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June 22, 2023

Surviving the Third-Party Cookie Apocalypse — EP 030

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Transcript

Drew Sanocki: All right, Demand Gen, let’s talk about retargeting. You’re in that business and you’ve got a product in that space. A lot of brands we talked to are sort of afraid or not really, they don’t know how to think about the cookie-less future. So, you’ve got Apple sort of limiting DTC brands, ability to monitor third-party cookies on their platform. I read the other day that Google is considering doing the same thing with Chrome. And so, what is a brand to do? How does a brand navigate this inability to leverage third-party data?

Adam Robinson: So, there’s a few ways. We have a couple of ways. So, we are part of publisher networks. This is getting wildly technical, but they use a strategy called CNAME Cloaking that pairs authentication events, unlike the New York Times, with the email that authenticated and matches it with a first-party cookie to a browser and then the CNAME Cloaking strategy is basically using that table of first-party cookies to match to the publisher network’s third-party cookie. So, anyway, it works in cookie-challenged environments.

And what’s interesting is our main use cases email, but if you take our audience that we can resolve to a SHA256 hash, which is like you can put in Facebook. If you put that audience on Facebook and exclude the Facebook retargeting audience, there’s a 40% lift, 40% of the people in that audience are left over. So, Facebook is missing them, which is not surprising because they’re getting blocked by everyone in Safari. So, it sort of proves to you that this works and those ads work really well, too, because those people aren’t getting served targeted ads right now. They’re not, you know what I mean? It’s like the tracking pages were getting blocked, so they’re just not getting ads.

That is the unfortunate reality. Fortunate and unfortunate, that’s one thing that you can do. A technology like Retention.com use it in your Meta audiences. You can use it with your email retargeting flows, like the browse and cart and checkout abandonment. One thing we figured out last week that I’m really excited about that you guys maybe will do at some point, we figured out how to lay first-party cookie, so like there is a problem with even a cookie that Klaviyo sets as Klaviyo on a browser, it’s got an average life of seven days on Safari. So, yeah, they’re not going to know somebody if they do it with an authentication event and they come back seven days later and they bill on a cart. You know what I mean? They’re not going to send the person a flow.

So, we figured out how to lay a first-party cookie from authentication events that happen in Klaviyo and in Shopify, like on behalf of the brand, that have the actual email address and will last forever down on these people to where, it’s basically like our third-party network was getting whatever, like on average 20%. We’re getting another 15% with an overlap of 25% of this other audience, which is actually 100% accurate, 100% persistent forever, and much higher intent because it’s people who are actually doing sh*t. It’s literally authentication events that are happening with these people through real email addresses, which is a huge win for brands.

There’s companies that are doing something like this called Blotout. Black Crow AI just made a product that is this, Elevar. It’s like, they call it server-side tracking. So, we figured out, it’s like a perfect complement to what we’re doing. It’s like our accuracy, we figured out through this. It’s actually pretty good, but this is a lot higher intent, so the flows perform way better.

If you can imagine how much more likely someone is to buy something and abandon cart that clicked on an email, then who is not opted into your list, right? It’s night and day. It’s like a 5x or 10x higher efficiency of that email going out. So, yeah, that’s another way to deal with this. It’s doing this, it’s basically running a little mini CDP inside of your brand which is what Blotout and Elevar are. It’s systems that lay down first-party cookies wherever they can, based upon whatever authentication events they can pick up. That’s the dream, right?

Unfortunately, in most cases, not many people are logging in. The universe of people you can lay down at a first-party cookie on is small, which is why the other strategy we use is so great. It’s like, maybe the conversion rates are not as good, but the breath is excellent. But combining them both is a huge win, I think. And it’s not only for email, it’s like Facebook needs that information too, because their conversion pixel is straight-up blocked in Safari.

