ellipsis flag icon-blogicon-check icon-comments icon-email icon-error icon-facebook icon-follow-comment icon-googleicon-hamburger icon-imedia-blog icon-imediaicon-instagramicon-left-arrow icon-linked-in icon-linked icon-linkedin icon-multi-page-view icon-person icon-print icon-right-arrow icon-save icon-searchicon-share-arrow icon-single-page-view icon-tag icon-twitter icon-unfollow icon-upload icon-valid icon-video-play icon-views icon-website icon-youtubelogo-imedia-white logo-imedia logo-mediaWhite review-star thumbs_down thumbs_up

Could digital survive losing the cookie?

Could digital survive losing the cookie? Tom Hespos

Since about this time last year, I've been seeing and hearing a lot of speculation about how consumer concerns over behavioral targeting and other perceived misuses of consumer information might bring about regulation from the U.S. government. I think it would be naïve to think that the government won't step in. There is, however, wide-ranging opinion from people I respect in the digital marketing industry about the extent to which regulation will affect what we do every day.

Following the iMedia Financial Summit this past year, I was having a conversation with Jason Burnham, the founder of Mass Transit Interactive, who sold that agency to Horizon Media in 2005. We were talking about this very issue, and that's when I first started thinking about what I would consider to be the next "Chaos Scenario" for digital: losing the cookie.

By way of background, I'm a total cynic when it comes to the subject of governmental regulation of business. In general, it tends to be heavy-handed, not very nuanced or articulate, and generally produces unintended consequences that are often the exact opposite of what was intended by the regulation.

This tends to hold true regardless of the industry being regulated, which party controls Congress, or who the president is. There are a lot of tiny but important details that are germane to the discussion of the evolution of a business sector and why things are the way they are. I don't believe that most of our elected representatives (or the appointed ones, for that matter) have the time to understand all of these details and issues.

Not to be alarmist, but I like to prepare for the worst. The cookie is an obvious target, and I could very easily see a naïve lawmaker landing on "let's just get rid of these third-party cookie things. Problem solved." 

So Jason and I started talking about what the post-cookie digital marketing world might look like.

If we lost the ability to marry data to third-party cookies, we'd lose some very important abilities that we take for granted in digital marketing today:

  1. Behavioral targeting across a network or multiple sites. OK, forget behavioral for a second. Most network targeting options would disappear, with some notable exceptions.

  2. Frequency-capping

  3. Retargeting and custom advertiser-specific targets based on cookie data

  4. Ad sequencing

  5. Much of the data-based targeting that relies on marrying data profiles via cookie-synching

  6. Closed-loop reporting

Some things we would still have left:

  1. Rudimentary geo-targeting based on IP address or user-declared data from first-party cookies

  2. Targeting based on anything in the HTTP header (browser version, OS, IP, etc.)

  3. Panel-based measurement

  4. Targeting options within a single site

If the government simply got rid of the third-party cookie for marketing purposes, we'd see an immediate thinning of the herd. Without an alternative to third-party cookies, ad networks and exchanges would suffer a great deal, as the targeting options that made them popular would disappear. Third-party ad servers would probably continue to exist, mostly to simplify trafficking and reporting, but much of their functionality would be stripped out. We'd stop getting those insightful reports from the third-party servers about the state of the industry.

Power would begin to shift back toward single sites with large traffic volume. In the absence of third-party cookies, after all, marketers would have to rely solely on data captured by individual sites in order to target ads in any compelling way. In other words, we'd be thrown right back into 1996-era portal mania.

Repercussions would be felt all the way through the measurement sphere as well. Direct response and e-commerce advertisers would be hit hard, as they would no longer be able to set cookies on users to find out whether they later bought something on their website. 

Companies like comScore and Nielsen might emerge unscathed, while cookie-reliant companies like Quantcast might not fare as well. 

Some of you might be saying to yourselves that this doesn't sound so bad. The notion of publishers being able to live or die based on their reach and the data they're able to collect from their own visitors sounds like a good idea. Thinning the herd and shifting revenue away from networks and exchanges might sound like fun for publishers. Agencies that have had to keep up a fevered pace of tracking industry trends might find the whole interactive sphere a bit easier to cope with. Certainly, things would get simpler for everybody concerned.

