Growth Matters
December 17, 2020
8 min read

What Will Enable you to Thrive in The Cookie-less Future?

Steve Horne
Michelle Bottomley

Our third article, in our expert series by Steve Horne and Michelle Bottomley, outlines what winning moves will allow you to thrive.

Key takeaways:

Introduction

In article 1 and article 2 we covered the why and how of the cookie-less future in the era of data privacy regulation. This disruption presents challenges and opportunities for each player in the digital advertising ecosystem to retool their offerings away from 3rd party data to survive and thrive. In this article we will summarize what moves you should make to ensure your business advances through this change period. 

Remind me - Why we are approaching the cookie-less future?

Google has announced the end of cookies by 2022 due to significant fines related to GDPR.

The main intent behind GDPR was to reduce the data being kept for marketing purposes to protect the consumer from unwanted promotions and to ensure consumer data didn’t end up in the wrong hands. This was originally to be accomplished by setting significant fines and excessive firewalls to protect individuals.

The cookie-less future presents significant challenges to the advertising ecosystem which currently relies on 3rd party data that is not permissioned.

How is the Digital Advertising Ecosystem Changing? 

We’ve created the ExchangeScape™ to clarify the digital advertising Buy/Sell Sides and Enablers, indicating in Red, Amber and Green our take on which players will thrive, hold their ground or not survive the cookie-less, permission rich future.

The ExchangeScape™ shows that five players will not survive or become so heavily disrupted that they will need to make almost total changes or fall out of the marketplace, while four thrive and nine remain in some form.

Descriptions of each group can be found in the ExchangeScape™.

What is the Role of Data in the New Digital Advertising Ecosystem?

the role of data in digital advertising

Today, digital advertising is served based on 3rd party data at the device and persona levels. We’ve all experienced persistent advertising based on the last website we have visited. Without cookies, marketers will seek other types of data.

Highly targeted and permissioned data solutions are emerging that cost more per transaction with fewer intra and inter file duplicates - and yet extend the marketer’s reach beyond their own 1st party data to a population likely to be in the market for what they offer.

Second party data will be used within DMPs and is being ingested into CDPs to support personalized connected digital experiences. CDPs and DMPs featuring 2nd party data could include digital signals at the individual level which will enable marketers to drive demand generation into their personalized connected experiences while remaining privacy compliant.

3rd party data is generally aggregated from many different sources and consists of rich behavioral or demographic data. It is often collected by an entity that doesn’t have a direct relationship with consumers. Third-party data is often an inferred (implicit) data, which means that it is based on past user behavior and not on information, provided explicitly by the user. By collecting detailed behavioral profiles of users such as interests, patterns of browsing activities, hobbies or preferences third-party data has an incredible reach. Cookies use third party data.

2nd party data is someone else’s first party data that can be utilized for marketing bought directly from the source. It represents a way to overcome scale limitations of first-party data and expand the reach while increasing the effectiveness of campaigns through personalization. It can be used to scale promotions beyond existing customer bases and drive acquisition. Access to it can be obtained through a specific agreement between a first party data owner and another entity such as direct partnership, data management platforms or a 2nd party data network. 

1st party data is the data collected about customers or audiences owned and managed by the marketer. It can come from their own website through cookies or via an app, CRM, customer feedback, in-store beacons, purchases, contact center, point-of-sale communication, or any other information given with the consent of users. It is a result of direct, trusted relationship and communication with an individual, which makes it the most powerful.

Owning first-party data gives marketers the freedom to create their own segments and profiles based on the unique individual data on hand. First-party data is considered to be more valuable and relevant through its specificity and quality compared to second or third- party data. 1st party data is often limited in reach and breadth as it includes the scope of the marketer’s operations only.

first, second and third party data

Today, many DMP data sets use 3rd party data with multiple personas per identity and duplication rates of up to 50x. High duplication rates means that marketers send similar messages to billions of media placements often 50x to the same individual. Duplicates resulting from 3rd party data were less of an issue in the cookie world.

For permissioning, 2nd party data can utilize “blanket permissioning” to overcome issues that cookie data (which is anonymous) can not. However,  1st party data, which has been originally sourced by the marketer and is permissioned by the interaction between the marketer and the consumer is compliant whereby second party data may or may not be permissioned.

Providers of 2nd party data are building processes for permissioning, deduplication and the capture of necessary data for audience selection at the individual level, thereby broadening the reach while meeting the regulatory requirements.

Are Permissioned 2nd Party Data Providers the Solution?

Publishers, Google, Amazon, Facebook, Apple and others are 2nd party data providers. The advantage of Google as a 2nd party data provider is the search click-stream data along, Android and other device individual level information. Amazon has their own set of rich information, including click and purchase intent/conversion information for a brand and that of their competition, while Apple has device app engagement data. Other types of 2nd party data sought by marketers includes IoT interactions.

All 2nd party data ingested into CDPs is increasingly analyzed with AI and ML tools to identify patterns indicating likelihood to purchase with other characteristics that can be reflected in personalized customer experiences and in digital advertising.

The Emerging Importance of Identity Resolution

Identity Resolution technology allows marketers overlaying their 1st party data with multiple sources of 2nd party data to reduce duplicates from 50 to 5 per individual.

Many companies have built "Identity Graphs" to link together and deduplicate individual-level entities

Marketers can utilize on average 4 separate identity graphs to bring individual level data together in an attempt to market to one universal “entity” or person. While marketers want to market to a human, not a code - most do not link 3rd party data used in digital advertising to a single “key” or identity that is the real validated person required to link all “personas” together. Hierarchical identity graphs solve this problem and there is only currently one that comes close.