If all you did was pass records from Shopify to Facebook’s conversion API, you would allow Facebook to label more conversions, like the conversion rate would appear to go up, even the throughput is not really changing. That is because they’re pixel’s blocked. And on Safari, it does pick up these conversions. So, I think none of these brands are big yet, these server-side tracking brands. I don’t think that anyone’s come up with true product-market fit for it. I think they’re trying to like, you got to charge a certain amount of money to make a business work.

And to me, this seems like a product that literally, every f*cking store would use if it were free, but for $4,000 a month or whatever, it’s like a little bit hard to get your head around like, okay, what is server-side tracking doing for me to this extent? So, anyway, maybe you see where I’m going with that. This is possibly a downmarket freemium play for us, I think.

Michael Epstein: I think I want to get follow-up.

Adam Robinson: Yeah, there was a lot of kind of interesting stuff there. But the long story short is like, I’m not a person who views third-party cookies getting blocked as death to vendors. I think there’s ways to make this stuff work.

Michael Epstein: What do you think the longer-term risks are with the server-side tracking or you think that that’s going to essentially be?

Adam Robinson: I don’t see it. I mean, it’s literally like a private CDP for the brand and no one else has access to what’s inside these cookies. I think it’s actually a great thing. The problem is getting enough of your audience, like cookied in this way because they need to actually perform some authentication events somewhere, be it on a website or an email or something that allows you to do this. So, that would be the issue, actually capturing enough of the audience to make it significant, to be able to do anything with it, but apparently, it helps Facebook a lot. I mean, their AI, just if you feed it more information from Shopify that it’s not getting from the pixel that it was before, it will better inform its models for look like audiences, everything, I don’t know. It’s not what it used to be still, but it helps.

Drew Sanocki: I want to ask a public perception question because we both have these retargeting products. So, you have one that identifies visitors and can essentially give the brand the emails when the visitor hasn’t technically opted in to that site.

Adam Robinson: That is correct.

Drew Sanocki: We have something similar with physical addresses. And when I talk about it online, 90% of the comments are positive. I know that’s kind of cool. Didn’t know you could do that, and maybe 5% or 10% are, this is wrong or evil.

Adam Robinson: Or worse.

Drew Sanocki: Right, right. So, do you see that? And I guess, how do you respond to that?

Adam Robinson: So, absolutely, by the way, my view on this has always been. And I got reminded of this, I was talking to Klaviyo a lot because they looked at everything we were doing in April just to sort of understand it better. And this guy, Jake Cohen, who’s VP of Product and their longest standing executive, he sent me this video that he made about Klaviyo’s position about third-party cookies and how they thought– the video was effectively like, we think it’s creepy that in ad tech, you can stitch together a disturbingly accurate picture of someone based upon what they’ve done and serve them an ad, right? And Klaviyo thinks that’s creepy. And they’re building products for a world in which you wouldn’t need to do that.

My opinion is I don’t think that’s creepy at all. I think that’s the Internet. I want to get served targeted ads based upon what I’ve looked at. Why would I want a generic, like, why would I want to get served an ad about it? They would be my Super Bowl feed, right? Like a Ford truck. I’m not going to buy a Ford truck. I want stuff based on my interests.

So, going back to your question, public perception. From day one, I thought that the competitive advantage for us was that my view was that we were willing to do stuff in privacy that larger brands were not willing to do. That was legal that a lot of people thought was creepy. Therefore, it was keeping competitors out, that I didn’t think was wrong.

And I did this Facebook ad campaign right when we launched. I don’t know if it’s on our website anymore, but I think it’s on my YouTube channel or Retention.com’s YouTube channel. It’s hilarious, like, I got really good at making these ads that would answer the sales questions, but kind of like also stir the pot with this vocal minority that hates this because it’s like a religious hatred of this and it is not rational. It is just a passion against things like this, right?

And I figured I could say some things and people would write a novel back to my ads. And then from the brand account that we just started, so there’s no brand to defame or whatever. I would just wind them up. I would just say a sentence that would make them even matter. And they just couldn’t even believe that it was from the brand account. Also, they’re like, does your boss know you’re doing that? It’s just amazing. But then the ad worked great because these vocal minority privacy people were just right, it’s what social media wants. So, I think the benefits are keeps competitors out. Certainly, what we’re doing, like it is very hard for me to imagine that some of these guys were popping up to compete with us are going to get venture funding and be able to play catch up.

