Technology

Cookie Deprecation: Why It’s Inspiring More Discussion Around Consumer Data Usage

By Craig Sellars, CEO and Co-Founder of Self

It has been four years since Apple began to allow users of the Safari browser to block third party tracking cookies. Over that time, the online advertising ecosystem has been scrambling to update their business models for what could be the most significant seismic disruption to digital marketing since cookies were invented in the first place.

Cookies are a crucial part of how websites operate, particularly when the website operator wants to provide a more advanced and capable user experience. Those same operators soon realized that they could embed third-party cookies from a handful of digital marketing platforms to increase the value of their user base for additional monetization. An unforeseen and unintended consequence of this capability, at least for those website operators and their users (because it was provided by this small number of ever larger and larger marketing platforms) was that those same platforms now had unprecedented access to the habits, interests and usage patterns of individuals who used any of the websites using their cookies.

To get the right message to the right person at the right time in order to drive incremental conversions and revenue, the core mission of digital marketing and advertising, it’s necessary to know what that message is, who's receiving it, where they are, and countless other consequential (and potentially invasive) details. Those data are essential to these business models, and more data is always better. 

Third party cookies, while invasive, were an effective part of this process, as they helped paint a more complete picture of individual consumers as they traversed the internet. This information combined with information from large-scale data providers, identity matching services and the like are how that product you looked at once can follow you around the internet. Of course, if you really like that product, this could be a win/win scenario.

Much of the critique and discussion around the threat of such tracking capability has largely been confined to industry experts and specialist publications. Now that we see the potential demise of - or limitations to - third party cookies, and with consumers increasing their appreciation for transparency and control over their data – the conversation around how brands might acquire and leverage data for advertising and marketing is beginning to reach a wider audience.

Any path the industry chooses will affect all of us as consumers, but it’s also deeply relevant to our decision making as investors: the risks and potential benefits are critically impactful to understanding a company’s data-driven marketing strategy and is a crucial diligence component in today’s environment.

Personalized display ads convert more reliably, which can dramatically improve ROAS, but that’s just the beginning. Longer relationships, more conversions, and increasingly attractive acquisition cost to lifetime value ratios are additional benefits. Once customers have been acquired, brands can combine their ad data with additional data they collect directly in order to power sophisticated lifecycle and retention marketing campaigns. To be fair, the loss of third party cookies won’t necessarily spell an end to these practices, as sophisticated platforms will be more than happy to point businesses to their “privacy preserving” tracking and targeting solutions.

Consumers, however, are becoming more aware of this tracking than they’ve ever been previously, and nearly every year surveys show they are trusting brands less and less to handle their data responsibly and appropriately. Acquiring, leveraging and warehousing huge volumes of data has risks, and the stakes are higher than they’ve ever been. Using these data to target potential customers can backfire when not approached with finesse. Such surveillance is actively off-putting for a growing segment of consumers, and these outmoded “brute force” methods for opaque data collection should be a major red flag to investors.

Perhaps most concerning about this practice is the potential for mass-scale data breaches, which have become increasingly common as more and more companies assemble what amounts to irresistible treasure troves of highly valuable data. These databases are the ultimate honeypot for hackers. Catastrophic failures of security are deeply damaging to the victims whose data is compromised, and the reputational damage suffered by the companies who failed to protect their customers’ data has lasting, deserved, consequences. Share prices for breached companies fall in the immediate aftermath of such incidents and then underperform the market for years after being compromised – and in some respects that’s the best-case scenario. A severe enough breach in a sensitive enough industry can - and should - spell the end of even the most successful businesses.

Despite these dangers, targeted advertising’s potential upside for both brands and consumers is too much of a temptation for these businesses to ignore. They will still desire reliable ways to reach customers with timely, relevant messaging in order to be successful going forward, which is why secure, privacy-preserving alternatives to third party cookies are so important. Such alternatives aren’t all created equal, though. By and large, most marketers are simply looking to recreate the status quo with slightly different technology, whether that’s relying on non-cookie identifiers like browser and device fingerprinting or “Universal IDs.” These alternatives require little in the way of strategic adaptation, but they simply don’t adequately address consumers’ legitimate concerns around privacy, and will not change how increasingly-savvy consumers respond to being surveilled.

This will always be the case if we default into a “brands vs. consumers” way of thinking about data and privacy. Fortunately, that isn’t the only way to go about doing things: there’s a long-term, sustainable solution to be found in partnering with consumers where their data is concerned. Transparent collaboration with users’ identity assets (which is truly what they are) can be a viable offramp from the privacy arms race. The technology is increasingly able to support it: with user-guided, decentralized tools to give consumers control over access to their information. To be successful, companies will always need to stay one step ahead of the curve when it comes to data-driven marketing, but the true innovators who overhaul this paradigm entirely will be the long-term winners. When you see that, invest accordingly.

About Craig Sellars

Craig founded SELF because of his conviction that individuals should be able to own and control their digital identities. He envisions a future where walled gardens no longer gatekeep your information, where your identity becomes an asset that can never be compromised. Craig and the SELF team are working to realize this vision by creating a new identity standard for the internet built on a foundation of security and meaningful personal control over the most unique and valuable thing you own: yourself.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.