How DTC marketers are preparing for the end of third-party cookies

If you've ever bought a mattress that arrived in a box or signed up for a curated monthly wine delivery, then you know the telltale signs of a classic direct-to-consumer (DTC) brand. They usually don't have a single storefront, but between their eye-catching subway ads and an outsized online presence these digital natives blow past their category competition in a blitz of accelerated scaling.

Most of the brands we regard as DTC success stories got their start five to ten years ago, when third-party data was abundant and unquestioned. But as marketers in every sector eye the slow but certain demise of the third-party cookie, there is concern that traditional DTC launch strategy—underpinned by behavioral targeting—is in danger. Instead, marketers and investors are turning their focus to tactics like contextual targeting, first party data, and interactive communities to build a new foundation for growth.

As co-founder and CMO of Win Brands Group, a holding company for consumer eCommerce brands, Taylor Sicard has a front row seat for the next phase of the DTC revolution. The Win portfolio includes quintessential digital brands like home and lifestyle brand Homesick, silicone jewelry brand Qalo, and weighted-blanket maker Gravity.

“With Google's elimination of third-party cookies on the horizon, brands will no longer be able to easily execute an impactful ad campaign by allocating a certain amount of dollars per day towards guaranteed exposure and insights. Now, there will be much less visibility, making it much harder for brands to track revenue to its source.” —Taylor Sicard, co-founder and CMO of Win Brands

That might bruise the confidence of brand marketers who are used to seeing a very direct link between what they spend and how many customers they acquire on a daily basis. Still, Sicard said Google's decision to kill off cookies won't diminish online advertising overall.

Superbolt, a growth agency that works with digital native brands like personal care brands by Humankind and Malin + Goetz, adds that tactics will vary based on a brand's maturity. In a cookieless world, new brands are likely to spend heavily on first-party platforms like Facebook and Google. But brands that are scaling will have to move beyond those walled gardens.

“On Google, discoverability is limited by search volume. It's easier to scale on Facebook, but even there at some point—depending on your audience—performance is going to plateau,” said Pierre Hollier-Larousse, Superbolt's head of strategy. Brands that want to grow will have to diversify their spending. “The solution is to go toward more contextual advertising and the name of the game is to have best-in-class creative.”

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Eye-catching ads programmatically placed in relevant contexts is a good way to introduce these brands to a wider audience before driving them to a website where brands can offer discounts or other content in exchange for consumers' first-party data, Hollier-Larousse said.

Indeed, in a recent study by Epsilon, 61% of marketers said that they were investing in a more robust first party data strategy, while another 54% plan to spend more on contextual targeting in order to offset the loss of third-party data. The latter could be of particular importance to the next generation of consumer brands that launch after the cookie is eventually eliminated.

A lot of brands and agency owners are fearing the end of the cookie and the day that Apple drops the hammer on iOS 14” says Web Smith, founder of 2PM Inc, a hybrid media company and growth consultancy that specializes in eCommerce. “But ... a lot more brands are focused on the merits of first-party data and community building.”

Smith says the short-term loss could ultimately be a boon for advertisers, forcing them to lean more heavily into the tactics that build long-term growth. Brands like ButcherBox and Dr. Squatch, which has begun building communities on Facebook and Discord around products as niche as organic soaps and grass-fed meat, will be able to connect with and understand their customers without the crutch of third-party data.

He's also optimistic about retailers who have built out their eCommerce operations in order to collect more check-out data to fuel first-party data efforts. These savvy first movers, he believes, will be well-positioned to weather the loss of third-party data. He also believes that more traditional forms of advertising like contextual placements and top-of-funnel ads on television and connected TV will play a significant role.

“Coming out of the gates and spending hundreds of thousands if not millions of dollars building your audience and buying conversions won't be as possible,” Smith says of the tactics that once fueled DTC growth. “Brands are going to have to rely on the traditional mechanisms that moved brands forward for decades before this. Brand equity, and traditional advertising.”

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