The downside is, I think, given what our current product offering is, there’s a ceiling on the size of brands we can sell to. The good news is there’s a lot below true enterprise that I think are losing the luxury of having principles about this stuff. It’s getting so hard that they need to start employing tactics that are legal that they may have thought were impolite in the last few years. Certainly, it makes it hard to sell. Shopify has told us they’re not going to invest in it, they’re not going to buy the business.

It’s like the number of strategic acquirers for a large amount for someone who is operating with this posture towards privacy is very low. Who’s going to come along? And my view is this like take Klaviyo, for instance, right? Even if they weren’t so fundamentally opposed to kind of what we do from an ethos standpoint, they are messaging business, like they’re trying to IPO, they’re $500 million in revenue or whatever it is. Why are they going to add this narrative to such a clean story, like for what? How much is it really going to do for them?

So, I think, that’s my whole position on it. I think, in our situation, it allowed us to enjoy kind of uneconomic unit economics, if you want to think about it that way, like nicer than they otherwise would have been because any entrepreneur worth their weight in salt is not going into this space and the space isn’t funded, so you don’t have people bludgeoning themselves, like going after customers. And again, some people have popped up because I’m a moron and I’m showing my financials on my intention. So, of course, it’s like how to do it and they’re like kind of going after basically undercutting us a little bit.

But yeah, that’s my view. It’s like I don’t think it’s wrong. I think it’s how the Internet works. And I understand the argument that it’s like a net negative for the ecosystem. I just don’t agree with it. People would say, like, effectively, you’re ruining people’s inboxes by enabling this. It’s like, okay, well, here’s how I think about it. If you think about what’s in your promotions folder right now, and then you imagined an email from someone whose website you were just on, it’s probably more relevant than everything else you’re looking at.

Drew Sanocki: Right. And I mean, I don’t understand how your technology works, but isn’t the idea that the browser has opted in at some point, right? Like, somebody...

Adam Robinson: The person, it’s implied rather than explicit consent, which is ultimately what made Klaviyo okay with it, right? They didn’t just tell their customers to stop using it. In the US, we have gotten people to opt in to having their data sold into our identity graph at some point somewhere.

Drew Sanocki: That’s what I meant. Some other site, some other place, they sign up.

Adam Robinson: Exactly. And we can show them where. So, you don’t even need to do that technically, but it eliminates all real problems in the US if you can. And this comes down to like the only possible other issue is collecting consent for cookie tracking at the brand level. So, like using CookiePro or something and just getting them to hit accept and describing what you’re doing. Once you’ve done that, there’s no...

Drew Sanocki: Right. What’s the most common place people opt in and end up in your pool of data?

Adam Robinson: Co-reg networks. There’s all sorts of different paths to someone putting any– one way to describe it is like Legion websites that are kind of like just doors, that’s like healthcare credit card, mortgage, like whatever.

Drew Sanocki: That’s right. I was going to guess credit card or cable.

Like you’re killing this out. Yeah, it’s like Fluent runs a bunch of websites, right? There are large networks of sites that are literally on the Internet to generate data to sell as many times as they can sell it. And you can’t do that yet in Europe, but in the US, it’s not opt-in for data collection on the Internet. That’s just not how it works over here. So, in this regard, it is much more laxed in terms of data collection and data sales and data sharing.

And the states are clamping down, but they’re clamping down in ways that will ultimately require brands and vendors to just collect consent to do these things. They’re not clamping down in a way where they’re trying to stop it. They’re just saying the claim is that the consumer is unaware. So, if you get someone to say, accept cookies, and very conspicuously, you’re saying, we will take anonymous identifiers and connect them to email addresses and possibly contact you as a visitor of the website and they hit accept for that, that’s CCP, you know what I mean? It’s like that’s all that’s ever going to happen, I think, here.

