Anonymous Identifiers Can Aid Targeting, But First-party Data Drives Personalization
By Svetlana Filipson | Head of Analytics, DELVE
At first blush, it would appear the digital advertising industry has been hit with a double whammy in 2021. We’ve long known Google would be phasing out the use of third-party cookies in Chrome first by 2022, then by 2023, and the company has launched FLoC, a reset of and “new normal” for how consumers can be tracked on Google’s own platform. At the same time, Apple’s data privacy changes mean that if app publishers want to leverage users’ IDFA data, those users will need to opt into sharing it.
The industry is having a reckoning, which has increased the focus on privacy-conscious user identity solutions proposed by industry consortiums and data providers. Brands seem to be faced with major decisions about which user identity solutions they should hitch their carts to.
But are brands doing themselves a disservice by looking to AdTech intermediaries (who are focused on offering user identity resolution) to fill the gap left by Google and Apple?
We at DELVE believe that these latest moves by Apple and Google offer a great opportunity for brands to become more intentional about adopting a first-party data strategy to drive personalized experiences and higher conversion rates.
One of the easiest ways for brands to capture first-party user identity is to give consumers a reason to sign in to a website that assists them during their buyer journey. Examples might include offering consumers the ability to create wish lists, configure products, or receive discount alerts and then saving or sharing the information.
While it may be tempting for brands to simply wait on the industry to develop another third-party identification solution, the value of investing in first-party data collection and use is significant. Not only can brands improve offer personalization (therefore leading to higher conversion rates), but they can also extract unique data insights that their competitors cannot easily copy. These insights can be used to guide a variety of marketing decisions ranging from segmentation and targeting, to next best offer and loyalty programs.
While identity resolution through proxy ID may help with customer acquisition, it still falls short of providing the data insights needed to support effective customer retention marketing — which is critical for LTV.
Are We Close to ID Interoperability?
Through the years, third-party data has been plentiful, and frequently inexpensive. It’s been so convenient that brands have become over-reliant on it — arguably, more reliant on it than on their own first-party data. It makes sense for brands to impulsively look for a replacement that looks more or less analogous — so solutions like UnifiedID 2.0, Sparrow, ATS, and others can seem appealing. But the proliferation of IDs adds complexity and requires interoperability in order to work for brands’ campaigns. And any claims of true interoperability remain questionable and unproven at this point.
Brands should think at least twice about becoming over-reliant on another tracking and targeting solution that they don’t own.
Let’s face it — third-party data is often inaccurate, often outdated, and fraught with risk. This is not the time for brands to bet the farm on the prospect that competing platforms will start cooperating and help their cause.
The question is not whether any of the IDs on the table could work well for brands at some point. The question is whether they’re enough to underpin successful customer acquisition and retention strategies — and at DELVE, we think not. Tech giants Google, Facebook, Amazon, and Apple — with Verizon rising as a major ad tech contender — are consolidating and leveraging their first-party data. The walls of the walled gardens are only going to grow higher over the next couple of years.
Brands need to do what the tech giants are doing: take control of their own first-party data and put it at the center of their data strategies.
Understand Where Identity Resolution Solutions Fit (and Where They Don’t)
Some brands may be hoping that while the Big Four (Apple, Google, Facebook, Amazon) are battling each other for dominance, a unifying intermediary solution might emerge. The giants’ ID strategies are heading increasingly in different directions, creating confusion for everyone else. Remember that when Apple launched ITP in 2017, industry stakeholders sought a loophole they could exploit. Some brands and ad tech companies found those gaps. Then Apple gradually closed all of those loopholes. It’s unlikely consumers on the open web will take the extra steps they’ll need to opt in to sharing their data, and unlikely that competing publishers will band together to provide troves of aggregated data that brands can access. The industry needs to accept that any solution that claims to allow the same level of access to personal data, without consent, is one too many. Consistent data privacy measures and consumer goodwill go hand-in-hand.
This is the time to prioritize and create a first-party data strategy that has room for unified ID solutions but is built upon a commitment to what we call first-party marketing. First-party marketing embraces the idea that customers want personalized experiences based on their past and future behaviors — not somebody else’s. For brands, this means viewing themselves as a walled garden platform that collects and integrates valuable first-party data (enriched with first-party data from trusted brand collaborations) to drive personalization.
Let’s break down how brands can do this in practice.
- First, realize that to attribute touch points along a buyer journey, you need to physically unify your collected first-party data to associate touch points back to individual customers. This is true even today with third-party cookies, and it will become even more important when third-party cookies go away.
- Second, once you’ve physically unified your data, you need to relationally unify your data. That is, associate touch points to specific user identities to understand which touch points influence conversion (attribution) and build effective retention/LTV strategies. This will remove the guesswork from measuring media and campaign performance until such time as a third-party identity resolution solution emerges (if ever) and helps brands regain control of their customer journey insights.
- Third, build relationships with the right inventory partners. Yes, walled gardens hold intent data, but major publishers have behavioral data that can be tied back to your customer identities. Consumers spend about 66% of their digital time outside of Facebook and Google, so direct relationships with publishers set up brands and publishers for personalization success. And because the brand ultimately controls the spend, brands have the leverage to tell publishers what data they need to enrich their identity strategy, rather than simply asking what the publisher wants to share.
- Four, Use the right technology to unify the data. This could be an out-of-the-box solution such as a CDP, or an in-house solution. An out-of-the-box tool like Salesforce Customer 360, Amperity, or Tealium’s AudienceStream CDP has convenience, but also might have limited customization capabilities. Building your own solution doesn’t require building mainframes. A cloud-based solution, built on a data lake and a CDP function and customized for the brand’s specific needs, will perform the tasks necessary at an affordable cost. The important thing is to control your own data, rather than turning it over to an agency or a reseller.
Brands Must Take Control of their Data Future Now
One lesson that ITP taught us, and that the industry must remember at this moment, is that brands absolutely need to start early in developing their data strategies.
If you haven’t started this process meaningfully, start now, to gain the most insights from third-party sources – that may not be available in the future.
Audit your data processes, identify what you need, and plan for how you can bring it into your brand’s own walled garden. Try starting with one channel, testing one of the ID solutions — running incrementality or marketing mix measurement tests. Choosing the “best” ID solution is not an end unto itself but a means to understand what you need in the next iteration of developing your own identity solution.
Brands can start with a data spine, starting with reliable first-party data and enriched by second-party data from trusted partners who can verify its quality. From there, it’s possible to add intent data from walled gardens. At the same time, brands can choose to test any of the ID solutions available — from one of the Big Four, or from a leading data provider. In summary, there’s no “silver bullet” so you need to pursue a parallel-path approach — consider testing another ID solution part of your education, not your final step.
First-party data can be a source of competitive advantage that drives highly personalized marketing and customer experience. Why? Because each brand’s first-party data is unique and the data ecosystem partnerships that a brand forms to share (permission-based) first-party is also unique — thus, the resulting insights for targeting and messaging are not the same data sets easily obtainable by competitors. Similarly, the analytics that can be applied to these unique data assets can produce unique insights that can enable more effective segmentation, targeting, and messaging for conversion.
DELVE has developed a 3-tier competency model that helps brands think about how to shift from third-party data and outsourced digital skills, to a first-party marketing model that emphasizes first-party data and in-house digital (data, analytics, media) capabilities.
Want to know more?
Reach out to Svetlana Filipson at DELVE: begin@delvedeeper.com.
Svetlana Filipson
Interim Director of Marketing Analytics