1. The Cookie-less Future of Digital Marketing

Welcome to the Digital Distillery in Vienna and to the rooftop bar of the beautiful 25 Hours Hotel, (not affiliated, just a really cool place to stay and host an event).

The event was back after two years in hiatus and the crowd was buzzing. The first speaker was that of Juergen Schmidt, CEO of STRG, a technology hub in digital media based in Vienna.

Juergen's kick-off talk and the topic of the show day is all about Google's plan to drop the 3rd party cookie, the implications of that for the user and advertiser alike, and what might replace it.

We talk about what cookies are and where they come from, the commonly used variations of them, and how they affect the experiences of advertisers and users alike. We go into the fact that Google have decided to completely drop the use of 3rd party Cookies and what strategy is in line to replace them.

Originally it looked like FLoC was going to be it before backlash forced them to change tack and come back with Topics... but is it that different really?

We have a brief interlude about the story of the famous Vienna Wine Scandal, and finally about how our internet experience is going to change  in the next few years and the ever evolving meaning of Privacy in the online world.

If you would like to get in touch with us at the Digital Distillery with comments, corrections, info about the event or just to say G'Day you can find us at our website and hit the Podcast button.

For further reading and references to the topics discussed on todays show you can follow the links below:


https://learn.g2.com/cookieless-future

https://www.forbes.com

https://rockcontent.com/blog/cookieless-future/

https://zeotap.com/blog/the-cookieless-future-what-marketers-should-do/

https://www.wired.co.uk/article/google-cookies-floc

https://www.thewinestalker.net/2015/04/austria.html

https://www.thedrum.com/news/2022/01/25/wait-wtf-happened-with-google-floc-we-explain

This episode is brought to you as always by The Digital Distillery.

If you would like to get in touch with us you can head to our website or email podcast@the-digital-distillery.com

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Written, Produced & Engineered by Phil McDowell
Executive Producer: Nadia Koski
Project Leads: Dennis Kirschner

Transcript

Digital Distillery Vienna Script

Intro audio signature, followed by intro music

Phil: 

Welcome to the Digital Distillery Podcast, a deep dive into the exclusive digital media event format of the same name. Join me as we meet some of Europe’s leading digital media experts and, with their help, unravel and demystify some of the industry’s juiciest and most jargon-laden terms.

So, A bit of background…

Music: DD Theme music

The digital distillery started out as an exclusive A-level industry conference where some of the most influential and respected names in the digital media and advertising world come together to present their ideas and insights. These points are then tested to see if they hold up to the scrutiny of the ever discerning attendees and, inevitably, lively debate and discussion ensues. 

Audio clip: crowd noise from Vienna event discussion

May 2022 saw the return of the Distillery after two long years of unintended hiatus and the event hit the ground running with a vengeance. We packed all our gear, booked our tickets and made our way to the beautiful city of Vienna. 

Audio Clip: Train, classical music, cafe sounds

Welcome to Vienna, city of fine arts, classical music, architecture and coffee houses.

So the event took place on the rooftop bar at this exceedingly trendy hotel called the 25hrs, right around the corner from the stunningly lit Volkstheater, that’s ‘peoples theatre’ for those of us that need to brush up on our German, with a perfect view of that famous domed Vienna skyline. Now, this place was truly cool. Upon entry to the lobby you’re greeted with what can only be called an art installation with hundreds of vintage cameras with their flashes all wired up to give you that red carpet strobe effect as you walk through the door.

So this rooftop bar, being true to its name, is perched up on the roof of the hotel, overlooking the Vienna skyline and is adorned with these hanging lamps created from Old drum kits and various other vintage instruments and up-cycled bicycles. 

And so the stage was set for the arrival of our guests and the return of the Digital Distillery.

Audio clip: Crowd noise as people chat.

Roland (speaking German) introduces the event and the first speaker

Phil:

So the event was back, and the sense of enthusiasm from the room, having been away so long from events and socialising in general, was palpable. 