Michael Epstein: So, at a high level, I mean, just to recap, what makes it allowable? What makes it legal in the US?

Adam Robinson: So, specifically what we’re doing and the core technologies, someone hits a website, they don’t fill out a form, and then we enable communication with that person afterwards. Retargeting. So, there’s top of the funnel on the homepage to newsletters. There’s abandoned carts. There’s abandoned products, checkout, whatever.

There’s two parts to this. One is the email side and what makes it okay is the CAN-SPAM Law of 2003, which was reviewed in 2019, is opt-out rather than opt-in. That is a big misunderstanding. The market in the US, not Europe, not Canada, the email law for bulk email is opt-out. As long as you have an opt-out link, you can send whatever you want.

Why isn’t everybody spamming everybody? Because the thing that matters is whether or not you can get delivery. And if you spammed everyone, you would very soon not be able to deliver an email, right? So, we’ve come up with this perfect system where we’ve reverse-engineered the perfect email and cleaned it perfectly to where it just works. Everybody would buy lists if they could. It’s just there are very few lists that you could buy that actually don’t blow you up. So, like, this is a situation. So, that’s on the email side.

Then on the cookie consent side, the nuance explanation is the state-level laws have to comply with the federal level CAN-SPAM Law. California would love to have an opt-in email law. If they did, they’d get sued under federal law. So, they can’t. So, it’s still an opt-out law, and all of these laws have to do with more consent collection and they’re just letting the consumer know what you’re doing, giving them the ability to opt-out, giving you the ability to see the data that you’ve collected about them. It just doesn’t touch this.

And another interesting thing, depending on who the audience is here, if you have under $25 million of revenue, CCPA doesn’t apply to you, which like most people don’t have any idea of. This is another beautiful thing about this space. It’s so confusing. Like the compliance thing, it’s so confusing and it’s so much scarier than it seems that we have to deal with the education side of that, which is not helpful. But it’s pretty clear, the explanation, and we’ve never not made it through a legal department so that also, once you get enough big brands, clearly, this is legal, or Warby Parker, Dr. Squatch, Bulletproof Coffee, Tonal, Penske Media, they would not all be using this. They have internal in-house counsel. So, yeah, that’s the long and short of it.

Michael Epstein: So, pivoting a little bit, you’ve got a lot of data on DTC brands. You see what they’re doing. We have a lot of data and see what DTC brands are doing. What’s working from your perspective?

Adam Robinson: So, here’s what we see. We just see basically how the aggregate list of top-of-funnel emails is doing that we send people and then we see how these flows do. And from what I see, if you were to say like, should people be A/B testing the sh*t out of their abandoned cart flow to optimize it or should they be A/B testing their newsletter? I see 70% of the profitability of e-mail programs coming from newsletters. It’s like the flows are more lucrative per instance, if that makes sense. In abandoned cart flow, the first email of abandoned cart flow is very lucrative.

But the overall P&L of an email program, just based upon the sheer reach of people’s newsletters, more is generated outside of those flows with a reasonable attribution window. Something that is very interesting that I have talked to someone about, there’s two sides to this, actually. AI is a very topical thing to be discussing right now. We have this customer called Bruce Bolt. He’s great. Does he work with you guys? Chris Hall? You should.

Drew Sanocki: I don’t think so.

Adam Robinson: So, I’ll introduce him to you. They have cool, innovative batting glove brand. They love cool stuff like you do, like we do. He’ll be all over this. So, I had him on my podcast. I’m like, “Is there a tactical thing that you could talk to me about?” He’s like, “Dude, we started using this thing called Maverick.” TryMaverick.com, I think it is. And it is a personalized, generative video of their founder. When someone abandons cart, it sends them the video and it just personalizes their name. And it’s a really weak implementation right now. It’s just like a white page with the video and a response box. But he’s like our conversion rate doubled, when we did this. And the comments in the box that we were getting, it’s like the goodwill has been amazing too. So, I thought that was really interesting.

