Here is how brands can adapt their online advertising to compete in a dramatically changing landscape.
Key takeaways
- With the impending demise of third-party cookies and recent restrictions on using mobile-device identifiers for ad targeting, companies need to overhaul their advertising strategies to prepare for a dramatically different landscape.
- Three strategies can help companies gain an advantage: using their own consumer touchpoints to collect first-party data, creating partnerships to leverage second-party data, and experimenting with contextual and interest-based advertising.
- The specific path to success will be different for each company, but all organizations should focus on creating and sustaining strong consumer relationships while protecting the privacy of users.
efore the advent of the internet, advertising was a rather haphazard affair. Brands sent an abundance of messages and ads into the world, hoping that a few would find their intended targets. The system worked, but it was wasteful. Then the game changed. Web-based cookies and other personal identifiers enabled companies to track people online and target their advertising to specific kinds of users. But now third-party cookies are on their way out, and the game is about to change again.
How can advertisers prepare for this new reality? Building on recent McKinsey research into the challenges facing advertisers, we have developed three strategies that will help advertising brands thrive. Brands that leverage their own customer touchpoints, share data with other companies, and experiment with targeting consumers based on context as well as interests will position themselves for higher growth and more customer acquisition.
The cookie crumbles
“Before cookies, the web was essentially private. After cookies, the web becomes a space capable of extraordinary monitoring,” said Lawrence Lessig 20 years ago.1
At the time, Lessig, a leading legal scholar and former director of the Safra Center for Ethics at Harvard University, was a pioneer, if not a prophet. Today, privacy protection is one of the megatrends shaping the evolution of the web.
In a recent McKinsey survey, 41 percent of consumers said they don’t want advertisers to use tracking cookies. In 2018, the European Union’s General Data Protection Regulation (GDPR) imposed strict privacy and security measures, and many more countries have introduced similar regulations since then. While these developments are welcome to many consumers, they inhibit companies’ efforts to measure—and maximize—their return on investment in advertising.
Advertisers have long relied on cookies to track consumers across the open web, displaying targeted ads based on a user’s browsing history. But now, cookies are heading toward obsolescence. Starting in mid-2023, Google’s Chrome browser is expected to block third-party cookies, which are already blocked in Safari and Firefox (see sidebar “Glossary”). Because Chrome is the leading browser in large parts of the world—its market share in Europe exceeds 60 percent—Google’s expected cookie policy will effectively put an end to cookie-based advertising.2
Even more challenging for advertisers is that other tracking methods are also coming under pressure. In the mobile-app space, Apple already requires app providers to get explicit permission from consumers before tracking them through device identifiers as part of its app-tracking-transparency (ATT) framework.
Initial observations suggest that only around 46 percent of consumers will agree to be tracked, and the percentage could be even lower in countries in which users are particularly concerned about privacy.
In practice, this means that app providers will be unable to track the majority of users based on device identifiers across the Apple ecosystem. Notably, both Google and Apple have said that they will neither create nor support workarounds, such as probabilistic fingerprinting, to build user-level profiles in their ecosystems.
