By Jennifer Pelino, Media Center of Excellence, IRI (originally published in WARC)
There are implications for the advertising industry as it navigates new data privacy and compliance rules:
- Reliance on third-party cookies has been estimated to lead to a 36% decrease in measured and reported ROAS.
- There will be a shift towards probabilistic reach and more people-based measurement.
- An IRI study found “virtually no difference” in sales lift results when food and non-food brands captured 25% or 50% fewer iOS mobile IDs.
Why it matters
While deprecation of data will be disruptive, especially in the short term, impending changes create new urgency to build a stronger data ecosystem. A growing reliance on high-quality first-party data will create huge opportunities in technical and creative innovation and will help publishers and advertisers provide more relevant and engaging advertising content.
- Brands should consider the merits of consumer data behavior collection via loyalty cards. It offers an obvious form of value exchange and is least likely to be impacted by regulation.
- As new rules are introduced, there will be a renewed awareness of privacy-compliant targeting practices and opportunities to leverage first-party data logged-in environments.
- Marketers must focus on data that can be gathered consistently and transparently. Offline purchase data from retailers gathered from loyalty cards is a good example.
Data privacy is under the spotlight more than ever with the introduction of increased regulation for governance and compliance around the use (and sharing) of an individual’s data. The most high-profile victim of this legislation is the marketer’s favorite, the cookie.
Google’s decision to block all third-party cookies from Chrome by 2023 will make it harder to track the activity of web users, forcing advertisers to fundamentally shift digital buying strategies that have been used successfully for more than 20 years.
This year we will also see Apple iOS 14 and IDFA privacy update implications, leading to limits on tracking across mobile apps. These announcements arrived during a time when worldwide privacy regulations were being tightened, including the GDPR in Europe, the CCPA in the U.S. and the PDPA in Thailand.
A new media landscape
Data governance and consumer data compliance measures have resulted in the continued decline in value of what was once considered to be the primary exposure tracking mechanism – the cookie.
According to ad serving firm Flashtalking, 64% of cookies are rejected as consumers frequently delete or block their cookie histories and many web browsers reject their tracking capabilities.
So, what are the implications? The reliance on cookies has been estimated to lead to a 36% decrease in measured and reported ROAS; user and device IDs are replacing cookies as the primary measurement mechanism; consumers will have more control over how their personal data is shared and used; and measurement setup will shift to a partner-by-partner basis versus one cookie feed.
While cookies have not yet entirely disappeared, we are seeing a shift towards probabilistic reach and more people-based measurement. For example, bidding on LiveRamp ATS, FTrack ID, The Trade Desk Unified ID and others allows the industry to buy and track media without cookies. Rather than offering marketers a one-size-fits-all solution, this will allow an effective ‘stitch together’ approach, consisting of multiple partner IDs.
Ad servers (Flashtalking and Google/DoubleClick) are switching to cookie-less, probabilistic matching techniques based on non-PII signals to identify devices when cookies have been rejected or deleted. This will likely continue to be the case when Google Chrome blocks third-party cookies.
Due to ongoing uncertainty surrounding platform changes and regulation, businesses might want to consider the merits of consumer data behavior collection via a loyalty card as the most obvious form of value exchange. This is likely to be the last exchange that regulators or platforms get in the way of, and therefore providing built-in protection against near-term shifts in regulation and data privacy positions.
With inventory shifting to mobile devices and user IDs that typically enable higher conversion, having a greater reliance on mobile data (device IDs) may prove more beneficial than using a pixel for cookie-only tracking.
Finally, it’s worth noting that many of the shifts in advertising spend are to CTV and OTT. Owing to their non-reliance on cookies, this data can easily be captured.
Change brings new opportunities
For some, however, a reliance on high-quality first-party data will create huge opportunities in technical and creative innovation, forcing many involved in the industry to re-examine the well-established, early principles of advertising: to find the right people, in the right place, at the right time.
For this to work successfully, publishers, advertisers and brands will need to collaborate to ensure that future relationships with consumers are built on the trusted exchange of information.
