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What’s Happening To Third-Party Cookies and What Are FLoCs?

Third-party cookies have existed on the web since the 90s to help advertisers accurately target ads to interested users; however, users have had issues with privacy surrounding web-based cookies ever since. Privacy Sandbox is a Chrome initiative to make the internet a more private space for all users by restricting cookies and eventually phasing them out completely on Chrome in favor of a non-cookies based alternative, Federated Learning of Cohorts (FLoCs). 

What does this mean for advertisers who rely on the user data collected by third-party cookies for retargeting? What’s next for cookies-based advertising? We’ll answer both of these questions and more to help keep you in the know of the current events surrounding third-party cookies, FLoCs, and Privacy Sandbox.

Here’s The Gist:

• In an announcement last year about Privacy Sandbox, Google declared third-party cookies are being phased out. What’s in? FLoCs.
• The main difference between cookies and FLoCs lies in the way user information is aggregated. While third-party cookies examine individual user behavior on the web and build a user profile based on interest and browsing behavior, FLoCs are a device-based API that take the same data and put it into a cohort of thousands of like-minded individuals so one user’s behavior cannot be distinguished from the many others.
• Early testing indicates that FLoCs are nearly as effective as cookies-based advertising. Advertisers can expect 95% of the conversions per dollar spent on ads using FLoCs compared to cookies. Results may vary depending on the strength of the clustering algorithm and specific attributes of the target audience.
• Not everyone is on board with the initiatives proposed in Privacy Sandbox. There is currently an investigation ongoing in the UK determining if Privacy Sandbox puts Google’s competition at an unfair disadvantage by strengthening Google’s ecosystem with advertising spend disproportionately to that of its competitors.
• FLoCs will be available to the public for testing in March 2021 and testing of FLoCs with advertisers in Google Ads is set to begin in Q2 2021.

Why Are Third-Party Cookies Going Away?

Last year Google announced that third-party cookies (those placed on a website by a party other than the site the user is visiting— i.e. advertisers), would be phased out from Chrome. Today, Google is attempting to kill off cookies entirely in favor of FLoCs and Google is not alone. Other tech conglomerates, like Apple and Mozilla, announced initiatives to do away with cookies in favor of more user privacy online.

Third-party cookies have been used by marketers and advertisers for decades to collect valuable behavioral data from users about which websites they visit, products they look at, and links they click across the web. The issue with cookies has been one of user privacy. With third-party cookies, data about the user’s browser behavior is collected over a long period of time to build a user profile that one may never have consented to or been made aware of.

The usefulness of cookies cannot be discredited. In a statement about Privacy Sandbox, Google emphasized the importance of the information obtained by cookies for advertisers and users alike saying, “advertising is vastly more valuable to publishers and advertisers and more engaging and less annoying to users when it is relevant to the user.” Third-party cookies help make ads more relevant to the user. But users demand privacy, so Google set out to address growing concerns surrounding the privacy of cookies with Privacy Sandbox.

What Are Third-Party Cookies?

Have you ever looked at a product on one web page and then were shown advertisements for that product on other sites? That’s because of third-party web cookies on the internet tracking the websites you visit, the products you view, etc., to build a user profile about your likes and retarget relevant ads on the websites you visit.

Third-party cookies help digital marketers effectively target campaigns and products to internet users and fund free, online newspapers for consumers. Cookies allow a third party (mainly advertisers) to track a user’s behavior across the internet over time and create a user profile that informs ad retargeting. Some of the behavior third-party cookies like to store include ad clicks and information about the type of content viewed, to show ads to that user for a product or service they’d be most interested in.

How Are Cookies An Invasion Of Privacy?

It’s evident that cookies hold a valuable place in the hearts of advertisers, but internet users have had issues with cookies legally and ethically in regards to privacy. Not all websites ask users to consent to the use of third-party cookies, which means that a profile could be built over time about an individual that wasn’t allowed by the user in the first place.

Cookies are placed on websites by third party advertisers to track ad views, clicks, and conversions along with other valuable insights about user browsing behavior. Some, but not all, websites make it clear with a popup asking the user if he or she accepts third-party cookies on the site, but many times the user is unaware of the presence of cookies.

While web cookies pose a problem for privacy, there has also been a rise in other third-party means of tracking user information such as device fingerprinting, cache inspecting, link decoration, and network tracking. Google aims to “aggressively combat the current techniques for non-cookie based cross-site tracking” through proposals laid out in Privacy Sandbox.

What Is Privacy Sandbox?

Privacy Sandbox is a Chrome initiative with the mission to “create a thriving web ecosystem that is respectful of users and private by default.” according to a statement by Google. The first step to doing this is to “place more and more restrictions on the use of third party cookies… and eventually deprecate them entirely.” Privacy Sandbox includes proposals for how marketers can create and deploy ads to the appropriate audiences without third-party cookies, namely with FLoCs.