A week later, my buddy Ryan Pamplin from BlendJet who I think you guys do work with, he sends me this thing. Have you seen one-to-one video selling on Apple from Phil, Phil.tech? So, this is the total opposite of what I just told you. Ryan’s like we started using it. It’s amazing. It’s actually a non-AI person selling direct-to-consumer products on the website through this technology. It’s like within three weeks, I have someone– it’s just what these two people thought tactically was the most interesting thing that is interesting enough that I should hear about it is an AI-generated video and a completely non-AI human video both doing sales.

Michael Epstein: Okay, so it’s not like what Postscript just released, which is that two-way text using human interaction. This is still with video?

Adam Robinson: Yeah, still with video.

Michael Epstein: Interesting.

Adam Robinson: But tell me about that product. It sounds interesting.

Michael Epstein: Yeah, I just saw them talking about it, where to your point, you’ve got a bunch of companies going the AI route, thinking how do we engage AI to respond to SMS, to respond to comments on social media, or whatever. Postscript, from what I understand, stood up, it’s standing up like their team of sales reps based in the US somewhere and they’re going to respond on your brand’s behalf to two-way text messages and trying like...

Adam Robinson: So, there was a Shopify app called LiveRecover that did this.

Michael Epstein: Yeah. They basically took that model and are trying to implement it at scale.

Adam Robinson: Yeah, it’s really interesting. I’m just fascinated by what happened to me. It’s like one guy saying the generative stuff is amazing, and then this other guy is like, real humans are amazing.

Michael Epstein: Totally.

Adam Robinson: Like, in virtually, in a very similar context, right? Yeah, I thought that was cool.

Drew Sanocki: Yeah. I’ve got some questions about team. An incredible story. I don’t know, you mentioned at least you were six people last year. And now, you’re 40 at least.

Adam Robinson: Yeah, in September, 50. I wouldn’t recommend it. We probably should have stopped at 20 for like a few months, and then gone to 50.

Drew Sanocki: Was there an intermediary step of like 200?

Adam Robinson: No.

Drew Sanocki: It’s more or less straight line 6 to 50.

Adam Robinson: Yeah. But it is what it is.

Drew Sanocki: And the bulk of that happened like in a month, I think, is that right? One or two months. How do you maintain consistency when you do that? How do you ensure that they’re representing you well and they all get on board? I know you’ve got the video series, for example, but I would love if you could talk a little bit about how you maintain consistency.

Adam Robinson: So, you don’t. I think, we knew that it was going to be, and by the way, the way we got around this was, I think there’s two parts of it. There’s the consistency part, like, are your people trained up enough and whatever, know the gig well enough? Then there’s also your service to them as an employer, you need to provide them with a good experience at onboarding and training and help them with all the stuff. In terms of that latter thing, we just had to beg for forgiveness. We were like, look, there are no processes, there is no onboarding. We’re just going to have to figure this out together, this first, whatever.

We now have someone who’s head of people ops and internal comms and it’s slowly making all of that more adult, I think is a good way to put it. And in terms of consistency, if you get down to the actual tech of our product, it’s somewhat complicated. If you just focus on what it does and how to install it, it’s fairly simple. So, getting people to stick to this nine-slide demo that we had, I don’t think was that hard.

Now, what is, I think, incredibly difficult is actually training them all to be the type of consultative people that we need them to be, to actually properly qualify someone manage their expectations appropriately, which is like, I mean, I wrote this in an email, it’s like Dr. Squatch got 50x in 90 days, but they’re 50 times bigger than our average customer, right? I don’t know, if several hundred million revenue. It’s like everybody wants that 50x.

Of course, it’s a case study on our homepage. How would you not put that on your homepage, right? He’s like telling this to Olive Grove LA, and then they book a demo and they want 50x. I’m like, “Cool, get the revenue Dr. Squatch has and I’ll get you 50x.” But it’s a delicate dance that needs to happen between a salesperson in a brand where you’re like, “Hey, not only is it not going to be 50x, this is the low season right now for you. We amplify throughput for people. On the whole, we’ll probably get you 10x, but most of it’s going to come in the third and fourth quarter because that’s most of your revenue in a lot of cases.”

