What Are Cookies And How Do They Work In Advertising?

In this Susquehanna Conference Call excerpt, our Co-Founder Jeff Greenfield breaks down the details about cookies, how they work in advertising and explains the differences between first party and third party cookies.

Shyam Patil: I think what we can start is just on cookies. Jeff if you could just talk about how cookies work, how are they used in advertising, how are they placed and just third party versus first party cookies.

Jeff Greenfield: Absolutely. In this topic, Shyam, a lot of people get really, really confused. But in a nutshell, a cookie is a little, little tiny piece of code that’s placed on a device, whether it’s a mobile device, a desktop device, and in there is usually some piece of information, that information could be a password. Usually, hopefully it’s an encrypted password. When you go and you log into a site, you actually go to the site, it automatically remembers you. Sometimes you go there and you see your username is already entered in, that information is typically held in a cookie. Cookies are the backbone of the whole digital experience. It’s why when you go to Amazon, you’re automatically logged in. It’s why sometimes when you go to a website, it’s personalized for you. Your name is there.

Jeff Greenfield: All that information happens because of the web and it’s quite an advancement. The difference between cookies is there’s two types of cookies. There’s first party cookies and there’s third party cookies. A first party cookie is a cookie that is set by the domain that you’re on. If you’re on amazon.com, they’re going to what they call read and write cookies that come from amazon.com. If you’re on the New York Times, they’re going to read and write cookies with the newyorktimes.com domain. A third party cookie is that if you’re on the New York Times and there happens to be an ad there, they will set a cookie that is different than the New York Times cookie. That will typically be something like a DoubleClick cookie or a Criteo cookie or any number of cookies. Our platform writes cookies as well. Our cookie is a C3 tag cookie.

Jeff Greenfield: Now, the reason that we’re writing third party cookies versus first party cookies is because the only time you can read a New York Times cookie and look at the information that’s in there is when you’re on the New York Times. If I happen to be on the New York Times with my code and I write a New York Times cookie for purposes of targeting, because I say, Aha, you’re on the auto page and you happen to be reading an article about BMWs and I want to know that, if I were to write a New York Times cookie when I encounter you again on the boston.com website, I can’t read that New York Times cookie unless we’re back on to the New York Times webpage. I will write a C3 tag cookie. It’s one of my own cookies, or I’ll write a DoubleClick cookie and that’s something that I own and it’s my domain so I can read and write that wherever we are.

Jeff Greenfield: That’s the difference is that I’m a third party, I’m different in the website you’re on and I’ll write that cookie whereas a first party cookie is one that is there. Historically, the way the digital world has worked is that everybody has written third party cookies because of that limitation that I can only read and write those first party cookies when I’m on that site and I want to do this for purposes of targeting. Then, what happened is over the last couple of years, a lot of companies have moved to first party cookies because with the change that occurred in Safari browsers where they stopped allowing third party cookies.

Jeff Greenfield: Essentially that whole practice went away for the subset of the digital universe that uses a Mac machine and they’re using Safari. I wanted to be able to read those types of cookies. That’s essentially the differences between it and the way it’s utilized in the digital world is primarily for targeting ads so that I can tell some interest about you and it’s also used for analytics as well for an analyzing the effectiveness of these digital ad campaigns. Those are the big differences between those.