The cookie conundrum: 1st-party vs. 3rd-party cookies

Authored by Lakshmana Gnanapragasam, SVP – Analytics, Epsilon

The evolution of the internet has been largely supplemented by cookies. As mentioned in the previous article on 'Marketing world devoid of third-party cookies', these tiny text files track users’ online activities across multiple websites, allowing advertisers to gather valuable data, identify users, and deliver targeted ads. With Google removing third-party cookies from its Chrome browser to create a more private web, marketers who rely on third-party cookies will face a significant impact.

As we navigate the digital landscape, we must understand the pivotal role of cookies in today's online world. Although most marketers are familiar with cookie technology, a thorough understanding will enable marketers to adapt their strategies, find alternative ways to gather data, and maintain effective advertising practices without relying heavily on third-party cookies.

Types of cookies

First-party cookies are created and used by the website. They are deployed to remember language preferences, gather user data for analytics, and track login credentials. These cookies improve the user experience by expediting interactions on a particular website by offering personalized content.

Third-party cookies are files from domains other than the one that is being used by the user currently. They are placed by external marketers, analytics companies, or other third-party organizations that monitor user activity on many websites with the goal of creating user profiles. The most prominent uses of this data collected through cookies are a) cross-tracking, i.e., to understand user profiles; b) retargeting, i.e., to seed in ads based on similar interests or similar use cases; and c) ad-serving, i.e., to decide when and where to serve ads.

Third-party vs. first-party cookies

From a technical perspective, both first-party and third-party cookies are the same kind of file but collected and used differently. Both play important roles in the digital ecosystem and are necessary for online eco-system.

Since first-party cookies are hosted by the domain itself, they contribute to a better user experience and are typically regarded as favourable. With the help of these cookies, the browser can retain crucial user data, such as the products you put in shopping carts, your login, passwords, and preferred language.

First-party cookies are perceived as less invasive and are generally used to provide a better user experience, whereas there are some concerns about privacy with third-party cookies. This has initiated discussions about issues such as user consent, tracking, transparency, and the responsible handling of personal data.

The cookie crumbles

The era of personalized ads based on third-party cookies is drawing to a close. Google's commitment to phase them out in Chrome, building on existing browser restrictions, signals a pivotal change for marketers, who must now reimagine their approach to reaching consumers in a privacy-conscious environment.

What’s in store?

The best thing a marketer can do at present is not panic and continue to stay informed. If the marketing strategies rely on third-party cookies, it is time to start exploring alternatives. Companies must look for a partner who can provide a stable and scalable identity graph that does not rely exclusively on the existence of third-party cookies. They can explore tools that can better help them leverage their own first party data which includes customer demographics, transactions, and onsite and in-app behaviour. Additionally, if companies have limited or no first-party data, they can seek out partners that do have access to proprietary customer data assets to identify and reach customers across the web. The other viable option is to consider publishers who have a direct relationship with the visitors to their sites and apps. It is important to collaborate with them directly or indirectly (through a partner) to continue to stay ahead of competition in this race.