What Are Third-Party Cookies and How They Work in Advertising
26 July 2021
New legislation regarding online consumer privacy has brought attention to third-party cookies.
Cookies have been in use since the late ’90s. Yet many people do not understand the different types of cookies and what they are used for.
Understanding third-party cookies is a vital step in protecting online privacy. Advertisers and publishers also need to know the future of, and alternatives to, third-party cookies.
With the passing of new legislation, the phasing out of third-party cookies has begun. By 2022, all major internet browsers will block all third-party cookies.
This will have a huge impact on advertisers and publishers.
What will happen to digital advertising? How will this affect businesses, advertisers, publishers, and users?
Read on to find the answers to those questions. But first, what are third-party cookies?
What Are Third-Party Cookies?
There are two different types of cookies on the internet. There are first-party cookies and third-party cookies.
Both of these cookies observe user behavior. But there are some major differences between who uses them and what they are used for.
First Party Cookies
Image source: madmartech
First-party cookies are placed on the website by the owner. They collect user data and use it to remember website configuration.
They track and remember things like:
- language preferences
- login details
- products added to a shopping cart
- user preferences
- user settings
First-party cookies enable the owner of a website to provide a good user experience.
For example, a customer browses an online store and places a product in the cart, then they exit the site. When they return to the site, they see that the product is still in the cart.
They are experiencing the benefits of a first-party cookie.
Image source: madmartech
Third-party cookies are also called tracking cookies or targeting cookies. They’re placed on a website by someone other than the website owner.
They are set up by a third party, thus the name.
Third-party cookies track the same information as first-party cookies, sometimes more. All the tracked information goes to the third party.
But third-party cookies are not there to provide a good user experience. They are mostly used for advertising purposes.
Information that third-party cookies collect includes:
Third-party cookie data identifies users online and reveals their likes and dislikes. It provides powerful information useful in enhancing online marketing.
Online advertising is the most common use of third-party cookies. It uses the data to create user profiles and then present personalized ads.
Third-parties can add cookies to a webpage through tags. These tags are sometimes connected to an advertisement but not always.
Differences Between a Third-Party Cookie and a First-Party Cookie
Who sets it?
It is set by the owner of the website. It is supported by all browsers.
What do they track?
They only track the user on the domain that created the cookie.
What is their purpose?
Their purpose is to give users smoother site access. They remember login information, site preferences, etc.
Can you disable first-party cookies?
Users can block and delete them but it may result in a bad user experience.
Who sets it?
A third-party cookie is set by a third-party server. It is set by code loaded onto a publisher’s site.
They can be from ad servers, social media sites, live popup chats, and more.
What do they track?
They track users across many domains.
What is their purpose?
They enable adware to retarget potential customers with personalized ads as they move from site to site.
Can you disable third-party cookies?
Many browsers are now blocking third-party cookies by default. Users can also delete and block them on a regular basis from the browser settings.
From any browser window, go to settings and click on the privacy or security option. Users can also use private or incognito mode to block cookies during a browsing session.
What Are Third-Party Cookies Used For?
Advertisers use third-party cookies to learn about user’s browsing and online behavior.
They collect data about which websites users visit often. They record what purchases they have made and what products they have shown an interest in.
For example, users go to a website. They show interest in a product by clicking on it and reading the specifications.
They exit the site and go to another site that has nothing to do with the product. The current website shows advertisements for the product they showed interest in.
This is the result of a third-party cookie.
Examples of Third-Party Cookie Use
The most common third-party entities are social media sites, advertisers, and marketers.
Here are some examples of how third-party cookies work:
- A customer goes to bestbuy.com and looks at a product. A third-party cookie tracks, collects, and analyzes their activity on that website.
They leave bestbuy.com and go to a completely different website. On the second website, they see advertisements for the product or similar products to the one on BestBuy.
This means that both BestBuy and the second website load a piece of code from an ad server. The code from the ad server is from a different domain making the cookies third-party cookies.
- An advertising service (for example, Google Ads) creates a third-party cookie. This allows them to monitor which sites a user visits.
