In today’s Finshots, we tell you why Google is ditching cookies in 2024 and how businesses might just have to survive without them.

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The Story

In 1994, Louis Montulli was a 23-year-old engineer at Netscape. If you’re a millennial, you might’ve used Netscape. It was the browser of choice back then. And this young man created something that would revolutionize the internet. He created the first cookie!

For the uninitiated, a cookie is simply a file that a website places on your computer. This way,  it can remember what you did. For instance, say you log in to a shopping website for the first time and add a couple of items to your cart. Something else grabs your attention and you exit. But when you return the next day, you’ll find that the website still shows the stuff you added to the cart. That’s all thanks to a cookie or what’s known as a first-party cookie. The website placed it to give you a better browsing experience.

But then, some smart folks at a company called DoubleClick had another brainwave. They thought, “What if we could manipulate this for advertising?”

These cookies, also called third party cookies monitor a user's behavior online and can use that information to display ads across multiple other sites. This third-party cookie thing became an advertiser’s favourite gizmo. And Google realized its potential to really dominate the advertising world. It put up a whopping $3.1 billion in cash to buy out DoubleClick in 2007. For context, that was nearly double what it paid for YouTube!

And the rest they say, is history. Today, Google earns over half of its annual revenue from advertising. And Google Chrome controls over 60% of the browser pie.

But a couple of weeks ago, Google announced that it would drop third-party cookies completely from its Chrome browser in 2024. The change has already begun. And 1% of Google Chrome users will see this change for now.

That means advertisers are also panicking a bit.  Because nearly three-fourths of marketing companies in the world rely heavily on third-party cookies to scale their business. Simply because it seems that when companies shell out $1 on advertising they can make over $2.5 as a return on their ad spend by relying on data from third-party cookies alone.

So without third-party cookies, it could be a death knell for easy advertising.

But wait…why is Google even phasing out these third-party cookies in the first place?

In one word — privacy.

Over the years, people have become quite annoyed with all the tracking happening on the internet. And Europe was probably the first region to take action. They came up with the General Data Protection Regulation (GDPR) law in 2016 to ensure user privacy. We had browsers such as Mozilla Firefox hyping up the fact they cared about privacy, Apple blocked third-party cookies and launched big-hitting ads showing how companies can track you on the internet all the time. And slowly the pressure mounted on Google too. The tech giant had no way out.

And since Google’s move will now impact over 3 billion people worldwide, it’s a big deal.

So in a world without third-party cookies, how will advertisers survive, you ask?

Well, all is not lost.

For starters, every advertiser knew this was on the cards and it was only a matter of time. So you’d assume they’ve prepared for this armageddon.

But also, Google has been hard at work trying to create an alternative —under something called the Privacy Sandbox. Basically, instead of tracking and sharing the interests of each individual, Google wants to group them. For instance, you visit a website on Chrome and the browser assigns you to a group or topic depending on your browsing history. It then conveys this information to websites saying “Hey, these users like comics and anime” or “Hey, those users like sports”. This aggregated data is then shared with advertisers. That way advertisers won’t know everything about you. Google calls this ‘Topics’.

And Google’s now rolling out Tracking Protection for 1% of Chrome users which will restrict third-party cookies by default.

So ideas like these could be the afterlife of third-party cookies.

But wait…Google still needs a sign-off.

Yup, the UK’s Competition and Markets Authority (CMA) is yet to approve the ideas Google has in its kitty to replace third-party cookies. The CMA has to be convinced that Google isn’t whitewashing by telling people that it cares about their privacy. And for that, it has to deep dive into Google’s Privacy Sandbox. This could take anywhere between 2-4 months.

Also, it needs to be sure that Google’s new ideas aren’t impeding competitors in the space.

So if Google wants to completely eliminate third-party cookies by September this year, it first needs the CMA on its side to approve the Privacy Sandbox. Otherwise, we might just land up in a spot where the third-party cookies are out and there’s no alternative either.

That’ll hurt both Google and advertisers. So you can bet they’ll have their fingers crossed.

For now, we’ll only have to wait and see what the future of the internet without third-party cookies will look like.

Until then…

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