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In a permission-based world ad tech will retreat behind walled gardens, then what?
It’s impossible to know when the US will adopt a national data privacy law, or what the specifics will look like - but Washington, California, New York, Nevada, and Maine, as well as GDPR in Europe, provide a pretty good indication that something is coming.
One core concept at the heart of these initiatives involves consumer consent. For legislators, consent has a nice ring to it, especially in a press release. However, one unintended (or, at least, undiscussed) byproduct of mandating consent is that in an industry dependent on access and scale, such a policy could further centralize commercial control of the internet into the hands of a few top players.
Consent is the foundation for the new walled gardens
Consumers are owed safeguards against the improper use of their data. But while consent sounds like privacy, it’s really an ultimate barrier to choice.
Facebook, Google, Apple and Amazon are already in a position to demand consumer consent as a prerequisite for using their products. Ditto for the ISPs - they own your connectivity. Marketing and ad tech vendors such as DSPs, DMPs, SSP’s and attribution companies are essentially transparent to consumers. So, when they ask for consent - what consumer is going to grant use of their personal information to an unknown entity? While these firms provide vital commercial services by connecting and attributing audiences with opportunities, they have no leverage in a permission-based regime and therefore are at an undeniable competitive disadvantage.
With a critical mass of permissioned first-party data assets in hand, the tech giants will become the stewards of most of the advertising, entertainment and online purchases. Meanwhile, with no ability to reach consumers in a qualified manner, brands, agencies, and ad tech vendors will either become serfs to the plumbing of the walled garden, or they’ll go out of business. As the sales channel consolidates so will the leverage of top brands.
Advertisers will become frenemies inside cooperatives
The forecast is equally bleak for the vast majority of brands. Tech giants will defer priority to the high-end spenders and emerging brands will have a harder time reaching and gaining market share in a cost-efficient way. For every Netflix or Nike that can create leverage through their spending, there are hundreds of brands that are too small or too cash-poor to merit the special access to the consumer that the tech giants can sell.
To get access to customers and distribution, brands—especially direct-to-consumer brands—will either have to buy their way into the walled gardens (even if the walled garden sells a competing product) or they’ll have to find another path to first-party consent. How else will they acquire new customers?
One possibility is that brands (aided by the remaining independent ad tech vendors) might take a page from the direct mail playbook. Not so long ago advertisers pooled customer receipts by product and brand and allowed that data to be resold by others in noncompetitive markets. It could happen again. Advertisers could share their permissioned customer lists and leverage their opt-ins. Out of necessity, competitors would become frenemies united against the walled gardens. An alternative independent online marketplace that is privacy law compliant and (hopefully) more efficient and transparent than the current model could emerge.
Third-party data is an open question
Third party data is often sourced from public files like voter registration and the census. This data is required to create demographic modeled attributes that allow forecasting mundane things like discretionary income, home values and purchase preferences. Such data is needed to enhance customer lists, but it is also heavily used to source and qualify potential prospects. Historically, this class of publicly available data safely fueled entrepreneurial efforts to break into new markets and allowed existing advertisers to identify new prospect opportunities.
How do the prospective laws of consent play with third-party data?
Currently, we don’t know the answer. In a perfect world, the new wave of privacy laws would exempt third-party data collected from public sources until it is activated online. Once online the consumer would have a choice to consent or not. That said, we don’t live in a perfect world, and while such an exemption would be a critical tool for brands, advertisers and independent ad tech vendors alike, parsing the law around third-party could be viewed as uncomfortably close to IAB, NAI and DAA recommendations on choice.
To save third party data, the public—and more importantly, lawmakers—must understand what it is and how it works. We need to frame third-party data and its importance to a free-market and to an economic model that fuels opportunity rather than squashes it. Provisioning clear laws that specify that to use third-party data without consent should require that an advertiser have a permissible purpose that demonstrates a benefit and opportunity for the consumer.
It is important that those invested in this issue recognize that third-party data is actually a consumer protection like consent—we need to have both. If we don’t identify the benefits to the consumer that come from the proper use of their data, brands, agencies and consumers will be at the mercy of the mega-platforms to a far greater degree than they already are today.
Ray Kingman is chief executive officer of Semcasting.
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