Then it shows advertisements based on the collected data.
- You visit a website that has a Facebook “Like” button. Although you don’t click it, it contains a third-party cookie that stores information.
That information helps identify different users and tracks which websites they go to. Then if they go to Facebook, the user will see personalized advertisements.
How Are Third-Party Cookies Created?
Third-party cookies are created when a request is sent from the web page to the third party’s server. The requested file may be an actual advertisement or it can be a file with a tracking pixel.
A tracking pixel is invisible to the user but collects data even when there are no click events.
One basic way a third-party cookie is created is when a website requests a third-party service. One example is an integrated live chat pop-up.
For live chat to work, websites request a script from a service provider. The script loads the live chat file.
The user’s web browser receives the file with the live chat and some third-party cookies. Before the user notices, third-party cookies are collecting information about them.
Any request from a third-party domain can put cookies in web browsers. It can be from a script, image, fonts, CSS files, etc.
As the web page loads to retrieve the data, it assigns a cookie to the user at the same time.
Examples of Third-Party Services That Leave Cookies
Several third-party services leave cookies in web browsers. Here are a few examples of the main services that do so:
Ad Retargeting Services
Ad retargeting means following previous visitors to websites around the web. They show advertisements for products that the visitor has shown interest in, or has interacted with previously.
Retargeting efforts work across social media platforms, email, and more.
Website owners place an invisible tracking pixel on their site. When their site loads, it sends a request to the ad-retargeting server.
The ad-retargeting server then assigns a cookie to the user. Then it can track the user and retarget them on other websites.
Social media buttons allow users to log in, share, or like social media content. These buttons place cookies on the user’s device.
The social media platforms then track the user. They also collect information about their online behavior.
When users open a social media platform, they see ads based on the data collected.
Live Chat Pop Ups
As discussed above, live chat pop-ups also leave cookies in a user’s browser. These cookies help streamline the user experience.
For example, when a user visits the same chat box it identifies the user. It also remembers the conversation history.
Are There Benefits to Third Party Cookies?
Third-party cookies mostly benefit advertisers. They allow advertisers to understand users better and know what interests them.
Then they can display individualized ads. Some users prefer this.
Since they have to look at ads anyway, they prefer them to be relevant to their individual needs.
Users benefit more from first-party cookies. The first-party data collected from cookies is responsible for user comfort.
They provide a better user experience and allow users to get results faster.
The benefits of third-party cookies for advertisers, publishers, and users are as follows:
Benefits For Advertisers:
- Internet users see relevant ads which motivate them to click on them. This generates more advertising revenue.
- Enables a wide range of online advertising methods.
- More efficient, easier, and collects more data than first-party cookies.
Benefits For Advertisement Publishers:
- Easy to implement because the work third-party server does the work.
- Visitors see relevant ads which encourage them to click on them. This increases the revenue publishers get from ads.
- More efficient than first-party cookies.
- Third-party advertisements are not hosted on the publisher’s web server.
Benefits For Users:
- Personalized advertisements only show products users have an interest in. This makes the internet seem individualized.
- Website operators must be transparent about how they use third-party data.
- Many web browsers allow users to block third-party cookies.
The End of Third Party Cookies
As noted, the phasing out of third-party cookies has already begun. There are various reasons for this.
One reason is that advertisers and publishers have to combat ad blockers. These and other methods disable cookies from tracking and collecting user data.
Another reason is the increase in mobile website browsing.
It is more difficult to track users across several devices. Which means that advertisers are receiving an incomplete picture of users.
A third, very compelling reason, is the growing awareness of privacy issues associated with third-party data. Many new regulations are seeking to protect the personal data of website users.
Examples of new privacy regulations include:
- The California Consumer Privacy Act (CCPA)
- The General Data Protection Regulation (GDPR) in the European Union
These regulations change how advertisers and marketers manage, trade, and use consumer data. There are civil and criminal penalties if websites do not offer transparency.
They must notify users of the presence of cookies, the data they collect, and who they share the data with. Users must also have a way to opt out of cookie data collection.
