As third-party cookies fade, the cold start problem becomes an opportunity

This article was contributed by Alexandre Robicquet, CEO and cofounder of Crossing Minds

We’re all familiar with the immediate popup on the websites we visit: will we accept all cookies, including third-party cookies? The answer is typically a quick but reluctant yes. Without accepting third-party cookies, we wouldn’t be able to interact meaningfully with those sites. But with the rise of new consumer data privacy laws, this popup has come to represent more than just an agreement. It now epitomizes the massive, pressing challenge that’s plaguing online businesses: the “cold start.”

The cold start — often referred to as the cold start problem — is the phenomenon in which businesses don’t have the right technology to deliver truly personalized online experiences for new or anonymous users. This is due to a lack of existing information on those customers’ past purchases or preferences. When a customer enters a website for the first time, any “personalization” that a customer sees isn’t actually specific to them at all. But the stakes are high: in an ecommerce landscape where consumers have come to expect experiences tailored just for them, a lack of meaningful personalization can have dire consequences when it comes to conversions and revenue. In fact, 91% of today’s consumers say they’re more likely to shop with brands that provide offers and recommendations that are relevant to them — but on average, 68% of visitors on a site are new users.

Over the past two decades, businesses have been trained to believe that the third-party cookie — a vehicle through which to gain access to customers’ personal information — is the best way to get around the long-standing cold start problem. Unfortunately, this strategy has also opened up a new can of worms, resulting in customers who either feel spied on due to hyper-personalized recommendations or who become frustrated by poor recommendations based only on their age or gender. In both instances, allowing third-party cookies to pull personal information is a sacrifice consumers have been making for years, without fully understanding the repercussions.

But things are changing. The power of the third-party cookie is in rapid decline, thanks to constantly tightening consumer privacy laws, such as the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR). Facebook made headlines for its lax privacy protections that led to the Cambridge Analytica scandal. And Google has announced plans to phase out its own use of third-party cookies in Chrome by the end of 2023.

Consumers are growing tired of the third-party cookie, too; a recent survey showed that 86% of consumers feel a growing concern about their data privacy, with 40% expressing a lack of trust that companies will use their data ethically. While first-party cookies — which are stored directly by the website a consumer visits — can help build a solid customer experience without exposing users’ data, it’s the third-party cookies that represent a clear threat to their privacy.

Clearly, it’s no longer just a service to customers to keep private information private — it’s a business imperative. Still, after getting their tried-and-true, cookie-centric strategy yanked out from under their feet, companies are scrambling to pivot.

A change in mindset is necessary. Businesses must adjust their thinking on the cold start and no longer view it as a problem, but rather embrace it as an opportunity. Crucially, major changes to existing platform architecture aren’t needed in order to accomplish this. By simply embedding technologies like AI into a platform, businesses can start cold with customers and seamlessly personalize at the outset—all without demanding their private information.

How does this work? Instead of focusing on who customers are, companies should focus on what they’re doing once on a website. With increased access to live data through on-platform interactions like short quizzes or clever content filtering and product indexing, businesses can understand what customers really want and immediately deliver compelling experiences.

Fostering early insights about customers will help paint a more nuanced picture of what they’re likely to want in the future, allowing companies to add more value through true personalization to each customer touchpoint — website, email, and beyond. Ultimately, this will result in better relationships between businesses and their customers.

Language choice is also important. We typically only categorize something as a “problem” when there’s no better alternative available — hence the cold start “problem.” But today, there is a better alternative to traditional methods of personalization: embracing the cold start as a secret weapon to improve customer experiences and build long-term loyalty.

We stand at the beginning of an inflection point. The demise of the third-party cookie is poised to transform how companies interact with their customers, and it all begins with the cold start — once a problem, now an opportunity.

Alexandre Robicquet is an experienced AI scholar and CEO and cofounder of Crossing Minds.