The digital advertising industry is defined by change. It is accustomed to meeting new challenges and discovering innovative solutions. But let’s not forget that the legacy advertising ecosystem is far from perfect. As new rules are introduced, there is a renewed awareness of current privacy-compliant targeting practices and opportunities to leverage first-party data logged-in environments.
Some of these openings include:
Sharper focused attention on data gathering and origins: Data assets that come from incentivized panelists and loyalty card holders are more resilient to changes in privacy laws because the first-party data collector has more control over the drafting of the applicable privacy notices and the value of the incentives offered to consumers. In both cases, the individuals choose to either scan their products or provide their loyalty card as permission to collect their purchase details and store them as part of their profile.
Retailers must indicate participation in the loyalty programs relating that their data may be used to make offers more relevant to the individuals. This data, governed by retailers, ensures that use of the data is beneficial to the consumer.
Increasing the size and value of first-party data: The deprecation of third-party data has focused efforts among advertisers, retailers and media companies to increase the coverage, depth and recency of first-party data.
This has long been a key asset for marketers in highly considered purchase categories like automotive, real estate and telecom. Prompted by impending changes, more CPG marketers have started or increased efforts to acquire and enrich first-party data while applying metrics such as customer lifetime value previously reserved for highly considered purchase sectors.
Effective communication of your value exchange: When GDPR and CCPA was introduced, publishers often created clunky experiences that interrupted site visitors without a clear explanation of benefits. With the deprecation of third-party data, stakeholders have a new opportunity and incentive to build consumer and audience relationships by effectively communicating benefits through a positive experience.
Meanwhile, industry organizations will continue to collaborate on new approaches to make the transparent consent process more effective and efficient, such as enabling multiple opt-ins within a single user session and in a simple user interface. These efforts will benefit the entire ecosystem, including smaller players with limited resources to go it alone.
Publisher/consumer value exchange optimization: Data-informed media audiences are more valuable, resulting in higher advertising sales performance and higher monetization for publishers. The interests of advertisers, retailers and media publishers are aligned and their ability to sustain and grow revenue will be commensurate with their efforts to optimize customer audience value in exchange for first-party data consent.
Already, work has begun to reinvigorate testing and learning across alternative strategies. Tactics include “freemium” soft paywalls, access to relevant or exclusive content and offers, ability to track and use loyalty benefits while shopping, add items to shopping cart across multiple store visits and channels, keep track of favorite items, automatically replenish items and many more.
Removal of silos and reduction of friction: Different identifiers are often deployed and siloed across disparate platforms such as connected TV and open web. Data often needs to be transported, transformed and matched to be useful for multiple interdependent purposes such as consumer insights, audience segmentation, activation, optimization and measurement. Opportunities to unify and improve identity resolution hold the promise for a more efficient ecosystem with easier integration through improved standardization.
Better governance and standardized operations: Established identity companies are deploying new solutions to adapt to changes. As new and open-source methods emerge, both established industry groups and new-breed organizations will enable additional connectivity. These groups will provide access to standards, methods, open-source code, publish bylaws and codes of conduct as means to reduce conflict of interest and standardize rules intended to govern a more frictionless ecosystem.
Test and apply technologies that allow new ways of working: Demands for these have been further accelerated due to data deprecation. Marketers will increasingly seek out modular approaches to bring their own data, bring their own data science and build applications that collaborate externally while retaining proprietary capabilities. Clients will increase experimentation and use of collaborative workflows enabled by technologies such as hybrid clouds, data bunkers and others.
Case study – The implications of iOS 14 data loss
Google’s cookie killer-blow was followed by Apple’s decision to introduce several new privacy enhancements for consumers, including a stricter policy where iOS 14 users can opt out and control their data sharing on individual apps where they are served advertising.
The impact for marketers is potentially huge given there are an estimated 1.65 billion Apple devices in active use overall. The impact for consumers is greater data privacy which can be the foundation for building more meaningful relationships with companies and brands.