The first topic of the day, and the feature of today's show, is that of the somewhat depressingly coined phrase, The Cookie-less Future, presented here by our first esteemed guest Jürgen Schmidt from the Vienna based digital marketing agency STRG.

Audio clip: Jürgen (in German) introducing his talk and the topic

But wait a sec. Let’s not get too far ahead of ourselves, before we can appreciate the impact that a cookie-less future might have for us, we need to first talk about what cookies actually are and where they came from. 

Audio clip: bell of an oven timer 

In order to find this out, we really have to dig back to the dawn of the internet

So, the idea of a globally connected information network has been around since at least the 1900’s when Nikola Tesla toyed with the idea of a World wireless system but nothing readily practical was done about it until a Mr JCR Licklider from The Pentagon in the 60’s popularised his idea of an ‘intergalactic network’ of computers and the concept of ‘packet switching’ was developed.

This packet switching, which is a way to break down information into very small parts and then reassemble it after transferring it from computer to computer, allowed the further development of this inter-connected network, initially used only by the military and later among scientists.

As the technology improved the internet began to morph into the communications and commercial behemoth that we know today, it was clear that this relatively simple method of connectedness just wasn’t going to cut it.

The problem was that for many sites such as the burgeoning industry of e-commerce and online advertising, the internet needed something that just wasn’t factored into its original design… The internet needed a memory.

Enter: the cookie.

A cookie comes in different flavours, and is a tiny packet of information that is stored, either on your computer or on the browser itself. They were originally designed with the simple purpose of improving the user’s browsing experience and, depending on their type, recognising that user the next time that they visit.

These crunchy little guys, session cookies to be technical,  are what allows things like shopping carts or ‘recently viewed items’ to exist. They are stored for the duration of the session and then lost.

Then we have persistent, or permanent cookies and, as the name suggests, these last over multiple sessions and remember things like your language preference, preferred shipping address, payment methods, things like that.

There are a few others such as flash cookies, zombie cookies 

but the important distinction is whether a cookie is a 1st or a 3rd party cookie and that basically boils down to the quality vs quantity of the data, as well as who actually owns it and what they can do with it.

The key thing to remember here is that the 1st party cookies are stored by the website you are actually on, providing those essential elements of a user experience. These contain the most significant and impactful data because they collect it directly from the user. 

The 3rd party cookies on the other hand are a little more insidious. These guys are collected by websites OTHER than the one you are on, hence the name, and these are commonly used for cross-site tracking, re-targeting and ad-serving all across your broader internet usage.

Now these 3rd party cookies are the reason that you can buy a product online and then constantly see ads for that product or similar all across the internet afterwards. As internet users ourselves, we have all experienced the kinds of limitations that this approach to data collection and usage has.

Audio Clip: (2:19-3:40) Jürgen  (In German) describing his experience buying a pram

So take Juergen’s situation for example.

After learning that he was to become a father he began researching the all important new parent purchase decision of the Pram, or Stroller for our American listeners.

Now a pregnancy lasts a set amount of time and really not longer, and a pram is pretty much a one and done purchase, at least per child. So after purchasing his pram, ads for prams continued to follow Jürgen around for months, even though there was no way he was going to buy another one. This is clearly a nuisance for the user, but it’s also not doing anything for the advertiser. 

Because these cookies are not the smartest of baked goods, that award goes to the German Zimtschnecken or Cinnamon snail, they don’t actually know WHO you are.

Now don’t get me wrong, the cookie system has been extremely important to the infrastructure and development of the internet over the decades, and has been the key tool that advertisers have used (or misused as the case may be) but It’s a pretty primitive system really, and whether we like it or not, it’s all about to change.

Now, over the last number of years there has been a growing concern, globally, but notably so here in Europe, regarding the, just, MASSIVE amounts of data that is being collected on every one of us, and the implications that has on user privacy and safety, not to mention the actual effectiveness for advertisers of the current quantity over quality approach. 

