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The catch-22 of digital advertising: privacy vs personalization

online advertising
(Image credit: Image source: Shutterstock/mtkang)

Many marketers may have breathed a sigh of relief when Google announced plans to delay the withdrawal of third-party cookies from its Chrome browser for another two years. However, while the industry is seeing a short reprieve from Google, Apple’s latest privacy updates to iOS 14.5 and its new restrictions to IDFA tracking on Apple’s mobile devices are still causing concern. Without a doubt, data privacy is one of the biggest issues currently facing digital marketers today – and this is consistently reflected in industry surveys that see CMOs ranking it highly against other concerns and challenges.

Data privacy is also increasingly at forefront of consumers’ attention. There is a lot of uncertainty, hesitation and fear from consumers around how companies use and share personal data. Much of this has been driven by news of things like data breaches and high-profile cases about questionable use of data.

This is repeatedly manifested in the ways that consumers choose to communicate their feelings and concerns to brands. For example, when WhatsApp updated its privacy terms earlier this year, 7.5 million users switched to Signal and 25 million moved to Telegram as a direct result of perceived lack of trust. On top of this, according to a recent eMarketer report, 87 percent of consumers surveyed said they believed that data privacy is a basic human right.

The value exchange 

However, the data privacy debate is not all doom and gloom for brands. Many studies also show that users will happily share their personal data when they get a real sense of value in return. Indeed, many commentators may have underestimated the levels of willingness among consumers to share their data. While the widely publicized belief was that if given the chance to opt-out of data sharing, 80-to-90 percent of consumers would ‘go dark’, early indications suggest the figure is in fact closer to just 60 percent.

So, far from expecting to have access to just 10 percent of their first-party data, brands are realistically looking at more like 40 percent. This gives them far more chance to effectively analyze, interpret and extrapolate across their wider strategy. To capitalize on this, brands need to focus on rebuilding trust with the consumer and move away from data models that lack consent and transparency or are seen as having a one-sided benefit or pure profit-motivated model in place.

The changes that are currently driving the industry trend towards increased consumer privacy should be welcomed as a chance for brands to reset their privacy policies. Even if, for those marketers who have become dependent on third-party cookies and mobile IDs to target and scale their ad campaigns, those changes represent a massive disruption and are causing more than a few sleepless nights. Moving forward, consented first-party data will be key to campaign success.

Personalization vs privacy 

So, how can brands walk the tightrope between personalization and privacy?

There are four areas that marketers will see the biggest impact on their activities compared to what they have become used to.

1. Developing their own privacy-compliant first-party data and infrastructure will be crucial

2. Measurement mechanisms that have traditionally been based on observed or recorded behavior will need to move to a more model-based format, using artificial intelligence, machine learning or aggregation.

3. Targeting options, like frequency capping, will become more limited

4. The ability to create personalization will become less

Despite these challenges, privacy and personalization can still go hand in hand, marketers just need to learn to be customer-centric. This means ensuring that their existing and new customer relationships are built on mutual benefit and increased transparency. By building out a strategy in this way it will enhance their ability to collect first-party data which in turn will mean that they can engage more with their consumers. In the modern digital marketing world, first-party data is your most significant asset.

Becoming customer-centric means listening to the customer concerns around data privacy and acting on them – in essence this means being open and clear about what data is being collected and how it is being used, and just as importantly what the customer gets in return for agreeing to share their data. On top of this, it’s important to remember that customers want not only to be able to choose whether they share data, they also want to have the opportunity to retract that consent as well.

Collaborate to drive change 

Despite a lot of fear-mongering, marketers and brands have a real opportunity to look at their data strategies and rebuild them around a clear value exchange. Some of the incentives that work well for getting customers to share their data include offering a better experience, personalized or unique content, loyalty programs, rewards and exclusive offers.

Once first-party data is acquired, brands can use AI and ML modeling techniques to identify the common traits and characteristics of their ideal customers. By using these personas and audience segments to design data-enabled contextual advertising campaigns, it’s still possible for brands to speak to their target audience on their preferred channels. Additionally, by continuing to search for new audiences and opportunities to develop first-party data with emerging channels such as podcasts and digital out-of-home, it will still be possible to deliver impactful omnichannel campaigns. 

To do this effectively, whole organizations need to work together to drive change, as I mentioned earlier this is not just a tech problem, nor is it just a marketing problem, it spans across businesses. The industry needs to rebuild consumer confidence, and the only way it can do this is if we all collectively listen to consumers and come back with safer more effective ways to use data.

Rather than being the ‘end of days’ for digital marketing as we know it, this should be regarded as an opportunity to create a new trusted ecosystem that delivers better experiences for everyone involved in the creation, distribution and consumption of digital advertising.

Damien Bennett, Global Director, Product Strategy & Growth, Incubeta

Damien Bennett, Global Director, Strategy & Growth at Incubeta is a regular speaker at events and his work has been recognized through several industry awards. He ensures the company delivers the best-in-industry work for its partners, helping them to rethink the rules of marketing.