In 2022, the use of third-party cookies will be banned on all major browsers. So what's the solution to advertising in a post-cookie world?
We are all familiar with cookie-based display advertising, it is ubiquitous on the Internet. As you visit various web pages looking at shoes, light fixtures, or camping equipment, those sites put cookies in your browser. When at some later point you visit a news site forgo to a sports website to check the latest scores, you will often see the ads for—you guessed it—shoes, light fixtures, and camping equipment. The technology that makes this possible is known as the “third-party cookie”—the news website, through a chain of technologies, is able to access the cookies placed on your browser earlier, and can then try to guess which ads you might be interested in.
This technology is controversial. On one hand, it raises privacy concerns—users don't like being tracked around the Internet, and feeling like the Big Brother is watching. On the other hand, it allows better ad targeting, potentially resulting in more relevant ads, and higher revenue to publishers placing those ads on their websites, allowing them to generate more and better content.
The debates about the use of third-party cookies continued for years, but as of 2021, the privacy side has won. Mozilla’s Firefox and Apple’s Safari have already banned such cookies, forcing websites to only show generic ads targeted only based on very crude information (e.g., the geographical area from which the user came). But the biggest change, dubbed “Chromageddon,” is yet to come.
By 2022, the use of third-party cookies will be banned on Google Chrome, by far the largest and most popular web browser. The consequences for web publishers will be as dramatic as the name suggests. A pair of careful research studies, one from Google and one from Yahoo and Caltech, showed that disabling third-party cookies will lead to a massive reduction in revenues for typical web publishers: on the order of 50-65%. And for a meaningful fraction of publishers, the reduction in revenues is even more dramatic: up to 90%, leaving them with one tenth of the revenue that they previously had.
For many web publishers, such reductions are existential, threatening their ability to pay their content creators and thus the very existence of their businesses.
So is there anything that publishers can do to address this change and thrive in the post-cookie world? For “general” publishers, on which user intent or interest is not clear, or is not commercial (say, news websites), it may be hard to find a good substitute, and thinking of the entire monetization model may be warranted. But for other, “niche” websites, whose audience is focused on a particular theme (fashion, productivity, car repair, and so on), the outlook is much brighter: they can replace display ads with sponsored listings for items related to the theme and the content.
Next to that content, in place where display ads are currently shown, a publisher can allow vendors focused on this theme to show relevant products and services—and compete via an auction to determine the best ad to show. The details of the implementation may vary, and may depend on the particular characteristics of the publisher and its content. For instance, for a fashion website, next to a photoshoot, the publisher may auction off space to vendors selling items from the photoshoot, or related ones. For a do-it-yourself website, next to an article describing a DIY project, the publisher may auction off space to vendors selling tools and materials involved in the project. And similarly for other thematic websites.
Crucially, this advertising model is immune from “Chromageddon,” because it does not rely on any third-party cookies. For the same reason, it is easy to implement it in a way that is compliant with GDPR and other privacy regulations. And most importantly, the ads are highly relevant to the content, leading both to much higher user engagement and monetization rate than generic display ads.