The upcoming ePrivacy Regulation will likely put more restrictions on the use of third-party cookies. Thus, it is difficult for advertisers to use them in their current form.
Mozilla’s Firefox and Apple’s Safari now block third-party cookies by default. Google announced that Chrome will block cookies by default in 2022.
This may be because 90% of their revenue comes from advertising. Without the information from third-party cookies, their advertising revenue could be negatively affected.
Until then, Google are taking steps to reduce the invasive aspects of third-party cookies to consumer privacy.
Is Online Advertising Doomed?
For users surfing the web, the end of third-party cookies might bring an end to personalized ads.
But for advertisers and publishers, the effect will be much greater. There will be much volatility in the digital advertising industry.
Publishers will take a big hit.
Advertisers will not be able to target consumers with as much accuracy. Thus, the price per view will decrease and with it the revenue of publishers.
Many wonder if online advertising is doomed. The answer is no.
Money always wins and advertisers will find other ways to continue their work. There are already several alternatives to third-party cookie data collection.
Even now, new methods are being tested.
Digital advertising will experience big changes. Bit publishers and advertisers will adapt and solutions will emerge.
Publishers could create their own ad solutions based on information received from customers.
Advertisers and publishers may need to work more closely together. This will allow them to produce targeted ad campaigns.
Other solutions include the following:
Relying More on First-Party Data
With third-party cookies gone, the data from first-party cookies will become more valuable. First-party data collects information such as email addresses and previous purchases.
Brands will need to find ways to collect data straight from users. That information will enrich the data collected on them and boost marketing campaigns.
They will also need to share the data across the brand. This will ensure that all channels receive accurate information.
Some ways to collect first-person data include:
- Email login before sharing free content
- Direct contact through email or text messaging
- Guided selling experiences that ask for customer input
- Post-purchase and customer surveys
Shift to Contextual Advertising and Content Marketing
Contextual Advertising displays ads on websites based on the content of the website. It allows advertisers to show Pay-Per-Click ads on websites that rank for similar keywords as theirs.
For example, if an ad is for car equipment, it will appear on websites with car equipment content.
People-based targeting views online user behavior across devices. It channels but does not store any information that could lead to identifying the user.
Before, people-based targeting was best used within specific websites like Facebook. Here people are happy to provide personal information.
Nowadays, marketers can use a people-based targeting method to understand person insights better.
One suggestion is to pair this method with automation. Thus it’s possible to deliver personalized, relevant, and tailored ads to users.
Effects of the Elimination and What Actions to Take
The elimination of third-party cookies will impact the digital advertising industry. It will also change the way the internet is used as a whole.
It will affect users, publishers, and advertisers.
Users might not receive as many targeted advertisements as before. However, that might be an agreeable compromise to keep personal information private.
Publishers might take a hit in revenue. This is because advertisers will pay less for less targeted ad campaigns.
Advertisers who have thrived on personal information for targeted ad campaigns will have to adapt. Advertisers may also worry about how to navigate the upcoming changes.
The loss of third-party cookies will bring challenges. But it will not end digital advertising as a whole.
There are several alternative advertising methods that marketers can fall back on.
For instance, they could combine tools such as first-party cookies with contextual advertising and people-based targeting. This will help marketers to forge ahead while respecting privacy rights.
The best thing for marketers to do is implement these advertising strategies now. Then when more changes come, they can adapt with ease instead of falling behind.
They should also stay up-to-date with any new developments regarding third-party cookies. Any new policies will then not negatively affect their business.
Ending thoughts on what are third-party cookies
In conclusion, what are third-party cookies? They are a tool used by advertisers.
They collect user information from website visitors for online advertising purposes. They enable cross-site tracking to determine a user’s behavior.
New legislation seeks to protect consumer’s personal information. As a result, third-party cookies are being phased out.
No doubt, time will show that advertisers will find new ways to advertise.
Users will be happy that their personal information is protected. Publishers will also fare well as they are the link between advertisers and clients.
The future holds changes regarding the use of the internet and personal information. As these changes come, let’s strive to benefit users, publishers, and advertisers.
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