similar place to where we started.

Tom: Thing about it is, maybe the cookie was too open-ended you could do too much with it. Maybe step one could have been let's limit ... Put some limits on that. The brilliant thing about the cookie is it actually put a lot of power into the individual browser's hands. You can go through and set all of your own permission levels on those items.

Jude: One thing I wanted to tack on to your point, Lori, is that nobody owned the third-party cookie, if there's a universal standard, I think we're seeing the LiveRamps of the world and the Neustars of the world, trying to jockey for being the one who's going to introduce that standard. Now suddenly a company, a big player is going to have to stand behind that and take the arrows from the public about how trustworthy it is to be using that, what it means to their privacy. And in some ways you're absolutely right, Lori. Functionally, you get back to the same thing, but instead of it being organic, nobody owns it, nobody's responsible or accountable to it. If you had finally a standard that got adopted, that was exchangeable in the ecosystem, but it's LiveRamp wins the race. LiveRamp is the one who has to have all of the consumer's trust, that this is how it's working.

Lori: Yeah, totally agree. Hey, I'm going to make a quick segue into our one and only trivia question for the day. What do you think the average life of a cookie is?

Tom: If you're asking the question, how often do users go in and clean out their cookies? I bet the typical lifetime is forever, and then some. But if it's, when someone sets a cookie and they set the expire date on it, 365 days.

Lori: Jude, what do you think?

Jude: Seven days.

Lori: That's quite a range somewhere between seven and 365 days. Well, there are actually two answers, 40% of cookies live for less than a day. But when a cookie lives longer than a day, there's a 76% likelihood that it will live longer than a month. Really speaking to the fact that some consumers want that personalized experience and others are more concerned with privacy. So we have to be able to accommodate both. I am just curious since you guys have been doing this for such a long time, if you can think about a time when technology has been disrupted like this.

Tom: Yeah. I'm thinking in terms of the disruption is always additive. It's a new thing. And that shakes up the system. We added mobile devices and that changed the internet, or we added streaming video and that shook up the DVD and VHS tape renting market. Those are always additive. The weird thing about this one is, it's taking a thing away. It isn't that we added something new and it made that thing obsolete. We're just taking this thing away, and we don't know what's going to be the replacement for it. Or we haven't ... There's no organic finding of the right way to do a thing. It's just, this element is not available to you anymore.

Lori: Yeah. That is very different. Jude, I'm always going to throw some tie back into NaviStone. So when we think about the third-party cookie going away, what implications are there, if any, for the NaviStone solution?

Jude: At a high level, we do two things, do audience behavioral analysis and we've solved that problem. And then there's a second problem that we solved, which is this concept of addressability for direct mail. And with these changes in the third-party cookie standard out in the ecosystem, the impact to us is that it is forcing us to just think differently about the second piece. It's not going to impact the first big problem that we've solved, value proposition that we have, but it is going to impact the second one. So it's forcing us to just think a little bit differently, think we're creatively, think about how we assemble and maintain that part of our platform.

Lori: Well, that's certainly good news and I think there's no better way to end this discussion than knowing that the impact of the NaviStone solution is minimal and already being addressed. Tom, Jude, I can't thank you enough for joining me today and contributing to this really great discussion. So that'll do it for this episode of 2 Guys and Some Data. If you want to read more from us, check us out at navistone.com/blog. And if you enjoyed today's show, head over to iTunes and leave us a five star review.