Google has announced in a surprise move that it will reverse its multi-year plan to phase out third-party cookies.
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Google on Monday announced a bold move that has some big implications for advertisers and the future of the Internet.
The US internet giant said late Monday it was reversing a long-planned move to scrap third-party cookies – the critical text files that track users’ web activity for advertisers.
But what exactly are cookies? And what does Google’s decision mean for how you interact with the web moving forward — or, for that matter, the advertising industry?
CNBC breaks down what you need to know.
What are cookies?
Cookies are small pieces of code that websites deliver to a visitor’s browser. They remain as the person visits other websites.
These pieces of code silently track our online activities, gathering information about what we search for and the types of products we tend to buy, for example. They have become a key way for advertisers to fine-tune how they target people with online ads.
The practice of using third-party cookies to track web activity has helped fuel much of the digital advertising ecosystem, and advertisers still rely heavily on cookies as a data-gathering tool for their customers.
About 40.9% of websites worldwide use cookies to collect data about users, according to data from W3Techs, a web technology research firm.
“Third-party cookies are the backbone of online behavioral advertising. They’re how your products or brands follow you around the web,” Matthew Holman, partner at law firm Cripps, told CNBC.
“If you’ve ever wondered how you can search for a new pair of shoes online only to find the same shoes advertised five minutes later on your favorite social media platform, the answer is: third-party cookies.”
But cookies are not only a method of tracking users’ browsing habits. They are also a key part of how the modern web works. They play a critical role in keeping a user connected as they navigate from one website to another.
One argument for keeping cookies alive on the web is convenience. Simply put, they can make it more convenient for users to browse the web, as the ads displayed on shopping devices are more tailored to the user’s interests.
They also help keep the web free to use — many publishers have introduced paywalls and invested in sponsored content in response to the expected phase-out of cookies.
Somehow, cookies have also become annoying for many users.
Privacy regulation in Europe requires websites to display boxes asking users which cookies they want stored on their devices. This results in the check boxes we are now very familiar with asking us to consent to cookies.
What alternatives did Google suggest?
Initially, Google tried to introduce a more privacy-focused alternative to cookies.
The company launched its “Privacy Sandbox” initiative in 2019 to find a solution that protects user privacy while allowing content to remain freely available on the open web.
And in 2020, Google said it will end support for these cookies once it finds a solution that works for users, publishers and advertisers alike. The company had targeted early 2022 as the year this new alternative would be released.
One of the proposals included so-called “Federated Cohort Learning,” which would essentially put people into groups based on similar browsing behaviors, meaning only “cohort IDs” would be targeted, not individual user IDs.
Google she has previously said she is “extremely confident” about progressing her proposals.
However, the company has repeatedly delayed the timetable for phasing out cookies, citing feedback from the advertising industry that implementing these changes would mean potentially less effective advertising campaigns.
This issue is the main reason why Google has now decided to end the planned deprecation of third-party cookies.
“Essentially, it boils down to Google recognizing that the marketing industry was not ready for this change,” Cripps’ Holman told CNBC.
“It also believes it can develop a feature in its Chrome browser that will allow consumers more choice.”
What is Google introducing now — and how will it work?
Google says it now plans to retain cookies. Instead of undermining them, the tech giant will “introduce a new experience to Chrome that allows people to make an informed choice that applies to their web browsing,” the tech giant said in a suspension.
“We are discussing this new pathway with regulators and will work with the industry as we roll it out,” the company said.
Google did not provide specific details about what this new approach will look like, but said it is discussing the “new path with regulators and will work with the industry as we develop it.”
For now, Google’s move will likely mean that the way you interact with the web will be more or less the same. Users will still see checkboxes at the top of a web page asking if they want to accept all cookies or just the necessary ones.
The implications will likely be greater for advertisers as the valuable data marketers receive from tracking users on the web will continue.
“The number one impact is that the internet will remain free,” Steve Silvers, executive vice president of global creative, media and ecosystem at Kantar, told CNBC in emailed comments Tuesday.
“Without third-party cookies, website owners would struggle to figure out how to monetize their audience, which is one of the reasons why there has been such a rise in gated or paywalled content in recent years.”
Ironically, some media publishers could even start rejecting content, paywalls, Silvers added.
Don’t expect “business as usual”
Not everyone is happy with the changes Google is proposing.
On Tuesday, the UK Information Commissioner’s Office said it was “disappointed” that Google had changed its plans.
The regulator — along with the Competition and Markets Authority — had been working closely with Google to ensure that alternative cookie proposals adequately protect user privacy while also not being too detrimental to businesses that depend on cookies for advertising .
The ICO said it would “monitor how the industry responds” to Google’s decision and “will consider regulatory action where systemic non-compliance is identified for all companies, including Google”.
However, Google’s move does not mean it will be “business as usual”, according to Vassiliki Makou, digital strategist at London-based marketing agency Axicom.
“While this may seem like a reprieve to some, businesses should not confuse this decision with a return to business as usual,” Makou told CNBC via email.
“The push for greater online privacy isn’t going away,” she added, referring to the impact of privacy laws such as the EU’s General Data Protection Regulation.
– CNBC’s Jennifer Elias contributed to this article
