Advertising is going through a dramatic transformation — whether brands, agencies, and the Silicon Valley monoliths, including Google and Facebook, are ready or not. The global push towards consumer data privacy is central to driving this change.
And while Facebook can’t be blamed entirely, the Cambridge Analytica data misuse scandal, in which the private information of more than 50 million Facebook users was harvested without their knowledge, contributed to the public’s growing awareness of how their data is being monetized, often without their knowledge. New legislation, such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), which goes into effect in January 2020, has also contributed to consumer awareness about just how valuable their data is to brands and advertisers — forcing many brands to change how they treat their customer data and to institute required opt-in processes for the way they market to consumers.
The question remains whether Congress will enact laws that follow the EU’s lead. There are a variety of ideas on the table right now, ranging from compensating consumers for the use of their data to taxing data, and then there’s Senator Elizabeth Warren’s plan to break up the big technology companies earning revenues in excess of $25 billion per year, with Amazon, Google, and Facebook clearly in the crosshairs.
But the bottom line is this: with all the awareness among consumers that their data is being monetized, customer-centric brands must be cognizant of the potential fallout by not using customer data wisely.
The end of third-party data?
The threat of GDPR and CCPA to established marketing and advertising practices are real and could dramatically impact, or even lead to the eventual demise of, companies with business models dependent on the sale of third-party data. Privacy International already filed complaints against seven companies, including data brokers such as Acxiom and Criteo, companies that provide audience profiling data for advertisers such as Tapad and Quantcast, as well as Equifax and Experian, which broadly collect sensitive financial data. The complaint claims that none of the companies’ practices comply with the GDPR’s specific, named protection principles of transparency, fairness, lawfulness, purpose limitation, data minimization, and accuracy.
So, with the onslaught of laws protecting consumer data privacy, which will likely make anonymous cookie sharing a lot less important, where is advertising headed?
The bulk of marketing budgets is still earmarked for advertising, so the real challenge for brands and marketers is how they can ensure that they can increase the return on ad spend (ROAS) by using first-party data, avoiding privacy contamination, and making sure their companies are maintaining compliance with data privacy laws.
Most important, marketers should realize that consumer data privacy is actually a good thing.
GDPR and CCPA will ultimately benefit a brand’s relationships with its customers, creating a stronger bond based on mutual trust. In the process of complying with consumer privacy laws, marketers can more effectively personalize because they’ll be reaching an audience that wants personalized experiences.
That’s one reason many brands are contemplating how they can more fully leverage their owned first-party data and become less reliant on third-party data brokerage strategies. As the tide has turned toward greater consumer awareness and control over their own data, brands have accumulated a wealth of data that consumers have willingly given them, such as opting in to a loyalty program, agreeing to be “cookied” on their website, signing up for an email list, and choosing to receive SMS alerts.
The challenge for brands is that this data is usually siloed in separate systems, so although reams of data exist, brands can’t easily tap into it. And with the shift away from marketing strategies that rely on anonymous data, marketers need to tap into that first-party data now more than ever.
Despite obstacles such as data silos, there are financial gains in this shift to a greater reliance on first-party data. By more fully leveraging owned first-party data for targeted advertising, brands can increase ROAS by more intelligently suppressing customers for whom the ad would be irrelevant, creating more effective lookalike models based on the brand’s own set of customers, and personalizing at a more granular level.
So yes, marketers will need to make some drastic changes to meet and stay compliant with the growing number of consumer data privacy laws across the globe. Change isn’t easy, but as these laws force modifications to the ownership and use of consumer data, brands and customers both win.
Omer Artun is founder and chief executive officer of AgilOne