How the new cookie laws affect your business

Joel Davis

agency:2 – the social media agency

Wed, 04-05-2011 04:27

Cookies have proved to be an increasingly successful tool for marketers, offering the ability to track online behaviour and provide tailored advertising. Together with social media they are providing unique ways to personalise the web for users.

However, as a result of concern over privacy issues, new laws have been introduced - aimed at giving consumers more control over how their internet browsing is tracked. These laws mean European website owners will need to obtain explicit permission from online users before they begin tracking their behaviour using cookie files. So what impact will this have on businesses and advertisers?

A little background...
Since their introduction in 1998 cookies have become more and more sophisticated, with marketers discovering exciting and innovative uses for them. Cookies offer the ability to provide a highly personalised user experience, producing a vast amount of tracking to deliver targeted behavioural advertising.

They allow businesses and marketers to store and track information such as age, location, passwords and other personal data. Marketers can then embed this data and target the user with personalised, relevant content and ads.

There are essentially 4 different types of cookie:

The Temporary Cookie which lasts only until your browser closes and so has only limited tracking potential.

The Permanent Cookie which can, in theory, last forever. In practice they usually last for between 30 days to a year and are used to impact Customer Relationship Management.

The First Party Cookie is written by the site you are visiting and drives activities within this site.

The Third Party Cookie is written by sites other than the one you are visiting – which means it can be used to track other sites you visit. It is therefore the most controversial cookie.

Cookies and the changing privacy laws
The amount of information that users are sharing through cookies, sometimes without their knowledge, has raised concerns over privacy issues.

Through the 2002 ePrivacy Directive customers had to opt-out from cookie use to ensure their online behaviour was not being tracked. Yet because of their importance, in many countries there has been a lot of flexibility in how the law has been interpreted. 

However, due to growing consumer concern over privacy in November 2010 the European Council passed a new law concerning data privacy. Under the new legislation, which will come into force across the EU on May 25^th, websites will be required to obtain explicit consent from visitors in order to store and retrieve information from their computers.

How will this affect the user experience?
The new laws have brought up many questions:

• How much will it disrupt the user experience?
• What are the possible solutions to this?
• Will websites require an opt-in for every cookie?

One potential answer is browser-based consent. Microsoft's Internet Explorer 9 browser already offers a setting to protect users from potentially intrusive cookies. Firefox and Google's Chrome could soon follow suit as they attempt to integrate 'Do Not Track' technologies.

Safari, the default web browser on the Apple iPad and iPhone, blocks third-party cookies by default. For marketers targeting those on Apple products and relying on 3rd party cookies to track conversions it means they have a distorted view of users’ buying behaviour.

This setting means that advertisers need to move away from using third-party redirects wherever possible and try to take advantage of a website pixel and first party cookies in order to build a more accurate and complete picture of their activity.

The Internet Advertising Bureau (IAB) and the DMA discuss best practice and how they are addressing the privacy concerns of users. As part of a self-regulatory initiative launched by the IAB, online behavioural advertising will be marked by a privacy icon when used in Europe, today.

The 'Advertising Option Icon' will be shown on or near behavioural advertising. Web users will also be able to manage information preferences (including the ability to stop receiving behavioural advertising) by going to www.youronlinechoices.eu. 

This is all very well, but UK businesses who don’t comply with the new legislation still run the risk of being sued. So what can you do to ensure your business complies without too much disruption to your marketing activity?

Look out for my next article, ‘Is your business ready for the change in cookie law?’, to be featured here in the next few days, which explains the four vital things your business needs to do to abide by the changes.

Joel Davis is the founder and Director of the UK’s first social media agency, agency:2. From its founding in 2007, Joel oversaw the agency’s growth to its emergence as a truly global business, leading brands like SAS, Barclays, Dow Jones, Disney and Microsoft into the social media arena with a range of highly successful campaigns. agency:2 is a founding member of the DMA’s Social Media Council.