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Are clean rooms the answer to getting around data privacy roadblocks?
Data clean rooms (DCRs) are secure, cloud-based solutions designed to allow companies to integrate customer information without exchanging personally identifiable information. While promising to help marketers tap first- and second-party data amid new privacy restrictions, they remain sparsely used, according to a study from the CMO Council and NCSolutions.
The survey of more than 160 marketing leaders — primarily at CPG and retailers — found that 57 percent of respondents do not have a DCR nor have plans for one. One in five reported having one and 24 percent are planning one.
The top obstacle preventing firms from establishing DCRs is lack of data science expertise, cited by 42 percent, followed by lack of budget (35 percent), lack of talent to evaluate (28 percent) and no fully formulated data strategy (25 percent).
“Standing up a data clean room is hard,” the study states. “It takes a lot of resources and the right people: partnership experts who can forge deals with third-party data providers, and data science experts who can evaluate data, understand data clean room structures and run models.”
Interactive Advertising Bureau (IAB)’s just-released study, “State of Data 2023: Data Clean Rooms & the Democratization of Data in the Privacy-Centric Ecosystem,” cited inconsistent state-level privacy legislation, coupled with increased ad signal loss, among the factors increasing the appeal of DCRs.
However, the study authors likewise regard the software as “far from being turnkey technology,” creating “significant challenges” for smaller agencies, brands and publishers/retailers.
Surveys with over 200 data decision-makers found more than half of DCR users (52 percent) cite leveraging results/proving ROI as a challenge. About one-third are facing data interoperability/customization (39 percent), internal resource (38 percent) and privacy (32 percent) challenges when using DCRs.
Less than a third of users are using DCRs’ advanced measurement capabilities, such as attribution, return on investment (ROI)/return on ad spend (ROAS) measurement, media or marketing mix modeling, and propensity modeling and predictive analysis.
“So far, most companies are using DCRs for privacy controls, matching data for collaboration and data activation,” said Jeffrey Bustos, vice president, measurement, addressability & data, IAB. “But that only scratches the surface of what’s possible.”
Discussion Questions
DISCUSSION QUESTIONS: What do you think of the potential as well as the challenges of using data clean rooms to help marketers transition from third-party cookies for targeting? Have the barriers to using the technology put it out of reach of all but the largest brands and retailers?
Poll
Loading …BrainTrust
Nikki Baird
VP of Strategy, Aptos
Doug Garnett
President, Protonik
DCRs are a good idea in theory and offer a lot of potential in meeting global, privacy requirements while providing advertisers with better data. Unfortunately, DCRs are not cheap and, unlike what advertisers are accustomed to with television, they have yet to offer a single source of truth. There’s also the challenge that the data advertisers contribute and rely on is generally not uniform and that DCRs require a good amount of data collaboration across competitive entities. Unfortunately, this means that in their current state, DCRs will remain difficult projects to justify for the largest retailers and brands and out of reach for everyone else.
I mean, I know retailers who are still using credit cards to track consumers (possible, even under PCI requirements, but incredibly risky), so that should pretty much tell you all you need to know about the level of sophistication of retail marketers. In the grand scheme of things, they’re still trying to build any kind of 360 view of customers, let alone do that in a sophisticated way or leverage that for advanced analytics or engagement.
Risky, and just not being honest. Several years ago I accepted to meet with a credit card issuer who wanted to show off a new marketing channel to retailers. Essentially they were tracking individual customer card data and sharing/selling it back. I gave a hard pass because shoppers weren’t likely even aware this was going on. No thanks.
As John Lietsch said in his comments, DCRs are a good idea in theory, but many retailers have difficulty mastering basic descriptive analytics (using data to determine “what happened”). My counsel to retailers/CPGs is to spend their resources and capital on improving their analytic maturity first before spending any dollars on clean rooms.
What is the true value of this integrated data? In my experience, it can do no more than uncover whispers – not serious market opportunities.
And as my podcast partner Shahin Khan has observed, the value we get from data asymptotically approaches zero as the amount of data we have increases. Meaning we get ever less value from ever more data. Retailers should be wary of what they’re being sold.
Simply put the potential is quite high, but so are the challenges. Those challenges involve cost and expertise as Tom’s article indicates, but the real problem is that brands and retailers still see data and data analytics as the province of the CTO or CIO not as integral, integrated and foundational gear driving all activities. Without adopting that mindset they will never build strong tech capabilities.
Brands and retailers need better data to elevate customer experience, help customers make a purchase decision, inspire customers to add product to cart (wish-list, save for later) through personalized recommendation and making it easy for customer to move into checkout. Demand of clean data has increased and will continue to grow because retail brands would need clean data to construct audience from past purchase/lapsed buyers, adjacent category buyers, prospecting segment, and online signals that help predict customer’s future purchase intent. Running a data clean room will be expensive, complex and need expertise, therefore brands & retailers must keep end goal clear that is to democratizing the access, usage and adoption of data by the creation of streamlined dashboards for business leads. The end goal of a data clean room should bring all stack holders to an agreement to invest in the project.
Data clean rooms are the future if cookieless marketing. The only problem with that is exactly no one is prepared for it today. It is, indeed, destructive innovation, emerging at a time when we are just beginning to figure out a new normal. We are a long ways from the scaled potential of what DCRs can be.