With this, IDFAs will be unable to be targeted, and a usable device ID will only be passed for in-app exposures if users have chosen to opt in. This puts pressure on the consent mechanic and message, and there will be a degree of trial and error to obtain healthy opt-in rates. It also means that a gap remains in collecting media exposure data specifically in relation to in-app media on Apple mobile devices.
To understand the implications of data loss due to iOS 14, IRI conducted a case study in which mobile IDs were restricted and then measured the possible impact on sales lift results.
The following question was asked:
“What would be the difference in results with original/normal data capture vs. ~25% loss of device IDs?~50% loss of device IDs?”
- Historical campaigns (running from late 2019 to mid-2020)
- Open web
- Food and non-food
- Cookies and device IDs available via exposure data
While the magnitude of the overall lift fluctuated slightly, the answer to whether a campaign was able to drive significant sales lift did not. Looking at absolute lift, dollar sales remained unchanged or only fluctuated a few cents between results. This equated to minimal, tenths of a percent difference for lift, representative of roughly a ~5% -10% decrease in incremental sales.
There was virtually no difference between capturing 25% or 50% fewer devices on the results. Food and nonfood alike had little fluctuation. Scaled deterministic data allows for more relevant targeting, stronger 1:1 matching and increased chance of significance to measure.
The marketing ecosystem is in the midst of significant transformation, driven by new data sharing practices introduced by Apple and Google.
As data companies such as IRI work together with industry bodies, publishers, media companies, retailers and technology providers, a deeper level of understanding will pave the wave forwards for a frictionless online experience and greater data privacy for consumers. Working together with high-quality data will help create better solutions for publishers and advertisers to provide more relevant and engaging advertising content.
Considering the forthcoming changes to data privacy, IRI’s recommendation is to focus on quality data gathered consistently and transparently. Data from retailers that gather offline purchase data from loyalty cards is a strong bet following these guidelines:
Understand the source and collection technique of the audiences. Is the data passively or actively collected from consumers? Is it survey, demographical, purchase or contextual data? The answers to these questions will help determine if you are working with the right vendor to help answer your brand objectives.
Ensure comprehension of recency, frequency and consistency at which the data is collected and refreshed. Recency can be the difference between reaching someone at the precise point in their purchase cycle and missing your window of opportunity. Data refreshment and its frequency is often not communicated, and it’s often why you receive countless re-targeting messages for a category product for which you just purchased.
If propensity or lookalike modeling is being applied, know the techniques and validation methods being used. If you don’t have access to first-party validated buyers, models can be used to drive improved personalization, predictive scoring, triggered campaigns, and media sensitivity. These robust machine learning applications are strong, but you still need to determine the basis of the original data in which the back-end models are using to churn through.
Remain agnostic during time of transition. New products and methods will continue to emerge and evolve for the foreseeable future, causing fluctuations in data volume and accuracy. Maintaining flexibility will allow you to dynamically adapt to take advantage of new and improving tools and methods.
Focus on interoperability with a modular approach to identity. Our industry is built on the collaboration of advertisers, publishers, retailers, data companies and tech providers. Your ability to work with multiple partners will be a key success driver regardless of whether ecosystem tools and methods further fragment or consolidate over time.
Support clients to increase value of first-party data. The true value of your first-party data is commensurate with the coverage, depth and recency. Continuously add and update profiles with accurate attributes and behaviors, especially sales, to build and sustain the value of your data asset.
Sustain and continue to develop best in class aggregate data solutions. Aggregate level measurement solutions are far less impacted by the pending changes. For many marketers they will increase in value as a means to overcome potential data blind spots. In addition, aggregate level measurement can provide a stable point of comparison to understand the relative impact of data deprecation on event level solutions such as multi-touch attribution or household lift.
Test, learn and benchmark performance of audience and measurement solutions over time and versus historical results. New and alternative solutions will result in varying levels of performance over time. We have a window of opportunity to test and learn about the performance of alternative solutions. Testing and benchmarking now can help to prepare for success in the near future.
Do you have questions on how you can successfully navigate the latest data privacy and compliance rules while also improving the return on your advertising spend? We can help! Reach out to your IRI representative or IRI@IRIworldwide.com.