Time is running out for small businesses that rely on online advertising services (e.g. Meta, X).

Third-party cookies, which are the staple technology for the online advertising industry, are going to die. Google Chrome, the last cookie-friendly web browser standing, will disable third-party cookies in a few months. Web browsers like Mozilla Firefox, Apple Safari, and Brave, had already disabled third-party cookies by default. Chrome, which has 65% of the market share, is following suit in a few months.

This is going to throw the entire AdTech industry into uncertainty. If your business relies on online advertising, it is going to be affected by this major change.

How do web browser cookies work?

First-party cookies

I will use an analogy to explain how cookies work.

Imagine you go to ABC Thai Food restaurant in a shopping mall. Upon entering the restaurant, you are stamped on your forehead with the restaurant’s logo and a unique serial number.

That is akin to first-party web browser cookies.

ABC Thai Food is going to use that unique serial number (with their logo) stamped on your forehead to identify you. So, next time when you come back to ABC Thai Food, they can identify you as a previous customer and can pull out all your purchase history and other personal information about yourself that you have given to them.

First-party cookies are not controversial. Many of us have retail store loyalty cards in our wallets. So, this allows the particular store to track our purchase within that store, in exchange for loyalty discounts.

Third-party cookies

Now imagine the next time you enter ABC Thai Food.

In addition to the stamp on your forehead that you already have, a staff member from BusyBody Tracking Agency stamps its logo and a unique serial number on your forehead. The staff member from BusyBody Tracking Agency observes what you do in ABC Thai Food and reports them to head office, along with BusyBody Tracking Agency’s unique serial number that is stamped on your forehead.

This is akin to third-party web browser cookies.

Let’s say you enter XYZ Sushi the next day. Another staff member from BusyBody Tracking Agency takes note of its unique serial number that was already stamped on your forehead, observes what you do in XYZ Sushi, and reports them to head office.

Advertising technology’s data collection

Now, the head office of BusyBody Tracking Agency has information about what you do in both ABC Thai Food and XYZ Sushi. The unique serial number from BusyBody Tracking Agency tells them that you are the same person who visited ABC Thai Food yesterday and XYZ Sushi the next day. The head office knows what you did in both restaurants.

Now, imagine every store in the world has a BusyBody Tracking Agency staff member doing the same thing! You can see that you will have no privacy.

Showing advertisements

Given the BusyBody Tracking Agency knows everything about you, they can show you more targeted advertisements.

For example, next month, when you visit NiceCuts Barber, the staff member from BusyBody Tracking Agency will be able to identify you with its unique serial number already stamped on your forehead. He can ask the head office which advertisement to show you based on what the head office already knows about you. For example, knowing that you are interested in camping gear, he can show you advertisements from the CrazyAdventures Camping store.

If you want to find out more about the CrazyAdventures Camping store, you can ask the BusyBody Tracking Agency staff member. When this happens, the CrazyAdventures Camping store will pay a small advertising fee.

Death of third-party cookies

Very soon, third-party cookies will no longer be operational for all web browsers.

To use the above analogy, this is akin to BusyBody Tracking Agency being banned from every store. This means they cannot even stamp your forehead with their unique serial number.

Each store can still stamp your forehead with each of their store’s unique serial numbers. But that serial number is only visible to the store that stamps your forehead. For example, XYZ Sushi cannot see the serial number stamped by ABC Thai Food.

Implications on advertising

How is advertising technology going to work when third-party cookies are not going to work in a few months?

Advertising technology (AdTech) companies are going to be in trouble soon. AdTech companies that rely on third-party cookies, better work fast to find new ways to track users. Otherwise, these AdTech companies are going out of business. If your business relies on these AdTech companies, it is going to be affected.

Is Google affected?

Since Google is a massive advertising company, wouldn’t they be shooting themselves in the foot by killing third-party cookies on their Chrome web browser?

Well, Google has built a completely new advertising infrastructure from scratch that no longer relies on third-party cookies. They called it Topics. Topics is a completely new approach that protects your privacy better. In the status quo, the collection of data about users and the auctioning of advertising is done on central servers. With topics, Google will move these activities to the web browser instead. Since Google controls the majority of the web browser market, their Topics will work for the majority of web browsers on the Internet.

If you are using Chrome, you may already be running on Topics as a test pilot user.

What can you do?

If your small business relies on advertising for revenue, you have to adapt to a new strategy fast. I will talk more about these new strategies in the months to come. If you want to hear from me, please feel free to subscribe with your email address below. 👇

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