Cookieless Tracking: What are the Impacts of the Topics API on Publishers?

On January 4th, 2024, Google turned off tracking cookies for 30 million users of its Chrome browser, which represents a mere 1% of its 3 billion global users. It’s no news that by year’s end, Google plans to completely phase out these cookies, finally following suit after Safari and Firefox.

In a world in which they go away and buyers are looking for predictable performance growth, ad buyers may start - or continue - to leveragie cookieless tracking methods and put more money behind platforms, like Google, as opposed to the open internet (publishers) with less inventory. 

For publishers, that means that advertisers will shift more spending to GAFA (Google, Apple, Facebook, and Amazon) and away from the direct business, as they have the data to allow the best targeting

As a result, publishers who rely heavily on open demand are seeing a major decline in their programmatic ad revenue during this transition. In our latest AY Industry Insights Report on Google Cookie Depraciation and Topics API Impacts, we delve into some of these early results and provide exclusive insights from Assertive Yield’s database.

In this blog post, we will explore some of Assertive Yield’s insights from Chrome users without cookies, spanning from January 12th to 18th, to evaluate the impact of Google’s Cookie phase-out and Topics API on publishers’ ad revenue across different demand channels, GEOs, and bidders.

But first, let's understand how cookieless tracking works.

What is cookieless tracking?

Cookieless tracking, in the context of publishers and the Topics API, refers to methods of tracking user behavior and preferences without relying on cookies. With increasing privacy concerns and regulations like GDPR and CCPA, there's a shift towards cookieless tracking. This involves using alternative methods to track user behavior without storing personal information on the user's device.

The Topics API is part of Google's Privacy Sandbox initiative, aimed at developing privacy-preserving alternatives to third-party cookies. Instead of tracking individual user behavior across the web, the Topics API assigns users to groups based on their browsing interests. Here's how it works:

• While a user browses the web, the browser keeps track of the topics they seem interested in, based on the websites they visit.
• These topics are stored locally on the user's device, not on external servers.
• When visiting a website that uses the Topics API, the browser shares a limited number of topics relevant to that user with the website and its advertising partners.
• This allows for interest-based advertising without the need for cross-site tracking.

In summary, cookieless tracking for publishers involves innovative methods like the Topics API to gather insights about user interests and behavior in a privacy-preserving manner.

Cookieless Tracking and the Impact of Topics API on Publishers

In a situation where cookies become extinct, publishers face profound challenges in maintaining sustainable ad revenue while maintaining the same ad stack  infrastructure. This chapter delves into the implications of eliminating cookies and explores potential strategies for publishers to adapt and thrive in this evolving environment.

Without cookies, a disruption occurs in how advertisers can gather information about users, necessitating adjustments in reporting strategies, targeting efficiency, and user privacy considerations.  Publishers and advertisers must now seek new methods to uphold an optimal bidding model, measure ad campaign effectiveness, and RPMs, as well as to adapt targeting models to the changing business environment.

Since ad platforms commonly use pixels to transmit conversion signals based on third-party cookies, the most significant impact on revenue will be observed in bidding models. Google’s algorithms, for instance, will no longer be trained on purchase intent, but on users’ general interests - such as with the Topics API.

Key takeaways on the impact of the Topics API on publisher revenue

Our latest report reveals the outcomes of the Topics API’s control testing across three conditions: no third-party cookies with no alternatives, no third-party cookies, but with Topics API, and the existing traffic with third-party cookies enabled. Here are our main takeaways:

• Google’s own demand emerges as the frontrunner, capitalizing on forthcoming changes in Google’s browser.
• Prebid demand ranks as the least prepared for the decline of third-party cookies.
• The Topics API, while promising, currently demonstrates limited Impact.

Global Change in Revenue Metrics with Topics API by Demand Channel

Looking at the second week after the slow start of the “cookie apocalypse”, the data we are seeing is quite worrying. For the 0.75% of all Chrome users who got rid of third-party cookies and had the replacement Topics API enabled, we see a Session RPM 45% lower than the existing users, which the industry has known for so many years.

Furthermore, it seems that the only positive number at the beginning of this trial, operated by Google is... Google itself. AdX and Open Bidding win rates are up 4% on average, while both Prebid and Amazon take a resounding hit.

The average highest bid in the Prebid Auction shows an even further disparity, 59% lower than existing traffic. Even without the full data for AdX and Open Bidding CPM, we can clearly paint the picture where the most significant player in the display programmatic market gets to acquire even more traffic for cheaper.

Global Change in Session RPM by Bidders

Looking at Session RPMs by SSP on Prebid inventory, we see that some data looks a bit better than the rest, with both AppNexus and Magnite achieving “only” a 52% decrease. While others like Media.net see a significant difference.

Hopefully, the demand partners would work to better prepare for the end of the third-party cookies, otherwise we might see an even more dominant position of Google in the programmatic space.

Want to check out the full insights? Download the free report now!

Cookieless Tracking: Strategies and Alternatives for Publishers

Amidst the shift towards the elimination of cookies and user tracking, publishers should prioritize these three key areas:

1. Integrating and optimizing Identity solutions.

2. Increasing authenticated traffic (email/phone number collection).

3. Preparing for the revenue impact of the next phase of cookie depreciation

According to a study presented by eMarketer, there is a significant divergence in opinion between publishers and advertisers regarding the primary alternatives to cookies. Nearly half (47%) of publishers view the adoption of first-party data as a key strategy to replace cookies, yet the majority of advertisers are not in agreement.

Advertisers continue to focus predominantly on leveraging their own data. In practical terms, it’s improbable that first-party data from publishers will become a major player in future strategies, except for a few of the largest publishers worldwide. Advertisers seek data that is consistent and scalable, something that is typically not achievable with the data provided by most publishers.

Conclusion

Transitioning to a cookieless approach might appear daunting, with challenges that span various functions and departments within publishers, which makes it tempting to postpone this transition. However, the move towards a cookieless world is inevitable.

Moving away from reliance on cookies not only presents difficulties but also offers an opportunity to view targeting strategies and ad inventory management differently, particularly in how user privacy is respected. 

It’s important to acknowledge the current challenges in visibility and data, which will only intensify as we approach the second half of 2024.

Some ad tech providers already offer “cookie depreciation reports” to help publishers assess the impact of cookieless users and the Topics API on metrics like RPM and win rates. Tools like AY’s Yield Intelligence analyze differences in key metrics for users with different cookie usage scenarios.

Embracing a cookieless environment calls for creativity and a reassessment of established practices in targeting, bidding, tracking, and procurement. Want to learn more about this transition with help from experts? Explore AY Industry Insights Talks, a live event showcasing Yield Intelligence Cookie Depreciation reports and fostering expert discussions on the evolving landscape.