Why Hierarchical Identity Graphs?

Most identity graphs today are “amorphous”. They link together individual parts of entity components but do not necessarily connect to an ultimate validated entity. They have no consistent structure or form, linking to one specific entity or validated person. This was acceptable to a certain extent when the data was all managed by interrelating third-party cookies which could have a certain degree of duplication.

If you can’t deduplicate your records across all of the potential personas you are marketing to, how do you suppress the records that have requested to opt-out? Multiple personas for the same entity across multiple data sources will not be allowed under the new privacy laws and will come with high penalties to marketers and providers who cannot guarantee that these records are removed based upon the individual’s request.

Those firms able to provide ongoing access to 2nd party data who can ensure individuals are permissioned and deduplicated via identity resolution will be the ones that emerge as essential to powering personalized experiences including digital advertising. 

How can we ensure individual privacy while personalizing the customer experience across multiple devices?"

While most individuals today are single or limited platform users, within those platforms (e.g. the IOS/OSX, the Android world and the Windows world), they often have multiple devices which will have privacy that goes beyond textual codification, into graphic or encrypted objects such as digital functions known as “thumbprints or “watermarks” to uniquely identify individuals utilizing the device. Browser and search engine providers, mostly Google, will continuously transform their access processes to build greater privacy protections as well as limit movement between applications and products that are not within their walled gardens. 

Other digital devices, such as Set Top boxes are interactive and permissioned. Internet of Things devices such as Amazon Alexa or Google Home, smartwatches like Apple Watch, internet-connected baby monitors, video doorbells, refrigerators, driving monitors and even toys contain information that will need to be permissioned if used for marketing purposes. 

How will marketers reach cross-platform, multi-device individuals in permissioned and personalized ways? All of these systems require tremendous speed and agility. We are talking about billions of potential transactions that have to be moved across multiple processes to be managed in this ecosystem. It will be important that these processes are tightly coupled and fully integrated with high speed interconnections to ensure performance necessary to create placements in a reasonable timeframe. If not, the provider will be unable to perform. 

What’s the Role of Blockchain?

The role of blockchain in digital advertising

Another key technology emerging into this space is blockchain.  Each block contains a cryptographic hash of the previous block, a timestamp, and the transaction data.

Blockchain is resistant to modification of its data. This is because once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks. Not only is the blockchain, by design, cryptographically secure, it is also a great way to maintain a log of permission of the records both for opt-in and opt-out designations. 

To ensure that the logs of permission are maintained in an unalterable and continuously managed fashion, blockchain is a very viable way to manage this process. For reference see our previous article on the importance of blockchain technologies in business operations.

Why Purchase Behavior Will Become the New “Gold”?

Why does Amazon attempt to make buying a “one click to order” experience? Because they want buyers more than shoppers. 

We are not discounting shopping, just understanding the value of selling into people who are ready to buy or have behavior that shows purchase patterns vs. those who shop but may never actually buy.

Once a purchaser is identified, advanced analytics can identify what that individual is next likely to buy via algorithms known as “Next Best Action” and other analytic techniques applied to buying behaviors. For example, if they buy a refrigerator, what is the next thing they will buy? Analytics will tell us that it may be another appliance or something that on the surface may seem to be completely unrelated. 

Summary

The cookie-less, permission rich future presents challenges and opportunities for every player within the digital advertising ecosystem. Permissioned 2nd party data will be the new gold powering personalized digital experiences enabled by CDPs and DMPs. Advanced analytics indicating likelihood to buy based on digital interactions (or signal) and recent purchases will help marketers target their messages and experiences to maximize conversion to sale at favorable ROIs. Other enabling analytics will rapidly optimize in-market tests as well as budget allocation.

While Google, Apple, Amazon, Facebook and Apple will enable privacy and richer targeting/ROI, marketing across these “walled gardens” will create challenges for marketers that emerging companies will aim to solve

Emerging companies will have the ability to market cross platform, maintain privacy and utilize the various keys and codes that emerge from the cookie-less future to drive ongoing marketing while at the same time be responsible to the public. Digital advertising players will have to be well funded and understand cybersecurity at the highest levels with excellent privacy experts on staff, lawyers on retainer and insurance to back up any potential risks incurred in the management of individual level data in the permission-rich world.

Keep in mind that 2nd party data has the potential to drive greater business impact than the current digital advertising ecosystem, resulting in a remix of marketing budgets to fuel greater alignment across sales, marketing and service to propel more of the right prospects and customers along the buyer journey for real growth momentum.

How can Arbolus Help you Thrive in the Cookie-less Future?

Arbolus connects clients with the expertise to navigate new spaces, source deals, and conduct due diligence.

Questions to ask within your “cookie-less future, permission rich” preparedness plan: 

Click here to connect with world class experts in this space, including Michelle Bottomley and Steve Horne.

Steve Horne

Steve Horne, Former Senior Partner at IBM, has the unique capability of discussing deep business insights with CEO's and their teams while at the same time understanding the technical aspects of Analytics and Big Data at the most advanced levels.

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Michelle Bottomley

Michelle Bottomley is an experienced Independent Director and C-suite executive for Fortune 500 companies who has led the transformation of some of the most iconic and legacy brands and businesses across a variety of industries.

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About Arbolus

Arbolus is a global experience platform. We use technology to connect people for the purpose of sharing experience.

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