So, things like this, I think, are harder, but every day, we just try to tackle the biggest problems and it is finally getting, which is six or seven months after we started doing this massive hiring. It’s finally getting to the point where this is the priority. It’s like the consistency in actually training people up well enough to do this job in a very sort of sharpshooter way. That is the top of the list now. And we have the right staff to do it. But it was literally just like, well, we’re going to need some VPs. We’ll probably need 10 salespeople and 13 CS. So, let’s just go hire them all right now.

Diana, like this woman went from doing the sales demos to, like, all of a sudden, we didn’t have a CS leader for a long time. She had 28 direct reports. The VP layer didn’t start till February 1st. So, it was a brutal time for her in particular. It was a brutal time for me until they started to because I was handling a lot of product stuff and everything to do with affiliate and agency, trying to figure out the agency things. So, this is crushing. But yeah, I mean, I hope that in a year from now, I will have had a better answer about exactly what we did. I mean, my answer is kind of like, well, you don’t until you get there, right?

Drew Sanocki: Yep. Awesome.

Michael Epstein: You stay in the asterisk by the Dr. Squatch case study that says if you run a Super Bowl commercial.

Adam Robinson: Right. Yeah. It’s a strange thing. And I don’t think it’s hurting us, but it’s just annoying. It’s like, why can’t this just cause the floodgate that it should? Like that good of a brand, that good of an outcome.

Drew Sanocki: All right. I don’t have any other questions. Mike, do you have anything else?

Michael Epstein: I think I’m good.

Adam Robinson: Sweet. Thanks, guys.

Drew Sanocki: Yeah, thanks, Adam.

Introduction

We’re doing things a little differently in this episode as I join Drew Sanocki and Michael Epstein on the Nerd Marketing Ecommerce podcast to discuss what life will look like for DTC companies in a cookieless future.

As giants like Google and Apple relay their plans to limit the collection of third-party cookies, eCommerce companies will be forced to tap dance to come up with ways to continue personalized ad targeting. But while some people think these changes will be fatal for DTC companies, I see a few ways companies can adjust to the new normal.

As the founder and CEO of Retention.com, I’m constantly involved in the nuances of effective customer tracking. In this episode, you’ll hear Drew and Michael ask me important questions about ad targeting, customer retention and data collection.

You’ll also hear about the important differences between server-side and client-side tracking, how Retention’s technology works, and what part of marketing you should optimize to increase sales.

Key Takeaways

  • 00:00 How can brands prepare for the upcoming deprecation of third-party cookies?
  • 07:31 Server-side tracking helps websites collect user data at the server level instead of on the client’s device. What are the long-term risks associated with it?
  • 08:52 The fine line between privacy and ad targeting that companies like Retention.com navigate — and why the business model has a capped ceiling.
  • 16:26 The differences in data collection laws between the U.S. and Europe.
  • 18:12 A crash course in misconceptions and realities behind the legal nuances that affect email marketing.
  • 21:09 Should Ecommerce stores be A/B testing abandoned cart flows or newsletters?
  • 26:14 Is it possible to maintain business consistency when experiencing rapid growth?

The Death of Third Party Cookies

Tweetables

  • “I'm not a person who views third-party cookies getting blocked as death to vendors. I think there are ways to make this stuff work.” – Adam Robinson
  • “I want to get served targeted ads based upon what I've looked at. Why would I want a generic ad? I want stuff based on my interests.” – Adam Robinson
  • “The thing that matters is whether or not you can get delivery. And if you spammed everyone, you would very soon not be able to deliver an email.” – Adam Robinson
  • “Should people be A/B testing the s**t out of their abandoned cart flow to optimize it or should they be A/B testing their newsletter? I see 70% of the profitability of email programs coming from newsletters.” – Adam Robinson

Resources

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