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How Will FLoC Affect Your PPC Strategy When Third-Party Cookies Die?

January 27, 2021
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written by Luke Davis
Internet cookies

Federated Learning of Cohorts is Google's new technique to replace third-party cookies. But how will it change PPC strategies?

If you’re the Cookie Monster, look away now.

Google announced the phasing out of third-party cookies in its Chrome browser platform by 2022 and members of the digital marketing community aren’t too happy since Chrome has an estimated 63.38% global browser market share on all devices. On 25th January, Google unveiled its new alternative to cookies called Federated Learning of Cohorts (or FLoC) but what does this all mean for PPC marketers and their strategies?

In this article, I’ll be examining cookies, why they’re getting culled, and what PPC marketers will need to do once they’re gone as well more information on Google’s Privacy Sandbox and the recently revealed FLoC.

What are cookies?

Cookies (also known as HTTP cookies, web cookies, Internet cookies, and browser cookies) are pieces of data stored on a user’s computer by their browser. They were created by Lou Montulli as a way for websites to remember things like the items you had in your shopping cart or login details. Cookies had helpful intentions but soon, e-commerce grew and cookies were used to aid online advertising and track users behaviour.

There are two main types of cookies:

First-party cookies

First-party cookies are created and stored by websites and allow site owners to collect data such as:

  • User language settings
  • Analytics data
  • Shopping carts items
  • Usernames and passwords

This is what cookies were initially designed to do and help to improve user experience.

Third-party cookies

Third-party cookies are created by third parties on behalf of websites who use them. Unlike first party cookies, they have more ad-focused uses such as:

  • Cross-site tracking
  • Serving ads
  • Retargeting ads

The main differences between first-party and third-party cookies are the intentions behind the data collection, what they’re used for, and who manages the cookies.

Why are third-party cookies dying?

Privacy concerns

The user of tracking cookies grew in prevalence over time and they started to track long-term user behaviour. This activity posed a privacy threat and in 2011, European and U.S. lawmakers took action. For all websites involving EU traffic, site owners had to acquire “informed consent” from users before storing non-essential cookies on their devices.

Sketchy alternatives

With so many major browsers blocking third-party cookies, developers have created new ways to bypass the blocks such as ‘fingerprinting’, where setting changes are used to track users. On the plus side, Google is aware and continues to extinguish its use.

What will this mean for PPC strategies?

Google’s ban of third-party cookies is arguably a good idea but it will affect both digital advertisers and Google itself in terms of ad revenue for both sides. So what will PPC strategies look like once those cookies crumble? And is FLoC a good substitute?

I spoke with my colleague, Sophie Logan, a PPC manager at Adzooma.

“As marketers, we knew third-party cookies wouldn’t last forever and since the introduction of the new GDPR, it was only a matter of time until this came into force. I think off the back of this, a loss of data is the most powerful side effect for PPC strategies and technologies in 2021.

We will need to rely more heavily on first-party cookie platforms such as Facebook and Google. This will increase their control and power of user data, and provide them with data which is not available to other advertisers.”

In terms of next steps, Sophie suggested PPC marketers adapt to the new situation and “up their game”:

“Adapt and overcome. Advertisers have no choice but to up their game. But at least everyone (well almost everyone) is in the same boat.”

Privacy Sandbox and Federated Learning of Cohorts

Launched on 25th January 2021, Federated Learning of Cohorts (FLoC) provides an “effective replacement signal for third-party cookies” with early tests reaching in-market and affinity Google Audiences expected to see “at least 95% of the conversions per dollar spent when compared to cookie-based advertising.”

However, the new technique hasn’t pleased everyone with some advertisers claiming it is anti-competitive. The CMA (Competition and Markets Authority) are currently investigating the Privacy Sandbox proposal after a group of companies in digital marketing, news media and tech complained that Google was abusing its position by phasing out third-party cookie support.

Speaking to Sophie, she understands marketers’ concerns:

“From what I’ve heard from marketers, it looks like the use of ‘sensitive’ data is a major concern. I think that opens up the whole issue of morals when it comes to advertising and how data is used. Currently, we don’t have access to universally determined ‘sensitive’ data, but this could open that up.”

As for the Privacy Sandbox project, Google says its project’s mission is to “create a thriving web ecosystem that is respectful of users and private by default”:

“The main challenge to overcome in that mission is the pervasive cross-site tracking that has become the norm on the web and on top of which much of the web’s ability to deliver and monetize content has been built.”

Google wants to combat those sketchy non-cookie techniques like fingerprinting, cache inspection, and link decoration to maintain users’ privacy and improve the Web experience for everyone. It’s early days regarding privacy issues with the project so we’ll see how it develops.

A remarketing redux is required

Sophie said it’d be impossible to run remarketing in its current state which means the technique will need to change in order to survive.

A loss in revenue

Without remarketing (at least in its current form) and with reduced user data, there will be a significant impact to revenue for advertisers and Google. Users will also get more irrelevant and repetitive ads and could tank important KPIs like click-through rate.

According to Google Ads, cookie-less traffic yielded an average of 52% percent less revenue for the ad publisher.

Conversion tracking will take a hit

If you can’t track user behaviour, you won’t be able to assess your ads’ effectiveness in the same way. That lack of conversion tracking will therefore impair value proposition which is an important part of PPC strategy.

People-based marketing

There’s also “people-based marketing”, introduced by Facebook, which uses first-party data and isn’t affected by cookies. It compares user IDs with customer data to help advertisers find targetable users for their ads. Google can also use first-party data for similar uses but with their ongoing anti-trust lawsuits, who knows how effective they’ll continue to be in their current state.

Outside of the tech giants, data management platforms are looking at alternative ways to help advertisers to track their data. Sophie recommends looking into alternatives now and to stay up to date with cookie news.

“Using customer data and offline data will allow advertisers to compare their quality and identify the best users to target. There will also be more reliance on contextual advertising, such a native ads, where the ad content is tailored to the content of the website rather than a specific user.”

Conclusion

It will be interesting to see how advertisers react to these changes and whether they’ll embrace FLoC or try more basic strategies but with more resources and consideration.

Online advertising worked before the use of third-party cookies, and they will be able to continue without them too. This will require advertisers to more manually ensure that they are targeting the right individuals with relevant messaging.

From Google’s perspective, it’s important that the company gets FLoC right and doesn’t alienate its customers further.

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Author
Luke Davis

I'm an SEO Executive who's been messing around on the Web since 2000 and my fascination has never stopped growing. And that’s what led me to SEO (via self-taught HTML and CSS, a Music Tech degree and over 10 years of blogging). In my spare time, I blog, make music, code in Python, play Pokémon, and watch YouTube. I also have a Simpsons meme for any situation.

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