By Brian Mandelbaum, CEO and co-founder of Klover
If you follow the advertising space even from afar, you’ve likely heard that Google and Apple are upending marketers’ capabilities to precisely target consumers and also measure the effectiveness of advertising. Google has been threatening to deprecate third-party cookies since 2019, and just announced they will be reigning in mobile device tracking. Apple made device tracking purely opt-in, and as a result, Facebook reported that it predicts it could cost them an estimated $10 billion dollars in advertising revenue this upcoming year.
You’d think that marketers would be clamoring for a solution before Google finally drops the hammer after crying wolf for the last three years. On the contrary, there’s a false sense of security among advertisers, according to the 2022 International Advertising Bureau (IAB) State of Data Report. Three-fourths of the industry claim to be prepared for the loss of cookies, but actions say otherwise.
- Two-thirds are not adjusting their measurement strategies, and 59% are not increasing their investment in first-party data.
- Investment in third-party data grew 8% YoY, doubling the growth rate in 2022, even though third-party data will virtually become extinct in the near future.
- Despite already rising CPMs (cost per thousand impressions) and shrinking margins, two-thirds to three-fourths of the industry does not expect revenue and finances to be affected.
So, who is well-poised to reap the rewards when the cookie-pocalypse finally arrives at our doorstep?
Marketers with first-party data
First-party data is data that a company collects on their existing customers. This can be through loyalty programs, online purchases and behaviors, and marketing. The biggest advantage for brands with first party data is that it’s cookieless. The problem is, when it comes to finding new customers, you’re operating in an echo chamber. You only have data on your existing customers, the massive blind spot is potential new customers you’re not yet reaching. Furthermore, you are not seeing what they are purchasing throughout the entire ecosystem leading to large gaps in your consumers’ behavior profile.
Look at the retail media boom to see the writing on the wall - Walmart Connect, Kroger Precision Marketing, Roundel (Target), and of course Amazon - are all reporting a massive increase in earnings YoY. They can use the first-party data amassed through their loyalty programs to help brands target buyers of their competitors (Miller Lite targeting Bud Lite drinkers), leverage interesting patterns (people buying frozen dinners also over index for buying baby food), and most importantly, close the loop and attribute marketing spend to actual sales in store and online. What they cannot do, is provide insights to where they go and what they buy at every other retailer, which leaves marketers with a partial understanding of their behavioral profile.
Even better, marketers with zero-party data
Ironically, the changes to tracking and measurement being spearheaded by Google and Apple under the guise of user privacy will not get rid of advertising or even improve the consumer experience. It will just make ads outside of walled gardens dumber, marketers less efficient, and people more annoyed. If marketers and tech companies really wanted to improve consumer experience and create more effective, measurable advertising, they would prioritize zero-party data. Zero-party, declared, or consented data, is data that consumers intentionally and proactively share with a brand or company, often in exchange for something of value.
Zero party data doesn’t deprecate, it evolves. It ultimately provides real sources of truth that are deterministic and verifiable. It’s not dependent on surveys or on just what receipts consumers choose to upload. If marketers are connected at a transactional level, they can fill in the whole picture. With that, there is true value to build and target audiences with the right offers at the right moments.
Advertising partners’ performance expectations will not decrease because Google and Apple make it harder to track consumers’ behaviors. Advertising-based businesses will need to find new ways of delivering transparent and effective campaigns regardless of these and future privacy changes.
Allowing consumers to get value out of their data “exhaust” and willingly trade data for value creates a better and healthier ecosystem. It will enable marketers to collect more data types accurately without any privacy violations or concerns.
The writing is on the wall, privacy restrictions and governance will only increase, and consumers are becoming savvier about the value of their data. The companies that have access to zero-party data will be the big winners.
