6 CDP Trends Marketers Should Be Aware of in the Near Future


The year 2022 has been eventful for everyone, and the Customer Data Platform (CDP) industry is no exception. Overall, the industry has continued its strong growth: the CDP Institute’s latest Industry Update reportOpens a new window , published in July, identified more than 160 CDP vendors with 15,000 employees and $5.7 billion in funding, figures that had grown by 10%, 33%, and 70% respectively over the previous year. The Institute estimates that 2022 revenue for the industry will reach $2.0 billion, a 25% increase over 2021.

But steady growth hides the dynamics of a rapidly changing industry. Two significant trends are:

Vendor Specialization

The variety of CDP vendors always has perplexed observers who fail to see how such a diverse set of firms can be part of the same category. In fact, the diversity is easy to explain: as defined by CDP Institute, a CDP is packaged software that builds a persistent, unified customer database accessible to other systems. Any system that meets those criteria qualifies as a CDP, regardless of what else it does or does not do. So, the CDP industry encompasses firms ranging from those that only build profiles to those that build profiles, run cross-channel marketing campaigns, and even add operational tasks such as ecommerce.

This diversity has become even clearer, if no less confusing, in 2022. The relative handful of vendors who limit themselves to profile building have stressed their specialization and often concentrated on selling to large enterprises. Firms that offer additional functions — usually for marketing, sometimes for customer success or service — have added richer functions, including machine learning and message delivery. These tend to sell to mid-size firms where the simplicity of an integrated, department-level system is the most appealing. Yet another group has emerged that focuses on particular industries, such as banking, hospitality, healthcare, and education. Some of these firms also limit themselves primarily to marketing; others combine a CDP with operational functions for their chosen industry.

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A Slowdown in Funding and Acquisitions

The huge growth in funding in the first half of 2022 largely reflects entry into the industry of companies that had raised large amounts of funding in the past. New funding has slowed considerably: there was just one round over $50 million in the first half of 2022, compared with five in the second half of 2021 and three in the first half of 2021. Similarly, there was only one acquisition, compared with three in the previous period and nine in the period before that. These changes mirror the slowdown in activity in the overall tech sector, although they may also reflect some stabilization of the CDP market in particular.  

The period also saw shifts in CDP acquisition and use. These include:

Greater Involvement by Corporate IT Departments

The main buyers of CDPs were originally marketing departments and, to a lesser extent, customer success, service, and operations teams. They had a pressing need for unified, accessible customer profiles, which existing systems did not meet. When the need was limited to a single department, most corporate IT teams were happy to let that department buy a packaged CDP for its own use. But this changed when multiple departments began to make requests that required unified customer data. At that point, corporate IT shifted from simply helping to purchase and deploy a package to actively considering whether they should build their own CDP equivalent (because CDPs are defined as packaged software, a self-built system cannot properly be called a CDP).

IT interest in building a CDP equivalent was further heightened by digital transformation projects and direct-to-customer sales initiatives, reinforcing the strategic importance of unified customer data.  

Improved Data Tools

The tools available to help corporate IT groups build CDP-type systems have improved substantially. Integration platforms, data pipelines and reverse ETL tools make it easier to move data into and out of CDPs and have already been deployed at many firms for other purposes. Cloud services that give access to external identity graphs have simplified identity resolution, one of the most challenging of all CDP requirements. High-capacity, flexible cloud data stores like Snowflake, Elasticsearch, Databricks, BigQuery and Redshift have made it much easier to handle the massive and complex data needed in a CDP. Many of the cloud data store vendors have created marketplaces with pre-built connectors to pipeline, reverse ETL, identity resolution, analytical, and other systems, further reducing the effort to assemble a complete solution.

These changes do not necessarily mean a wholesale shift toward do-it-yourself CDP construction. Packaged CDPs are built to be flexible and easily integrated with other systems, so it is unusual for a company to have requirements that only a custom-built system can meet. Buying tools to provide CDP functions saves some development effort but also introduces significant new costs to select, buy, integrate, and maintain those tools over time. In practice, the key factor determining whether to build or buy is often how close existing data lake and warehouse systems come to fulfilling the needs addressed by a CDP. If just a small extension is needed, it makes sense to build it internally. But if there are many gaps to fill, a packaged system is often quicker, cheaper, and safer. Buying a packaged CDP also frees scarce development resources for other projects where no packaged solution is available.

New Privacy Concerns

Growing concerns about customer data privacy have further boosted recent interest in CDPs. Privacy regulations from governments and policy changes from companies like Apple and Google have reduced the data collected by third parties and restricted how companies can use customer information they gather directly. This creates new requirements to identify personal information wherever it resides in company systems, to collect that data in one place, and to ensure that data use complies with legal requirements and company policies. CDPs support these efforts by providing an infrastructure to catalog, collect, and govern the use of protected information. Many CDP systems integrate with data clean rooms and privacy management systems; a few CDP vendors have built their own versions of these systems.  

See More: What a Successful CDP Implementation Actually Looks Like

Advertising Integration

CDPs are still sometimes confused with DMPs (Data Management Platforms), a quite-different type of system that primarily manages pools of cookies to build advertising audiences. The DMP category is under strain as privacy rules make third-party cookies harder to acquire and use. While some DMP vendors have repositioned themselves as CDPs, the technical requirements for the two applications are very different, so substantial reengineering is required to make this possible. On the other hand, many companies are now asking their CDP to replace their DMP. This is technically possible for a CDP, although some extensions may be needed to offer DMP-level performance. CDPs are also being asked to feed email lists as audiences to social media and search marketing channels, where those audiences are used for direct targeting, response measurement, and lookalike models. CDP vendors are increasingly supporting these requirements by creating direct integrations with ad buying and publisher systems. This is an expansion of the CDP’s role from managing existing customers to acquiring new customers.

What will the second half of 2022 bring? We have already seen some interesting hints since the July report, including more funding, private equity deals, acquisitions by CDP vendors, functional unbundling, and expanded CDP product scope. The story never ends.

What do you think are some of the trends in the CDP industry going forward? Share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .