"It's sensationalism, and I think it's going to be a tempest in a teapot." That's what Matthew Roche, Founder and CEO of testing and optimization firm Offermatica, says about the uproar surrounding the Jupiter Research cookie report.

Even before aQuantive�s Atlas Institute poked holes in this data (by showing that the self-reported data diverged greatly from real-world behavior), metrics experts were downplaying the eulogies being said for the venerable cookie.

Click to enlarge
Atlas data comparisons

According to the Jupiter report, 58 percent of online users have deleted cookies in the past year, with 39 percent possibly deleting cookies from their primary computer monthly.

That may be true to a certain extent, says Eric Peterson, the lead analyst on the report. After all, he says, 53 percent of new web users said they have installed, updated, or run anti-spyware software, while up to 61 percent of the most experienced web users have - and seven out of the 10 top anti-spyware packages include cookie management.

On the other hand, 34 percent of "newbies" said that they've deleted cookies themselves, with that number reaching as high as 60 percent for experienced users.

So here's the interesting piece of the data, Peterson believes: The group of people who should know better - the experienced web users - seem to have the same attitude toward cookies as the newbies. But because sophisticated users know that cookies don't represent a privacy concern, Peterson believes they're deleting cookies simply because they don't want to be tracked.

Industry experts have weighed in on the accuracy of the numbers, but whether those percentages are high or low, the truth is that anti-spyware companies are succeeding in creating hysteria around the topic, making consumers fear for their privacy.

So if the numbers aren't a completely accurate representation right now, they might be eventually, says Brian Elliott, COO of Alibris, a supplier of new and used books, music, and videos online. "They have the right number, but the wrong year," he jokes.

First Party vs. Third Party Cookies

When looking at stats on cookie deletion, it's important to consider first party cookies (where a cookie is stored on a marketer's domain) as compared to third party cookies (where a cookie is stored on the vendor's domain), says John Squire, Product Management VP for Coremetrics.

Third party cookies allow for more ease of management, according to Ted Shergalis, Founder and Chief Product Officer, Poindexter Systems. But they are also the ones that frighten consumers the most, and that tend to get zapped. In fact, says Squire, Coremetrics sees cookie deletions of less than one percent for clients using first party cookies.

Truth in the Numbers: Is Your Ad Tracking Totally Off?

Online advertisers worry that cookie deletion means ad tracking results can't be trusted. For an industry that has based its success in part on trackability, that could be disastrous.

But Roche and Squire agree that, while the ad tracking numbers might be skewed, it's not a crisis. "Yeah, they're skewed from being completely accurate. But can you still tell the right direction? Absolutely," Squire says.

Besides, that imprecision is something marketers live with, Roche believes. "It's a natural and expected part of advertising that there's no precision in marketing. Seeking it is a red herring."

The tracking of latent versus immediate transactions probably isn't affected by cookie deletions - at least, not yet - Shergalis says. His data shows that the majority of conversions happen within the first week of a consumer coming to a site, a time during which 99 percent of people are keeping cookies.

"So those latent purchases are as accurate as they've ever been," he says.

Who Loses If the Cookie Crumbles?

Credible companies that are using third party cookies to serve more targeted advertising may have to think about different ways to gather their information if cookies die (such as Flash Shared Objects, a solution mentioned in the Jupiter study and covered in MarketingVOX).

Companies with higher margin products or longer sales cycles - financial services or consumer durable goods - may also begin to suffer if �average lifetime value� (never an easy metric to arrive at) becomes more slippery to grasp.

However, consumers are the biggest losers. "If you have to go in and remember your name, your password, the products you looked at before, it's like we've stepped back to the web in 1996," Squire says.

If consumers truly understood what cookies were, they wouldn't want them to go away - particularly since they're a democratic mode of handling identity, says Roche. Disable cookies entirely and certain platform providers like eBay or Microsoft could step in.

Without cookies, "Someone will have to create a token that allows you to pass information," Roche predicts. "Microsoft could come up with a file server which says you can drop whatever content of whatever type you have in there - purchase history, what ad was shown, etc."

Then, he explains, they could set a log-in through their explorer in order for companies to recognize consumers (or for consumers to be recognized at their favorite sites), "and we'll all be required to register to Microsoft to use their cookies."

"Suddenly a tool that's easy to use and allows a lot of experimentation becomes yet another managed part of the infrastructure that doesn't work," he says.

This, he says, "we really, really don't want."

What Does This Really Mean for Marketers?

If the ad tracking industry shouldn't worry that their numbers are badly skewed (just yet), there's still the issue of companies using cookies on their own websites - to track performance of their sites, for example, or to offer personalized merchandising.

Take this scenario:

A visitor goes to a site, logs in, and makes a purchase. On his second visit, he browses without logging in or purchasing anything.

On the third visit, the vendor may want to offer personalized merchandising based on his previous browsing session. But unless cookies are enabled, it won't know what his second visit was like, or that it even happened, since he didn't log in.

However, if the visitor logs in on the third visit, you can still offer personalized merchandising based on first visit and purchase (rather than browsing session), even without cookies.

But this type of merchandising is fairly sophisticated. "I don't think many places are there yet," Elliott says. And if that's the extent of tracking and merchandising you hope to do in the future, there are things you can do.

Steps Marketers Should Be Taking

"The sky's not falling, and I don't think it really changes the landscape," says Shergalis. "From Poindexter's perspective, it's more about education than about escalating an arm's race with the consumer."

Roche agrees. "It's like with email," he says. "You hate spam, but it's convenient enough that people will have to deal with it." The trajectory on cookies will follow email, as consumers realize the convenience.

Still, consider these steps to protect consumer data and speed the process of consumer understanding.

Remember when barcodes first hit the scene? "There was this backlash. People got t-shirts printed with a barcode that said 'I am not a barcode,'" Shergalis said.

But the increased ease of inventory management brought lower prices to consumers. Then data driven marketers realized that barcodes helped with cross-selling and up-selling, which consumers also liked.

Now, consumers are using their own barcode readers on cell phones and PDA's to track information such as where a vegetable was grown, Shergalis says.

He predicts the cookie will follow the same path.

- MarketingVOX contributor Jennifer Nastu has been a writer and commentator on ebusiness and email marketing for four years. She is also the co-owner of PJ Writing Group, a marketing and communications company specializing in email newsletters.