The power of identity resolution in a world without third-party cookies

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Digital marketing is at an historic moment. Tech giants Apple and Google are using public calls for increased web privacy to make a push to gain control of consumer data. Combined with new privacy regulation led by Europe and apprehension over how COVID-19 will ultimately impact consumer behavior, marketers face a perfect storm of uncertainty over how to track spending habits to target their advertising and boost their sales.
But, if marketers act now, they still have an opportunity to use a variety of means to gather data that can be plugged into identity resolution models to continue to understand the dynamics of their customers and give their business an edge over their competitors.

THE CHANGING LANDSCAPE

Google

Since the mid-1990s, companies marketing their goods and services on the internet have used third-party cookies to gather information that tracks websites visited and measures and records consumer tastes. Cookies — bits of code that are left on a person’s computer after checking a weather site, researching an illness, or comparing prices for a new car — have come to form the backbone of a rapidly growing industry that allows these digital marketers to track people’s internet activity and then finely target them with advertising. In 2018, the global digital marketing software market was $42 billion and is expected to grow to $84 billion by 2023.

But in January 2020, Google, whose Chrome web browser has 66% of world market share, announced it would ban third-party cookies from its platform by 2022. Moreover, it would keep the data it collected on user behavior for itself in what are known as “walled gardens.” That move immediately set off a firestorm of complaints. Google has since announced it will postpone the third-party cookie ban until 2023, but the shift is inevitable — and marketers must get ready.

By controlling the data it collects via Chrome, Google is putting tremendous pressure on advertisers. Whether they are selling vacation rentals, power tools, or shoes, marketers will be forced to spend more on access to these closed-ecosystem platforms, whose prices keep rising.

Apple

In June 2020, Apple announced that app developers will need to secure permission from iPhone users to track them via the AppTrackingTransparency framework. Since that requirement first took effect in April 2021 with Apple’s iOS 14.5 software update, some 80 to 95 percent of users have shut down location tracking, essentially killing a critical means for effective ad targeting.

As with Google’s move against third-party cookies, Apple is masking an effort to gain control of the ad market in the guise of a privacy measure. Giving consumers the ability to turn off tracking on their apps, for example, will force some app providers to turn to in-app purchases and subscription fees, of which Apple can take a cut.

Equally important is that Apple is now making life a great deal harder for Facebook, which has long relied on data supplied from the location tracking in the apps as the basis for its advertising revenue. Escalating their ongoing feud, Facebook has begun a campaign against Apple with full-page ads in national newspapers to cast doubt on its motives. The value of location data can be seen in why the hugely popular Angry Birds was offered for free. When people accessed the game, they provided data about their movements throughout the day that could be monetized. If they can see you shopped at Walmart, Target might be willing to pay to place an ad in front of you.

Facebook now must ask permission before accessing what’s called the IDFA (identifier for advertisers), a piece of code in each iPhone that Facebook had used to run hyper-targeted ad campaigns. If consumers opt out of tracking, they will still receive ads, but they won’t be nearly as precise.

Consumer privacy regulation

It took time for consumers to understand that the price of a free internet is their privacy – that their data is the product for sale. The European Union responded to a rising backlash with the General Data Protection Regulation, which went into effect in 2018 to protect consumer privacy. In the United States, the Children’s Online Privacy Protection Act of 2013 set limits how data is collected on children under the age of 13. And while there is no sweeping federal legislation in the United States as there is in Europe, several states, including California and Virginia, have passed privacy acts targeting data collection.

THE WAY FORWARD

Whether changes are a result of noble privacy intent or a war between the monopolistic internet players, advertisers and publishers need to respond. Clearly some are still in denial about the pending changes. According to a recent survey, 81% still rely on third-party cookies. These developments are making it very important for companies to focus on first party data – data that they own and gather from direct interactions with their customers. But there are lots of challenges in harnessing the full power of first party data based on all the complexities associated with data.

It’s time for savvy marketers to respond to this changing landscape by putting the power back into their own hands. Brands that want to reach their ideal target audiences must embrace the complexities of identity management. The more they understand who specifically they want to target, rather than relying on the walled gardens of the internet monopolies, the better their return on investment will be. They need to develop a first-party data strategy.

The first step is built around the concept of identity resolution. This is the process of collecting and matching deterministic data that allows a marketer to reach or contact a specific person, such as email, phone numbers, addresses and device IDs.

By deterministic, we mean it’s factually correct that a person is associated with a contact point rather than merely “predicted” to be associated with that data point. This is tremendously important since it is non-deterministic data that enables “bot” traffic and other fraudulent activity that greatly reduces marketing ROI with digital advertising. Global giant Proctor & Gamble cut $200 million in digital ads in 2017 after determining they were “largely ineffective.”

Even deterministic data has its challenges. In theory, it is the most robust kind of data because it relies on the first-party data that a customer has directly supplied. In fact, it is often a mess. With so many problems with accuracy, from formatting errors to lack of standardization, only 55% of companies rate the quality of their CRM data as good or very good. Think of trying to ensure you have identified the same person when sometimes they call themselves Bob Smith, sometimes Robert Smith, and in other cases they show up as [email protected] — not to mention that Smith is a very common last name. We see this all the time in data supplied to us. IAM has found that 53% of first-party data is not even being used or leveraged for media and advertising because marketers are relying on third-party cookies and external third parties instead. This ultimately equals lost revenue.

Once the deterministic identity data is collected, artificial intelligence and modeling come into play. All the multiple data points attached to a person are standardized, normalized, and combined using various means of artificial intelligence, incorporating automated machine learning built by our team of data scientists, to ensure they all point to the same person. Then it is possible to associate additional insights such as demographics and firmographics about these people that allow segmenting based on common characteristics that define who marketers want to reach.

When brands start to bring these capabilities in house, leveraging third-party identity resolution technologies, they can control very specifically who they target vs relying on walled gardens or third-party cookies. Advertisers can build their own audiences in house and then activate them for digital advertising, including within these walled gardens but with certainty of who is being reached. This allows complete transparency on where the advertising spend is going and ultimately it enables them to track whether their targets engage with the advertising content they create and therefore measure the effectiveness of their campaigns.

Once clear identity resolution of a consumer (or business) has been formed, analysts are able to place them into market segments that can be targeted.

TAKING BACK CONTROL

First party data is powerful and those who capture it well are in a good position. Companies that deploy identity resolution solutions to optimize and leverage data can take back the control they had once ceded to third-party cookies. Properly done, they can collect data in ways that ensures privacy, relevancy, and the certitude that real people are being targeted – as long as they incorporate strong identity technology and centralize their data across all media sites or touchpoints.

The most efficient use of a marketing budget will be to find the right customers through the rigor of creating an identity graph, and then delivering them relevant, compelling messages as consistently and often as possible, across all channels.

Marketers need to move fast to adapt to this rapidly changing environment in the digital marketplace. Don’t turn a blind eye just because this massive disruption has been temporarily postponed for another year. Time flies — use it wisely.

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