The issue became so hot that the most used browser in the world ‘google chrome’ came to the table in 2020 and announced that it would completely cease its use of 3rd party cookies by the end of 2023.

So what’s the big deal here?

Well, initiatively this had digital marketers just freaked out. 

All of a sudden they came to the realisation that the tools and the type of data they had been relying on forever were just going to disappear…..poof

Sound FX: Poof

Audio Clip: (Discussion 5:15) Kirsten Neubauer from Digital Hotspot.

Weltuntergangsstimmung, one word because German, literally meaning a World going under feeling.

But, with limitation and necessity comes innovation. And quickly, digital marketers started to shift gears and look for ways to create opportunity out of the situation.

Audio Clip Discussion:(5:30) 

‘(German) We have been using cookies irresponsibly…

One of the points brought up in the discussion after Juergens' talk is that, as advertisers, we have been using cookies really irresponsibly for many years. And in 2020, likely due to the fact that so many more people were conducting their business and social lives online, the demand for a more secure and privacy conscious internet reached a tipping point. According to ‘Think with google’ 

Aside: which by the way is a blog where google shares an absolute goldmine of information on its latest trends, insights and data, i'll put the link in the show-notes.

User searches for the term ‘Online privacy’ jumped up 50% in that year alone.

But what about the impact on advertisers? Who have been using and relying on the information 3rd party cookies provide for just about all their personalised ad targeting? Is google hanging them out to dry?

Intermission: 

Music: jazzy, chill

And Welcome to the intermission of today's show. When things get a little suspenseful we can all take a moment to breathe, contemplate and take in our surroundings a bit.

While we wait for the serenity to kick in, I can share with you an interesting fact I learned about Vienna from a very nice lady I sat next to at the airport bar.

So she was a wine expert and distributor and had been in town for a local show. Now I am not much of a wine drinker myself but I do always make a point upon meeting an expert in any field to try and glean some valuable insight or hot tips if you will.

As it turns out, Austrian wine has a bit of a bad reputation due to a scandalous nationwide …. Er scandal in the 80’s. Following some big contracts with the German market expecting the lovely sweet wines they had been producing, coupled with a few years of some really bad climate for wine growing, Austrian wine wakers turned to the only ingredient they could find that brought back the body and sweetness into their wines.

Unfortunately for their industry and wine drinkers alike, this magical ingredient turned out to be Diethylene Glycol, most commonly known as anti-freeze which has some pretty negative side effects if consumed, up to and including a mild case of death.

Understandably the industry essentially collapsed overnight and Austrias reputation for wine was left in tatters for the best part of 2 decades. 

The upshot of this? The Hot tip?

According to this expert, now in 2022 Austrian wine is a fantastic value proposition. It will always be of a much higher quality that the price tag suggests and that you will never get a bad bottle.

Now, Where were we?

Ah yes, did google hang advertisers out to dry by crumbling the cookie?

….well, kinda not really

You see, as I said before, necessity is the mother of invention, and the winners in the ad tech and marketing field will be those who see the opportunity in change.

So yes, Google are unceremoniously dumping the 3rd party cookie. But they aren’t necessarily just dusting their hands and leaving a void for some other company to fill. In 2021 they started quietly testing their proposed replacement, The Federated Learning of Cohorts or FloC for short.

Audio Clip: Juergen (In German) describing FloC

Arguably the biggest loss for advertisers is their ability to track the ‘interests’ of internet users and have the ability target them with specific advertising that is more likely to have an impact.

What FloC intended to do is to use browser history to group individuals into what they are calling ‘Cohorts’ These cohorts would consist of other users who have been loosely grouped together based on the commonalities or links in their search history. 

So that’s it, problem solved right?

Well no, as ever, it’s not that simple.

Shortly after its announcement FloC started receiving some major pushback from various corners as to if this is actually the best way to approach things and that perhaps it’s just another cynical example of Google continuing to try and reinforce its dominant position.