But the post-cookie digital marketing world would erase a decade and a half's worth of innovation in targeting, segmentation, audience aggregation, and measurement. It might kill the network business and the exchange business along with it. It will certainly give advertisers fewer options. I'll leave it to you to decide whether that's a good thing or a bad thing.

We should all be thinking about the worst possible regulatory scenarios and plan accordingly. The third-party cookie might survive scrutiny, and regulation might take another form, but we should prepare anyway.

Tom Hespos is the chairman and president of Underscore Marketing and blogs at Hespos.com.

On Twitter? Follow Tom at @THespos1 or @_MarketingLLC. Follow iMedia Connection at @iMediaTweet.

Tom Hespos is President of New York agency Underscore Marketing. He is a frequent contributor to industry trade publications and has been writing a regular column about online marketing and advertising since March of 1998. His clients include Wyeth...

View full biography


to leave comments.

Commenter: Richard Frankel

2010, January 09

Fun discussion. A few comments ...

- Tom's original article presumes an hypothetical but nowhere in this debate is a clear analysis of the harm caused by cookies. 'I feel like it invades my privacy' isn't a measure of harm. How exactly do 3rd party cookies cause harm? If anyone's seen a good analysis on this please point it out.

- I'm curious why web sites don't fight at all against ad blockers. Seems like users of ad blockers cloak themselves in self-righteousness, but I just think they're thieves. The implicit agreement for web sites is 'it's free to if we can sow you ads.' If you don't like this deal then just stay away. Nobody would agree with people who justified the stealing of cars because they didn't like how they polluted, or who snuck into movie theatres because they didn't agree with studio hiring practices. Will the ad blocker users be happy when there's no ad-supported content?

Commenter: Tom Hespos

2010, January 09

IIRC, all of those technologies are cookie-dependent, or fall under the heading of third-party cookies themselves, so they'd all go away (for marketing purposes).

Commenter: Béate Vervaecke

2010, January 09

If government explicitly targets 3d party cookies. there is still the flash cookie, facebook Connect, your Google account, ... to track your behaviour over several sites.

Commenter: Tom Hespos

2010, January 08

>Could it be that perfection is the enemy of growth for online? <----- Great summation

Commenter: Tom Cunniff

2010, January 08

Tom, you've asked the jugular question, and I don't think I have an answer. In the end, I think dollars ultimately chase audience and engagement. As long as online's waste is no more expensive than TV's waste and can offer reasonably decent engagemen, I think brand advertisers would be fine with it.

I wonder sometimes whether online has fallen into the trap of chasing perfection. TV isn't perfect -- not by a longshot . But it delivers mass reach affordably and it works fast. And, it's easy to manage.

Could it be that perfection is the enemy of growth for online?

Commenter: Tom Hespos

2010, January 08

That's a great point, Tom. Lots of folks I know have been thinking of the incremental improvements we've made to things like targeting as something that's not going to matter much in the grand scheme of things.

This whole column was written by taking a hypothetical as a given, but if we ever did really lose the cookie, here's one of my key questions: Would brand advertisers continue to feel comfortable investing in digital display if they had already defined its strategic role as the provider of targeted reach? In other words, would they put up with the waste or would they re-allocate to broadcast?

Commenter: Tom Cunniff

2010, January 08

Great article, Tom. Personally, I could argue either side of this debate but on balance I actually think the death of the cookie might do more good than harm.

Here's why:

1) I have come to believe that all advertising (including digital) is a far more blunt tool than marketers would like to believe. And, I think the flood of data tends to push our focus to the small stuff rather the big stuff. We not only don't see the forest for the trees, we can't see the leaves because we're focused on the cell structure of the tiniest bug sitting on one of the smallest leaves.

2) Supply and demand in the online universe feels hopelessly broken to me. I can't keep up with my RSS feed and all of those media properties are fighting to be monetized. Consolidation feels inevitable, and as awful as it sounds perhaps a fairly major bloodletting would be a good thing.

