The Death Of Third-Party Cookies Disproportionately Hurts Small Publishers

The Sell Sider” is a column written for the sell side of the digital media community.

Today’s column is written by Joshua Koran, head of innovation labs at Zeta Global.

Before the COVID-19 pandemic dominated the spotlight and our daily lives, the digital advertising industry was rife with speculation about the future of marketing and advertising technology and its relationship with consumer privacy.

In most discussions, the cookie was demonized for the very purpose it was intended: enabling internet sites to personalize their interactions with consumers.

Unfortunately, as cookieless proponents propelled the discussions, the long-term effects on the open web were typically missing. Four key points are too often ignored in these important consumer privacy discussions.

Small companies rely on partners to compete against larger rivals

Capitalism assumes small companies entering new markets provide healthy competition to entrenched rivals, while limiting competition undermines the effectiveness of these market forces. The barrier for new companies to enter this competitive field is lowered when startups can partner for technology and services that they otherwise would have to build themselves. By eliminating third-party cookies, there is a high probability of effectively limiting smaller publishers’ ability to compete online.

The need for small publishers to partner with technology and data providers to compete against larger rivals is the first topic missing from digital privacy discussions. Many privacy discussions suggest there should be a difference between how first-party cookies (generated by publishers) and third-party cookies (generated by ad tech vendors) are leveraged.

Those in favor of allowing first-party cookies suggest that the identical process of showing consumers their own emails, shopping basket or personalized content operated by a vertically-integrated publisher is somehow better than a smaller rival who works with multiple partners to show the same information. However, the primary difference between first-party and third-party cookies and related processing is corporate ownership.

Sharing data improves consumer experiences 

Access to competitive technology without comparable data would also disadvantage small publishers. The largest publishers can access sufficient data across a wide range of content from digital interactions within their own websites, while smaller publishers rely not only on partner technology but on data aggregated across other publisher properties to feed content matching algorithms. Restricting all publishers to access only first-party data negatively affects the personalized experience that smaller publishers could provide to consumers.

The recent financial success stories of companies benefiting from the sharing economy – Uber and Lyft for transportation, Airbnb for lodging and Kickstarter for loans – all benefit from increasing returns to scale. The algorithms powering personalization rely on aggregating data across numerous interactions by different browsers. Similarities in the content and browsing behavior enable these algorithms to improve the match of relevant content to future browser requests. The more data feeding the algorithm, the faster they can discover these patterns.

Advertising funds free access to digital content and services

Restricting access to first-party data also negatively affects the monetization that funds the open web. Most consumers do not pay to access the services and content they consume. Instead, advertising funds this access.

To focus their limited budgets, marketers rely on controlling the frequency of exposure (frequency capping) and post-exposure measurement of their advertising (attribution). Publishers can limit the frequency of exposure within their own website but require independent vendors to limit frequency capping across other publishers.

Marketers can better value the media space they purchase by tying subsequent purchases back to the publishers that drove the greatest number of purchases. Both frequency capping and attribution depend on digital IDs, often stored in third-party cookies. Without this measurement and control, effectiveness is diminished, especially when running campaigns across multiple publishers. Limiting marketer effectiveness on only smaller publishers shifts media budgets to larger rivals. We have previously seen this play out with local media vs. cable news. Thus, impacting third-party cookies again hurts small publishers.

While privacy clean data rooms or browser-based APIs are often offered as alternatives to the third-party cookie, these intentionally limit the information provided back to algorithms. This reduction in measurement fidelity across websites, while not impacting walled gardens, gives false hope to marketers and small publishers that the coming changes will not negatively affect them.

Freedom of expression benefits from multiple publishing channels

While these business interests are important, societal interests should take precedence. Centralizing more data in fewer companies is likely not the desired outcome for most privacy advocates. The policies behind some regulations and browser changes ironically do just that.

Freedom of expression is fundamental to thriving democracies. How should we evaluate policies that limit the number of platforms that enable consumers to interact with each other? How should we evaluate policies that limit the companies marketers and publishers can work with? Hopefully, we continue to support policies that increase the number of voices, rather than diminish them.

A path forward 

Breaking up large companies into smaller ones does not address the technical or economic requirements involved with providing ad-funded digital content and services. Algorithms benefit from access to more data. Providing more access, rather than less, improves the services consumers enjoy.

As we look to the future of digital IDs, the following points must enter the conversation:

  • The more we work together, the better the internet can be.
  • The more data is shared, the better the potential results.
  • The internet is not free but can be freely accessed with ad-funded business models.
  • Freedom benefits from less centralized control.

Companies advocating for their own business models and interests are not evil. However, as GDPR recital 4 states, “Data should serve mankind,” not just a limited set of company interests.

Hopefully our trade bodies and legislatures agree. My hope is that the next generation can still access free internet. Cross-domain IDs, especially third-party cookies, are vital to competition and the continued future of the open web.

Follow Zeta Global (@ZetaGlobal) and AdExchanger (@adexchanger) on Twitter.

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2 Comments

  1. Dirk de Ploert

    I tend to disagree, small publishers are usually niche and that is where there strenght is.

    That niche allows to make a better offer compared to a larger publisher. Hence, 1st party pixels and engagement on niche should be an opportunity for smaller publishers.

    Reply
  2. There are lots of small publishers that are not niche... ie. Local news sites. 1st party pixels and engagement are great but that probably won't scale for this group.

    Reply

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