FLoCs provide an anonymized way for advertisers to obtain valuable user data and maintain their capability to retarget ads to internet users on Chrome without violating user privacy as much. This API, which launched last year, allows advertisers to analyze aggregate data about various aspects of the consumer journey online including conversions and sales attributions.

What’s Going On With Privacy Sandbox In The UK?

In Early January 2021, the UK’s Competition and Markets Authority (CMA) opened an investigation into Chrome’s initiative Privacy Sandbox which includes FLoCs. This arose partially due to digital marketing, newspaper, and technology companies lodging complaints regarding Google’s initiative to eradicate cookies.

According to a statement by the CMA, the investigation is taking a closer look at Privacy Sandbox to see if “the proposals could cause advertising spend to become even more concentrated on Google’s ecosystem at the expense of its competitors.” The CMA is concerned that Privacy Sandbox could “undermine the ability of publishers to generate revenue and undermine competition in digital advertising, entrenching Google’s market power.”

The CMA has received complaints about Privacy Sandbox from Open Web Limited, a group of newspaper and tech companies, that allege Google is “abusing its dominant position” through the initiative Privacy Sandbox. The investigation is ongoing as the CMA is in contact with Google to better understand the project.

What’s Next For User Data Collection?

Google has begun testing a new API, Federated Learning of Cohorts, which is currently a browser extension for Chrome. The main idea behind FLoCs is to lend more privacy to users by grouping users into cohorts of thousands based on similar browsing behavior. This data is then sold to advertisers to make informed decisions about retargeting ads to interested users.

FLoCs work by analyzing individual user behavior on a device and anonymously entering that data into a larger pool of data that divides users into groups based on like-minded browsing habits. The outcome being that the individual has more privacy through this anonymous grouping process.

Here are the key differences you need to know between FLoCs and cookies:

FLoCs rely on machine learning, meaning the user’s data is stored and processed while on the user’s device, not across the internet. FLoCs are powered by AI and machine learning whereas cookies are not. Third-party web Cookies are text files stored on the internet with small pieces of information about the user’s browsing behavior to inform advertisers of user interests.

What’s The Buzz About FLoCs?

Chetna Bindra, Google’s senior product manager user trust and privacy said that FLoCs are paving a new, more private avenue for users of the internet. Bindra noted that advertisers “can expect to see at at least 95% of the conversion per dollar spent when compared to cookies-based advertising.” Results may vary depending on the strength of the FLoC’s clustering algorithm and targeted audience.

Bindra also announced that Chrome intends to make FLoCs available to the public for testing in March 2021 and testing of FLoCs with advertisers in Google Ads is set to begin in Q2. Google said that Privacy Sandbox aims to combat tactics like fingerprinting by moving away from individualized data in favor of anonymizing user data instead.

In an announcement regarding FLoCs, Google said, “Chrome intends to make FLoC-based cohorts available for public testing through origin trials with its next release in March and we expect to begin testing FLoC-based cohorts with advertisers in Google Ads in Q2.”

What Does Privacy Sandbox And FLoCs Mean For Advertisers and Consumers?

While not as effective as cookies-based advertising, Google is hopeful that the 95% expected conversion per dollar spent gives advertisers reassurance that FLoCs could be a valuable alternative to cookies. Many advertisers are worried about the loss of cookies and looking forward to testing results to become available. For years, advertisers have used cookies to inform ad retargeting efforts by tracking a user across the web building a profile based on user habits. 

FLoCs do not yield as high of a cost per dollar spent as cookies, but they do offer a more private alternative for users. 

Conclusion

Although the loss of third-party cookies in favor of its nearly-as-effective alternative FLoCs is a stress on many advertisers, it is a welcome relief to users wanting more anonymity and privacy on the internet. Google has proposed Privacy Sandbox as the company’s latest initiative to eradicate third-party cookies and create a more private internet.

While Privacy Sandbox is not without its issues, advertisers in the UK have concerns about the project putting smaller digital marketing and publishing companies at a disadvantage, it claims that the internet will become a more private space. The goals of Privacy Sandbox are two-part for Google: part one is maintaining user satisfaction by addressing privacy concerns surrounding third-party web-based cookies, the other is to keep advertisers happy with a non-cookie based alternative to gain information about user behavior, FLoCs. 

Instead of focusing on an individual user profile built through an analysis of user behavior on the internet, FLoCs anonymize that data and place it in a cohort of thousands so an individual user is indistinguishable from the masses.

Privacy Sandbox is Google’s latest initiative to make the internet a more comfortable, private, and safer space for users while preserving advertiser’s retargeting capability. With Privacy Sandbox, FLoCs, and the phasing out of cookies, users’ privacy issues are being addressed while maintaining the thriving information ecosystem that sustains effective ad targeting methods.