Winners and losers from the last Christmas cookie party

Mattia Fosci

Dec 20, 2023

December is a month of celebrations. Parties planned for a few friends end up with complete strangers crashing in, the noise growing until the neighbours complain and cops show up at the door. Eventually, the landlord kicks out the rowdy crowd, leaving disbanded groups hurtling along in the cold winter air.

Digital advertising is like a half-a-trillion dollar, 20-year long jamboree where food and drinks are fully paid for by the advertisers, the house is owned by the platforms, ad tech is drunk on data and publishers are the ones serving the drinks. The GDPR cops have been politely asking to get the house in order since 2018, completely ignored by the guests. With less than a year to go before Google wipes third-party cookies off, this may be the last cookie-based Christmas party for the programmatic industry. So what’s the afterparty going to look like for digital advertising, the open internet and the information economy? Here is my half-serious take on what might happen next, and what it means for the industry. 

Platforms: the Ruthless Landlords

As controllers of the devices and browsers, Google and Apple play the part of the reluctant landlord anxious to kick unwanted guests out. Their original guestlist only included publishers and advertisers, and then all these ad tech goofs showed up. The platforms do not need third-party cookies or interoperability, they make most of their money from their owned and operated domains and privacy is just giving them the opportunity to justify another massive land grab. When third-party cookies are over, Google will be using its own logged-in userbase and ubiquitous analytics for cross-domain tracking and measurement, locking the rest of the industry into a set of proprietary APIs that drive revenues to other parts of the business. If the API works well, they will have replaced much of the ad tech infrastructure with their own tech. If things don’t turn out well, ad budgets will just move to its unaffected O&O revenue machines. Either way, they win.

Advertisers: the Generous Patrons 

The advertisers are the industry’s lifeblood and raison d’etre. Although they are used to paying for everything, without third-party cookies they will have to pay more and have even less visibility of their return on investment. Without sufficient innovation, performance campaigns will die a slow death and the open internet will become a land of cheap awareness campaigns. Despite their generosity, we should expect advertisers to redirect their budgets towards more addressable and measurable destinations like search and social. In turn, these channels will become even more expensive, which means that on balance advertisers will get far less bang for their buck. 

Publishers: the Undervalued Bartenders

Publishers are the ever-useful friends who end up serving drinks and cleaning up the mess. They have access to all the booze, but they give it to others. Without third-party cookies, their pitch for advertiser money is much less compelling and they will be disproportionally affected by the shift in ad spend towards other channels. Publishers know they have a very bad deal right now, the cookies leaking their data to everyone, advertisers targeting audiences where they are cheaper and ad tech taking a big chunk of their revenues. Browser APIs don’t change this price dumping dynamic, and accentuate dependency on the whim of Google. Without alternative options, the platforms will hook them on their product and relentlessly exploit them, sucking up all the revenues and leaving them a few leftovers. Next time, they might as well accept the landlords offer to work for them.

Independent ad tech: the Uninvited Guests

Independent ad tech companies are the uninvited party guests whose name no one remembers. They're a lot of fun to dance with and quickly make friends with all the guests. While the cops negotiated an end to the party with the landlords, independent ad tech has continued to sing and dance in a LaLaLand of denial - ignoring the privacy problem or looking for loopholes to preserve business as usual. Considering that most of the data used in advertising is personal and that treating personal data as a tradeable commodity is illegal, the challenge had no easy solution and for many the temptation to look away was too strong. When the music stops, some of these companies will successfully pivot, some others will M&A their way out of trouble, but most will be left stranded and with a horrible headache. Few will be getting data-drunk at next year’s party. 

Regulators: the Hesitant Cops 

The cops turned up at the door asking the landlords to stop the party, but the landlords said the party was crashed by all these noisy ad tech people and they need help to kick them out. Regulations were created to protect users from the unwanted consequences of disclosing their personal data to any company that bothered to collect it. In that respect, the changes digital advertising is about to go through are exactly what is needed, but if the effect is that even more of our online lives and personal data will be shared with the large platforms it is difficult to see how citizens will be better off. Those who wanted GDPR to rein in the excessive power of big tech are enabling even more market concentration, and those that wanted to protect financially-struggling publishers are accelerating their demise. But hey, they're just following orders!

PETs: the Tea-total Friend  

Like the reliable tea-total friend at the party, privacy-enhancing tech companies (PETs) have been feeling somewhat out-of-place in digital advertising. They’ve maintained sobriety when the music was raging and, for that reason, they were largely ignored by the rowdy crowd. All that talk about compliance. Boring. Now that the party draws to a close and everyone is unsure what to do next, their measured predicaments suddenly sound reassuring. As the cookie disappears, their job is to offer workable alternatives to advertisers looking to reach their audiences on the open internet. They might feel that their moment is arriving, but they will have very little time to prove that a data-free party can be as good as a data-binge one. 

The platforms told us that next year’s Christmas party will be completely different: without cookies, fewer companies will be able to join, the landlords will choose music and drinks, and everyone will have to wear the same Christmas jumper. It’s hard to have a positive view looking at the current industry trajectory. Publishers will struggle financially, legacy ad tech will start to sink, advertisers will move to the walled gardens, competition will suffer and privacy will not be much better off. But this is not a foregone conclusion. There is an urgent need for, privacy-focused innovators to create an alternative finale. Let’s hope that more independent PETs will turn up at the door next year and that the other guests start paying attention.      

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