How Firefox's Anti-Cookie Policy Could End Web Advertising As We Know It

Business Insider

Mozilla, maker of Firefox, roiled the online ad world when it announced its new default setting on upcoming versions of its web browser would block third-party cookies (tracking devices used to target you with ads).

It's less obvious, however, that the move may play into the hands of huge publishers like Facebook, Twitter (and even Business Insider), as well as device makers like Apple.

And that's why advertisers are so angry about Firefox. The IAB called it a "nuclear first strike." Some of them are even thinking of ignoring or subverting Firefox's new policy.

The cookie crumbles

Essentially, the Firefox move weakens the cookie as the sole basis for an ad campaign. In so doing, it strengthens the hand of publishers who will still be able to track users on Firefox browsers. More importantly, it makes so called "native advertising" solutions — custom ad formats used only by companies trying to sell them at a premium to general web display inventory — more appealing as the quality of cookie-based advertising declines.

Firefox would line up behind Apple's Safari browser, which also blocks cookies from web sites you haven't visited ("third parties"), and Microsoft's Internet Explorer 10, which has a default "do not track" cookie command built in.

Only Google's Chrome allows third-party cookies by default — that's not surprising, because the Google advertising environment is heavily dependent on the cookie data its users generate as they surf the web and respond to ads and search results. Users are tracked by cookies from web sites they have visited ("first-party" cookies) and from advertisers who have been invited to target those users after they arrive on a site ("third party cookies"). Putting the two types of cookies together allows advertisers to slice and dice audiences in clever ways, based on their interests as extrapolated from their browsing history.

But in recent years, more and more money has poured into "native advertising." Facebook, for instance, has built a $5 billion ad business using a series of display formats that look nothing like traditional web banners. It is not a cookie-based system.

Facebook and Apple are not dependent on cookies

Facebook does have a cookie advertising business — its FBX ad exchange allows advertisers to target users inside Facebook with cookies from third-parties. But FBX is still only a portion of Facebook's ad revenue. Its most lucrative business is probably its mobile advertising and news feed sales.

Twitter recently launched its Ads API interface, allowing advertisers to plug their own ads into the tweet system. That's not dependent on display-driven cookies, either.

And large publishers (like BI) prefer to sell premium packages of custom inventory to advertisers, rather than expose their web pages to the vicissitudes of a real-time bidding auction from cookies servers.

Apple devices are famously a cookie-free environment — its users are tracked instead by IFA, Apple's own user tracking device for advertisers.

Supply vs. demand

Because publishers — not ad networks, exchanges, "demand-side platforms" or any of the other myriad cookie trackers out there — control their own first-party cookies, the Firefox blocker moves power into their hands.

They will become the primary, best, and sometimes only cookies available for advertisers to target in a world in which third-party cookies have been blocked or banned.

Advertisers are furious because cookies have traditionally allowed them to target a huge number of users at the lowest possible price. They create an endless supply in front of limited demand — and prices have fallen as a result.

Native advertising and publishers' own cookies are a smaller universe. With that supply of high quality inventory shrinking, because more users aren't carrying cookies, publishers can jack up prices for the remaining quality inventory.

And that's why native advertising is the dominant conversation in online advertising right now.



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