Why a Cookieless Identity Solution is Critical to Future Advertising

For much of the internet's history, cookies—files created by servers to identify and track activities of website visitors—were integral to online advertising.

But in recent years, steadily mounting data privacy concerns began seriously challenging the viability of third-party cookies. This prompted development of a prominent alternative for digital identity management—the cookieless identity solution.

What is a cookieless identity solution?

Cookieless identity solutions are technologies and methods that allow organizations to monitor their website visitors' browsing behavior without relying on third-party cookies. 

These solutions predominantly use first-party data—information gleaned directly from customers or site visitors who opted into engagement through various channels. As such, the tools aren't always literally cookieless, but they use little to no third-party cookies.

A long-delayed response to an ongoing issue

The emergence of cookieless identity solutions wasn't a conscious decision so much as a reaction. Specifically, it was the answer to those asking, "How can you prepare for a cookieless world?" in response to undeniable indications of third-party cookies' imminent phaseout. These signs started appearing more in 2020. Before then, consumer data protection advocates had expressed major dissatisfaction with what they believed was an unethical breach of web users' privacy. 

But ad tech providers and the enterprises they worked with considered cookies too reliable an advertising tool to consider changing. They helped organizations not only uncover the details of activity on their own websites but also some information on what visitors did elsewhere on the internet—a resource of obvious value and inevitable pro-privacy pushback. The former benefit outweighed the latter concern for more than 20 years.

The Google gauntlet

Google announced it was starting to reduce support for third-party cookies on the Chrome browser in early 2020, with the goal of eliminating them entirely in the next two to three years. This prompted advertisers and their customers to quickly start changing their minds about their dedication to cookies, even though Chrome wasn't the first of its kind to do so. 

Less popular browsers like Mozilla Firefox and Apple Safari blocking third-party cookies—as they'd done since 2013—was one thing. By contrast, Chrome accounts for over 66% of computer browser traffic and about 62% of mobile browsing. This was too large for enterprises and advertisers to ignore.

Surging e-commerce

Two months after Google's announcement, the COVID-19 pandemic struck. People wanted to minimize traditional shopping for the sake of their health, so they turned to e-commerce in greater numbers than ever—a trend that persists even as the pandemic has slowed. 

This, coupled with the cookie phaseout, raised the stakes sky-high for ad tech companies and their clients. Industry experts expect the cookieless identiy solution to be a pillar of multichannel digital advertising for the foreseeable future.

Emerging cookie-free identity solutions

Several notable cookieless user identification tools have emerged.

Universal IDs

These solutions create unique identifiers for website visitors using a combination of first-party cookies and offline data related to those visitors. Universal IDs don't require marketers and ad publishers to sync cookies across multiple platforms. This limits inefficiencies and helps deliver the right ads to consumers in the right context.

First-party data

This type of identity solution solely uses online first-party data. Key sources include email addresses—gained through contact forms or other voluntary engagement—and login credentials established when users create accounts on enterprise websites. Companies that send newsletters or otherwise stay in touch with visitors via email can build effective IDs with first-party data. Encouraging voluntary social media engagement can also be useful for a first-party ID.

Clean rooms

These are the settings where tech giants like Google, Amazon, and Facebook allow advertisers to examine audience data in aggregate, rather than on a customer-by-customer basis. For example, Google's Privacy Sandbox framework focuses strongly on developing clean-room solutions.

Ad tech firms match what they receive from clean rooms against first-party data they've collected elsewhere. The goal is to identify data trends that illustrate the reach and effectiveness of ads targeted at audiences with shared interests.

Contextual targeting

While contextual ad targeting is hardly brand-new, some ad tech firms have updated it to better meet the needs of a cookieless world. Like their predecessors, modern contextual targeting solutions attempt to attract users based only on the page they're currently visiting. But they incorporate natural language processing (NLP) and other advanced artificial intelligence (AI) technologies alongside programmatic advertising and real-time data processing to better determine optimal ad placement based on public data.

Benefits and challenges of cookieless user identification

Adopting cookieless identity resolution technology comes with benefits, and also presents challenges that can't be ignored.

4 key benefits

1. Ensure addressability

The concept of addressability—delivering marketing messages based not only on consumer details but also on where they are in the sales funnel—is integral to modern digital marketing. Addressability established through cookieless ID tools allows enterprises to create detailed customer profiles without infringing on their privacy.

2. Develop better multichannel campaigns

In e-commerce, personalized marketing is always more effective than any depersonalized effort, especially with the rise of mobile e-commerce. By using first-party data, it's possible for organizations to craft effectively personalized campaigns that strengthen the loyalty of their customers.

3. Establish compliance

Laws like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) contributed to the phaseout of third-party cookies. Using cookieless identity solutions that rely principally on first-party data voluntarily shared by users mitigates the risk of any noncompliant data misuse.

4. Maintain customer satisfaction

Although consumers aren't opposed to ads by default if they've opted in, they will grow weary of repetitive ads. Cookieless digital identity management helps target and personalize marketing so customers see only the most relevant content, and also lets marketers control how often certain ads are shown.

Possible challenges

Drawbacks of individual solutions: Cookieless identity tools are fairly new, and each type has its potential drawbacks. 

• Some universal ID solutions still use a small amount of third-party cookies. 
• First-party IDs must be established with a great deal of data, requiring a significant initial investment in data collection.
• Clean rooms may be cost-prohibitively expensive for smaller enterprises.
• Some critics still regard modern contextual targeting as too imprecise.

Interoperability: Some cookieless identity solutions, such as clean rooms, are only used by certain publishers and won't be compatible with others. It's critical to find a tool that's interoperable across the ad tech ecosystem, or adopt multiple tools.

Scalability concerns: Not all of the available options for cookieless digital identity management will be easily scalable or adaptable to shifting business needs. Advertising teams must ensure their cookieless tools can scale up to meet their organizations' growing audiences.

Combining first-party ID and data analytics for the cookieless future

It's clear that digital identity management rooted in first-party data will be the way of the future for digital advertising and marketing. But in addition to the effort required to gather that data, it's also essential that enterprises be able to make sense of it and maximize its value.

The partnership between Teradata and Celebrus helps ensure that organizations draw the most valuable insights from first-party digital identity management data. Celebrus' cutting-edge first-party identity graph solution is built into Vantage, Teradata's agile data analytics platform. The combination of these platforms allows enterprises to collect digital interaction data in real time, maintain identity across devices and touchpoints, and build personalized customer experiences with a strong foundation in analytics, all while remaining secure and compliant.

Download our case study to learn how Teradata and Celebrus helped a major global retail bank double its click-through rate and create personalized customer experiences that were responsible for a $50 million revenue boost.