Most of the discussion surrounding FloC is that setting up cohorts in this way might actually allow MORE opportunity for advertisers to identify users and get their hands on personal information. This is due to the fact that individual’s would be put in these groups, and therefore the potential is there to compare and cross reference others in the same cohort building up a clearer picture of an individual, and then use fingerprinting techniques to pin them with identifiers that 3rd parties could then use. 

So earlier this year Google responded to the criticism by essentially scrapping FloC and have proposed to replace the idea with something they are calling ‘Topics’.

The idea behind topics does share some DNA with FloC in that it uses browser history to figure out what kind of things are interesting to the user.

The difference here though is that rather than being put into cohorts, users will be assigned with a ‘topic’ from a pool of about 300. Think fashion, cooking or travel. When that user visited a website that supports Topics, they will be served an ad pulled from one of their top 5 topics from that week. 

The key thing here that seems to have cooled the jets on the FloC backlash is that the topics are really quite broad making it much harder to identify individuals and any topic pinned to a user from their browser history. 

Additionally, Google says that users will be able to view and access and remove certain topics that they don’t wish to be associated with or see ads for.

Now organisations that have previously lent into contextual targeting rather than behavioural are certainly in a stronger starting position for this transition. Here at ShowHeroes for example, we have been essentially cookieless since 2016 using contextual.

This is because contextual based advertising serves an ad based on the context of the website being visited. Seeing an ad for ski’s when reading an article on the best skiing locations in Europe for example, as opposed to behaviourally based, where you could get served an ad for cooking classes while looking at skiing holidays because you have been identified with an interest surrounding cooking.

At the moment however it is still unclear as to how things are going to pan out between now and when the cookie truly is gone but what is certain, is that we as advertisers, and as users are going to have to change the way we approach and utilise data on the internet.

For advertisers and marketers, we will need to be more innovative with how we collect and use the data of our consumers. We will need to be more transparent to our users as to how we will treat their privacy and how we want to use their data. And we will need to invest in the opportunities that come out of this necessity of change. Some of these we will talk about in future episodes.

For users, we need to know that likely our data and personal information is going to be a little bit more secure, but with that we have to accept that our user convenience and experience may be a little diminished, at least in the early stages. 

We are also going to have to be prepared to give over our information intentionally more often. Be willing to log in to websites that we want a good experience from for example.

And so, that’s the cookie-less future that’s just around the corner, or at least an introductory look at it. One which will affect all of us no matter which end of the transaction chain we are on.

The meaning of privacy in the ever changing digital world is trying desperately to catch up with the environment that changes around it. And huge drivers in what our privacy looks like in 5, 10, 20 years, will depend on how the big players, the digital marketers, and the users alike, interact with and innovate in this field.

And there we have it, the first episode of The Digital Distillery Podcast.

A big thank you to The Digital Distillery and ShowHeroes for putting on the event. As well as to our esteemed guest today Juergen Schmidt from STRG marketing agency. Roland Divos Country Manager at the Showheroes Vienna office and the 25hrs hotel for being a great venue. 

And of course our team on the ground at the event, Jana Orlova, Konstantinz Makarovs, Olafs Ositis and Nadia Koski for leading us all and mostly keeping us out of trouble.

This episode is brought to you by The Digital Distillery. Hosted and engineered by me, Phil McDowell, co-produced by Nadia Koski and led by Dennis Kirschner and Stefanie Leonardi. For more depth and insight into all sorts of other topics related to digital media you can check out our other shows at The Digital Distillery . com 

For more info on the topics discussed and references to the various articles that have helped inform this episode you can follow the links in the show notes.

And if you want to get in touch with us at the Digital Distillery about anything from discussion points, being a guest on the show, corrections or info on how you can be involved in one of these events you can email the show at..

Podcast@the-digital-distillery.com 

or use the contact section of the website

Join me right here next time as we stay in Vienna to meet more experts and discuss the topic of Programmatic creativity and the future of video in advertising.