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Three ways the new browser privacy modes will hurt site owners

Update, Sep 12, 2008: A “privacy mode” has now been announced for the up-coming Firefox 3.1 as well, making this post even more relevant.

Google Chrome has its “incognito” mode, IE 8 has its “InPrivate browsing” mode and Safari has its “private browsing” mode. It’s only a matter of time until Firefox adds one as well. These new privacy modes in the various web browsers will create serious problems for site owners that rely on revenue from affiliate programs and targeted advertising. It will also change the landscape for web statistics software and skew visitor statistics for websites.

Why? Statistics software (for example Google’s own Analytics), affiliate tracking, and targeted ads all rely on cookies to work. People have been able to disable cookies for a long time, but this is the first time that people will be able to enter a browser mode that prevents cookies from being stored with just a simple click.

In this article we focus on the site owners’ perspective and will cover three main areas where the browser privacy modes will hurt them:

  • Changes in visitor statistics and conversion rates.
  • Lost revenue from affiliate programs.
  • Broken targeted ads and lower click-through levels.

But first, a quick look at which websites are likely to be affected the most (and the least).

Different kinds of websites will see different effects

Websites will be affected differently depending on their content. It will be a gradient scale, where in one end there is basically no difference from now and very few visitors use the privacy mode (mainstream websites such as news sites and large portals), while at the other end of the spectrum you will have websites where people are highly likely to engage the privacy mode, for example, but not restricted to, adult websites (it’s already been nicknamed “porn mode”).

There will be a whole range of types of websites in between the extremes with various degrees of privacy mode engagement by their visitors.

Broken visitor statistics and skewed conversion rates

Web statistics software and scripts use cookies to determine if a visitor is a returning visitor or a new visitor. They use cookies for other things as well, but the main point here is that with missing cookies the differentiation between new and returning visitors will not exist.

If every visit to a website becomes a “new visit” (since no cookie has been stored to prove otherwise), the number of unique visitors shown in the statistics will increase, even though the actual number of unique visitors don’t. The more people that block cookies, the more the numbers will increase.

This will result in a three-fold problem for website owners:

  1. Skewed visitor numbers – The number of unique visitors will appear to increase for websites where privacy mode is commonly used, but this might just as well be a side effect of more people blocking cookies and not an actual increase in visitors.
  2. Site comparison problems – Comparing visitor numbers between different types of sites will be like comparing apples and oranges. Some sites will have visitors that are more inclined to activate the privacy mode of a browser than others. For example, a webmaster with three sites with of different kinds of content will have a hard time getting visitor statistics that he can use for comparing their relative success since they would have different ratios of “privacy mode” surfers.
  3. Lowering conversion rates – If you use your visitor statistics to make informed decisions about your business, you may be confused by seeing your conversion rates appear to go down, since unique visitors would be appear to be increasing more than they actually are. More visitors, no increase in sales, signups or ad clicks? Then you may be seeing a result of skewed statistics due to cookie blocking.


Above: Note that in the example above the actual number of visitors before and after is the same. The only change is in the perceived number of unique visitors.

Will these problems of measuring unique visitors lead to webmasters going back to the old way of counting: page views?

We hope not.

Broken affiliate tracking

Affiliate programs usually rely on cookies for tracking referrals. This allows affiliate credits to go to the initial referrer even if a sale is done hours or days after the person was directed to a website.

Without cookies, the affiliate program will have no way of knowing who initiated a sale (unless it is done immediately from clicking on a link).

This will effectively ruin this business model for websites where a high portion of visitors use the privacy mode, or at least significantly hurt their ability to earn money from affiliate programs.

But merchants will profit. The flip side of broken affiliate tracking is that, at least in the short term, affiliate merchants will be profiting from this because they will have sales that can’t be tracked back to an affiliate, and hence don’t need to do any profit sharing for those sales even if they actually came in through an affiliate.

Broken targeted ads

Targeted ads will lose relevance, since these also rely on cookies to a large extent. This will mean (in all likelihood) less relevant ads and lower click-through rates. In fact, blocked cookies would create all kind of problems for companies that provide and track advertising.

Jason Glickman, chief executive of the online video-advertising network Tremor Media, had this to say about the new browser privacy modes (quoted from New York Times): “If it is something that becomes default, or if users en masse are electing to turn it on, it really affects how things are currently done in advertising.”

Just as with affiliate tracking, the more likely visitors to a website are to activate privacy mode, the more that website will suffer.

Conclusion

The good thing about a web browser privacy mode is that it gives end users the choice to easily protect their privacy with the click of a button when they deem it necessary.

The bad thing is that a lot of solutions online currently rely on cookies to work properly, with the problems outlined in this article being prominent examples that could affect the bottom line for a lot of website owners and actually hurt their income significantly.

Protecting ones privacy is every user’s right, and we don’t question that, but the fact remains that the privacy mode will have negative effects for many site owners.


A possible workaround for traffic statistics software

Some may suggest tracking visitors based on IP addresses, but that simply won’t cut it. In today’s NAT-dense Internet whole corporations and thousands of users can hide behind a single IP address. At least this problem will remain for the foreseeable future until IPv6 has been widely adopted.

A possible way to get around the problem would be if each browser maker could (publicly) contribute monthly figures on how many (approximately, and on average) of their users are not accepting cookies, and the statistics tracking programs can then use these numbers to compensate for the use of “privacy modes” based on the ratio of browsers visiting it.

The adjustments will still be estimates based on the general stats for each browser, but this approach should be able to give a better indication of the actual number of unique visitors.

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