From a shortage of first-party data to increasingly complex regulatory environments, brands and publishers are struggling to acquire and manage consumer identities. Gowthaman Ragothaman, CEO, Aqilliz, explains how data interoperability is key to addressing the many challenges on the horizon.
Over the years, the proliferation of data-driven marketing has become the backbone of the digital marketing industry. This should come as no surprise. After all, today’s consumers produce a whopping 2.5 quintillion bytes of data every day. With that, data has fast become a precious and irreplaceable resource for marketers and publishers. But with its abundance comes its share of challenges, namely, when we look at the importance of identity management—the art of leveraging customers’ data across various channels for effective discovery and engagement at different touchpoints.
Today’s marketers face significant roadblocks when effectively leveraging data to build and manage consumer identities. What are the largest problems, and how can data interoperability play a role in mitigating them?
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With Great Data Comes Great Responsibility
Perhaps, one of the largest challenges in any industry today that relies on consumer data is growing regulatory scrutiny in data compliance practices. Across multiple jurisdictions worldwide, regulators are increasingly holding companies accountable for how personal data is collected, stored, and processed.
With many organizations caught in the crossfire for inadequate data management practices leading to security breaches, fines have continued to climb. For example, since the introduction of the European Union’s General Data Protection Regulation (GDPR) in 2018, the total amount of fines has increased by more than six-fold from €400,000 in July 2018 to approximately €245 million as of October this year, according to the CMS. Law GDPR Enforcement Tracker. While Europe may be leading the charge, organizations in the United States face the highest costs for violations, averaging at approximately $8.2 millionOpens a new window per breach despite being later to the game and lacking a uniform privacy law at a federal level.
That said, the true cost of inadequate data protections extends far beyond a one-time fine, not to mention the reputational loss that comes with it. Based on a 2019 survey by identity security firm Ping Identity, 81% of consumers stated that they would stop engaging with a brand after a data breach. When consumer loyalty is hard-earned, companies will do well to remember that it can be easily taken away, eradicating the returns previously gained from costly customer acquisition campaigns.
As the industry struggles to keep up with increasing scrutiny from lawmakers and consumers alike, more challenges are already on the horizon. With Californians voting “yes†on Proposition 24, businesses—both domestic and international—will need to brace themselves for a new regulatory framework, less than a year after the California Consumer Privacy Act (CCPA) came into effect. The newly passed California Privacy Rights and Enforcement Act critically points to cross-contextual advertising and new restrictions on data sharing—key activities that inform audience targeting efforts. And, it will require brands to comply with a new set of requirements by 2023.
Third-Party To First-Party Identity Management – a Rocky Transition
Amid the outcry for increased consumer privacy and heightened scrutiny from lawmakers, various technological infrastructure providers have begun to make critical changes to enable a more privacy-first online ecosystem. Most notably, various browsers have started blocking third-party cookies, with Google Chrome as the last major platform to implement the ban by 2022. Consequently, all attention has turned to first-party data and how brands can best construct identities based on information collected directly from consumers rather than relying on third-party sources.
However, brands are then confronted with a chicken and egg problem. To rely on one’s own database implies that you already acquired that data in the first place. To fully optimize consumer discovery processes, which is essential to marketers, identifying potential customers, and what they are looking for before they even make a purchase is crucial. Relying on transactional data alone is thus insufficient for this purpose.
This very situation has led to the lucrative success of walled gardens—data repositories owned by tech giants that offer a closed ecosystem of services to users that require the voluntary disclosure of data. These platforms present an alternative for marketers to better target potential consumers based on their preferences and behaviors within these ecosystems. However, these walled gardens are but data silos that fail to provide sufficient campaign measurement capabilities and comparisons across different channels and vendors.
The current fragmented state of digital marketing is hurting brands and consumers alike. For brands, not only is it costly to subscribe to a plethora of tech vendors and partners, true returns on their investments are hard to measure. As marketers grapple with the challenges of better balancing costs, personalization, and privacy, customer experience is at risk. This is a pity, as personalization platform Formation.ai found that four out of five consumersOpens a new window are willing to offer their data for a personalized experience, as long as they are collected ethically, used appropriately, and securely protected.
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Data Interoperability Is the Answer
With identity management increasingly far more challenging to navigate, industry players need to transform their current tech stacks in exchange for a unified, interoperable platform that allows for secure activation of data across organizational boundaries. It is not just the sharing of data, as insights without activation are purposeless. Many organizations focus on collaboration to gain insights, but in the world of addressable media, if these insights are not directly translated to compliant activation, they are of no use.
For this collaborative activation to work, the platform needs to operate on the back of a decentralized and open-source system, which can be powered by distributed ledger technology (DLT). Ethically obtained first-party data shared transparently across all network participants can then be activated for a meaningful exchange of value. Furthermore, a decentralized infrastructure ensures that data cannot be tampered with since any amendments will need to be collectively approved by all stakeholders.
By offering immutability and full visibility of all data processes, an interoperable identity management platform addresses both of the biggest pain points detailed above: a limited pool of quality first-party data and the challenges of complying with stringent data privacy rules.
Through unity and collaboration, brands and publishers can maximize the potential of ethically acquired customer data and reduce their reliance on tech giants who continue to dominate the audience targeting industry. Furthermore, data stored on this platform could be further anonymized by cryptographic algorithms. Differential privacy, for one, introduces statistical noise into data sets so that they cannot be traced back to any individual. Such security measures, together with the platform’s decentralized nature, can ensure utmost privacy and security for consumers as they entrust personal data to marketers.
A DLT-based platform also ensures data provenance—a key requirement of many regulatory frameworks today to sweeten the deal. According to the GDPR’s Article 30 on Records of Processing Activities (ROPA), companies must maintain records of all data processing activities. These activities include the purpose of processing, data categorization, and a list of data recipients, including overseas organizations. With DLT, brands, publishers, and platforms alike can better comply with stringent documentation requirements, should any of them be subject to inspection or audit.
With the emergence of new technologies in the marketing space, data silos must become things of the past. Data interoperability through collaboration is the key to sustainable and effective identity management. While emerging technologies can seem unfamiliar and daunting, the industry needs to step up to the challenge collectively.
If not now, then when?