They’ve shaped online marketing for 20 years, but global concerns over privacy mean third-party cookies are due to be phased out next year. For those who have built their businesses on this low-cost, high-reach technology, it’s a revolution. Join Peter Bale for the third part of our six-episode podcast Digital tomorrow: Powering transformation | Made in collaboration with EY New Zealand.
A new pair of sheepskin slippers.
It might have been an idle, forgettable Google search on your phone. You know the sort – the one you make around that 3pm lull when your mind starts to wander.
But now, even though you’ve closed the tab and moved on with your day, there those slippers are again: as a sponsored ad on Facebook. And a promoted post on Instagram. And a pre-roll advertisement before a YouTube clip.
Suddenly – somehow – you’ve let the internet hivemind know you’re interested in slippers, and now they’re set on selling you a pair.
But it’s no hivemind: it’s cookies.
Internet cookies are named for their ability to leave crumbs. They’re tiny pieces of code that live on almost every website. By tracking where you go and what you do online, cookies can create a digital profile of who you might be. For example: cookies may be able to make an educated guess that an internet user is a woman, aged 30-45, and living in Christchurch.
For advertisers looking to sell you products, this is valuable data.
Google, Facebook and Apple have recently announced big changes to their privacy policies to limit the data companies can access – especially ‘third-party’ cookies, when data is kept without a user’s explicit permission. Nations across the globe are turning their attention to their own privacy laws, too, as personal data becomes a more valuable commodity in the digital age.
Joe Bradford runs Work From Home Desks, selling from Cambridge in New Zealand as well as in Torrance, California. It was a business born from the pandemic: in March 2020, Bradford’s company, Fiasco, which makes cases for sound equipment and instruments, lost 95 percent of its business when musicians stopped touring – but demand for remote working set-ups boomed.
Bradford’s business model is built on e-commerce. He used to trust cookies to do their thing: help customers find his products amid a sea of competitors. But he’s already seen a big difference in the reach for his ads since Apple’s decision to ban automatic advertising tracking across its apps.
Now, users are often prompted to give permission for their data to be used – to ‘accept’ cookies – something they’re not always keen to do.
“We don’t get as much data feeding into the funnel to guide how our ads work,” Bradford says.
For his New Zealand base, marketing costs have ballooned from 20 percent to 30 percent to capture the same audience – an expense that ends up being reflected in the product’s price.
“It’s got some pros for privacy, but we were always looking at big datasets anyway – who’s interested in desks, in New York, population 12 million?”
Mark Challinor, who has worked in advertising for 30 years, including at The Daily Telegraph and The Daily Mail newspapers, says the industry is entering an era of consumer data privacy after a rapid digital expansion.
“If you look at the world today, whether you’re buying something via Alexa, or you have a fitness tracker, it’s a wild west out there – unregulated. People’s data is being taken, and it’s being sold to third parties,” he says.
The end of cookies, looming for the end of 2024, means advertisers will have to do more to get users to agree to share their data. One of the first places a business can look to sharpen up on is to organise its collection of ‘first-party’ data – information that businesses proactively gather themselves – says Michael Summers-Gervai, a director at EY New Zealand with long experience in marketing.
When businesses grow and create multiple different services or access points for customers, it’s important to make sure the datasets being generated can be “stitched together” to create a consistent picture of the customer’s engagement, he says. Investing in second-party data partnerships to fill gaps could also be part of how businesses move forward in a post-cookie environment.
This new emphasis on data privacy brings back a fundamental principle of marketing, Summers-Gervai says: “It’s about value exchange. You don’t collect something for no reason.”
“It’s not just about data hoarding. It’s ‘what can I do with that to assist the value I deliver to my customers?’”
Nicola Hermansson, who leads the EY New Zealand cybersecurity practice, says the onus will be on businesses to demonstrate the benefits to customers’ experiences through access to their personal data.
“Giving information could be great for [customers] in terms of value exchange,” Hermansson says.
“How many times have you gone on to a website where they’ve asked you for your date of birth? Why do they need to know the date that I was born?
“If I give you my date of birth, and actually, on my birthday, you give me a nice gift or a nice discount, then hey, I might give you my date of birth.”
Cookies may be on their way out, but they’re not the only means by which big businesses can use people’s digital identity to market to them. AI technologies could be used to sophisticatedly predict what customers will be interested in next, says Richard Pook, chief product officer of marketing firm Dentsu Media ANZ.
“It might not feel less directly creepy, but it’s still just as creepy,” he says.
Pook says there’s still a long way to go to find the balance when it comes to businesses and their customers’ data. Digital or smart forms of marketing are rapidly creeping to wipe out traditional advertising, with about 70 percent of marketing spend in New Zealand being for online platforms. A TV advertisement reaches many different types of people to varying degrees of interest, while a digital ad – in theory – can be tailored to target the right kind of customer.
Ads aren’t going away any time soon, so is it worth giving away some of your personal data to have ads that are curated, and show you products you might actually want – like that pair of sheepskin slippers?
“If it means more effective advertising, or better, more personalised experiences for [customers], maybe that’s the price they’re willing to pay,” says Pook.
Digital tomorrow: Powering transformation is a new, six-part Newsroom podcast, made in collaboration with EY New Zealand, where journalists Nikki Mandow and Peter Bale look at some of the most interesting, critical issues around the use of technology in our workplaces today.
We’ll release a new episode every fortnight, although take a small break around the election, covering everything from AI and spacetech to the digital workplace, to living in a cookie-less world.
Disclaimer: The views expressed in this podcast are the views of the author, not Ernst & Young. This podcast provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.