3) To date, all the added metrics and improvements in targeting have not substantially increased brand spend in the digital world. As a born contrarian (all Irish people possess this genetic trait, BTW), I can't help thinking that less may be better.

Could it be that the death of the cookie makes online advertising radically easier to buy, sell and manage from the brand side? I acknowledge that it would be rough for the DR folks, but they'd find a way to manage.

Personally, I get weary of squinting at spreadsheets and the endless hand-wringing over the optimization of this vs. that. Even if it improves results somewhat, I wonder if it really pays out when we factor in staff time and opportunity cost.

What's really happening in the forest while we're squinting at the bug on a leaf?

Commenter: Mark Stoneham

2010, January 08

Tom, a great capture of an issue that is being ignored by way too many in the adtech industry as they all furiously try to build better mousetraps. 15 years of development has produced systems that consistently put vendors before consumers and are therefore unsustainable. If there was nothing wrong then regulators would be focused on other issues.

What Richard has presented as wholesale carnage is in reality just change and change brings opportunity. Innovators will move quickly to fill the gaps created and I am aware of at least one system in development that is consumer-friendly, privacy compliant and will actually improve performance in targeting and analytics over the systems in operation today. Publishers, advertisers and consumers will all be better off, and we'll have an acceleration of the inevitable rationalization of the ad network/exchange space.

The industry has consistently ignored the value that can be gained from engaged consumers. Delivering fewer, better targeted ads to engaged consumers seems a good direction to head in and while we might have to suffer a dip while the online ad industry rebuilds, massive change may be a necessary evil.

Commenter: Tom Hespos

2010, January 08

Richard - I like your approach, but I'm not sure this would be as devastating as you might think.

I think advertisers would still continue to buy less-targeted inventory, and they'd also go in big with individual content sites and portals. I think the effect would be devastating to digital DR advertisers, but I think brand-based display would soldier on.

I'd also add that I never underestimate the stupidity of crusading politicians looking to make a name for themselves by "protecting our privacy."

Commenter: Richard Frankel

2010, January 07

Wow Tom, this is indeed a chaos scenario. What-if scenarios are fun, so let's see what the carnage would be. At a high level, not much of the non-portal business would survive. Here's what I think the gross impact would be. These are super guess-work type rough numbers, but here I go anyway

- Industry worth $5 Billion to $10 Billion would be wiped out immediately. Job loss would proportional. And this would be relatively high-paying white collar job loss.

- All publishers would suffer. Most publishers are supported by third party ad revenue or by sophisticated targeting capabilities. How many publishers could stand to lose 20% - 40% of their higher margin revenue? Many would be wiped out as well. Most that would survive would be large portals and niche vertical pubs, though the larger pubs they would be put under huge pressure as well.

- Display ad rates would plummet. This gets worse for all publishers. Prices for niche/targeted web sites would shoot up.

- Online marketers would see a mixed bag. Display rates would fall, but mostly for gross/mass audience buys. But worse, many would immediately lose their most/only effective means of marketing online at any price, and would suffer concomitant loss of business margin.

- Google's core business would be fine. Likely rates for search advertising would get pushed up as well as marketing dollars flowed there from targeted display advertising. Google's ancillary businesses would suffer tremendously.

I'm not an economist, but I'm guessing that if you take into account the downstream effects of this kind of change, this is a hit to the US economy in the $10s of billions. Not to mention the crushing of a major source of innovation, job growth, and likely future job growth.

I hope that this is not something Congress would do lightly!

Commenter: Paul Wenzel

2010, January 07

As a web developer, privacy advocate, and cynic of most digital advertising, I say good riddance. One of the first things I do when I set up a browser is disable third-party cookies (in addition to my ad/popup blocker and IP filter).

Changes in regulation will force web sites and content producers to deliver something more relevant than the what is provided by large marketing/ad networks.

I know I'm not alone either.

Commenter: Dave Youngblood

2010, January 07

Could have a much larger impact on the industry, especially with marketing budgets needing to be justified more and more. Conversions and transaction help justify additional programs and dollars.