Ad tech breathed a collective sigh of relief when Google delayed its decision to phase out third-party cookies on Chrome until late 2023. With recent research from IAB Europe revealing 40% of businesses are not fully prepared for the change, this extended period of grace gives small businesses much needed time to explore, test and understand the solutions available.

While much will change in the next two years, small businesses need to use this time wisely to prepare for the new advertising environment. But the industry must also address concerns around data parity and consumer trust in advertising to ensure all parties – not just the large players – prosper in the future.

A growing data imbalance

With a dizzying array of solutions emerging to address the demise of third-party cookies, an innovation fog has descended on the industry. The result? Brands and publishers – both large and small – are unclear how to navigate all the options available, the benefits they offer, and determine what approach they should take.

One thing, however, is clear. As the industry seeks solutions to fill the void, first-party data will be critical.

This puts the walled gardens, such as Facebook, Google, Apple and Amazon at a distinct advantage. With their vast pools of authenticated user data, they have access to first-party data at scale to power their suite of advertising services. Uncertainty around which solutions to choose, coupled with the scale walled gardens offer and how familiar companies are working with them, only strengthen their position, at least in the short term.

Added to this is the fact that there is no dominant identity solution, forcing brands, agencies and publishers to balance multiple solutions to be effective. Once again, the large platforms benefit from this lack of consolidation.

With first-party data increasingly critical to delivering success in a third-party cookieless world, a greater imbalance between data-rich and data-poor businesses is opening up. And with company size often determining data wealth, it’s the larger players who hold the advantage.

Opportunities for smaller businesses

Google’s announcement has highlighted two key facts – how reliant the industry is on Google and how unsure it is of Google’s Federated Learning of Cohorts (FLoC) alternative and the other options in the market. While FLoC doesn’t allow the targeting of individuals, a company’s first-party data can help identify correlations between cohorts and its customers. This can be used to inform its marketing. Again, this favours larger businesses that are rich in first-party data, leaving smaller firms at a disadvantage.

An alternative (and an area where many solutions have been brought to market) is identity. Developed to support marketers in a third-party cookieless world, these identity frameworks include The Trade Desk’s Unified ID 2.0 and ID5’s Universal ID. And though we haven’t yet seen consolidation, leading to the emergence of two or three dominant solutions, this is the very point at which smaller companies should be testing them. The more smaller businesses can learn about which solutions work for them and fit within their existing tech stack, the better.

Brands with a wealth of data should be taking advantage of the technologies available to maximise the data’s value. By reconciling identities via an identity hub and activating their data in a Customer Data Platform (CDP), they can better track and measure their activity to deliver engagement and marketing return on investment (ROI).

For businesses lacking first-party data, particularly small businesses, cooperation is essential. By working in tandem with companies in a similar position, they can aggregate data, develop a standard taxonomy, and assign it to cohorts to build out their own scaled targeting segments. These can then be activated in a suitable privacy-based solution. However, all companies involved must ensure their data is consented and used in accordance with privacy regulations before it can be activated for marketing purposes.

When it comes to realising the potential of data-driven insights, the very nature of a small business is a positive.

In the case of data, more is not necessarily better. For large businesses, the volumes and varieties of data being created and the velocity it comes in makes it expensive and difficult to manage. Too much data and companies can struggle to apply it effectively. With less data and therefore an inherent agility, smaller businesses can identify and respond to opportunities much quicker than their larger counterparts. This can give them the edge in delivering data-driven marketing success.

Building the future on trust

While programmatic has become the dominant buying method for digital advertising, constant reporting on data misuse, frequent data breaches and greater recognition of how their data is used has eroded consumer trust. The result? Increasingly stringent data protection and privacy regulations are being implemented globally, including Europe’s General Data Protection Regulation (GDPR) and, early next year, the California Privacy Rights Act (CPRA).

The industry challenge is to ensure compliance with consumer privacy preferences while allowing marketers to measure the revenue impact of their investment and empowering publishers to make money.

The future may be uncertain, but one thing is for sure: privacy regulations will continue to evolve. At the same time, consumers will continue to demand greater control over their data, and which companies can access and use it. As ad tech builds solutions to prepare for a world without third-party cookies, adherence to privacy legislation and consumer needs must be central to these developments.

Innovation, by its nature, is a response to overcoming existing challenges. But it needs to benefit the whole industry and not be weighted to the needs of the big players. Google’s delay gives small businesses a welcome breathing space. But they must take full advantage of this time to test the privacy-centric first-party data solutions available, to be in a strong position to prosper when third-party cookies do eventually disappear.