Today, the conversation around data—its acquisition, value, utilization and privacy concerns—have been a central topic. The merits of first-party data are hyped, especially with the deprecation of 3P cookies, setting the stage for a recent piece by James Hercher in AdExchanger that challenges these assumptions and struck a nerve with the AdTech community.
Hercher boldly questions the value of leveraging first-party (1P) data for marketing, highlighting the struggles of digital native direct-to-consumer (DtC) brands like Allbird, Dollar Shave Club, and Bonobos. He suggests that the first-party data revolution is more a marketing tactic for giants like Amazon or Google. Given the low-cost data solutions they offer (such as AWS’s Entity Resolution or Google Cloud’s data clean room) – he states, “first-party data revolution is something that happens on Amazon or Google, not inside your own business”
Is he right?
There definitely are some uncomfortable truths to explore. CDPs have under-delivered expectations after being sold as a marketing data easy-button. Conversion rates have stayed the same, despite MarTech SaaS category growing 7,250% in a decade. Amazon, Google, and Snowflake have all unveiled products in direct competition to some of MarTech’s independent darlings, and are poised to underpin the $200 Billion cloud advertising market.
We think it’s crucial to take a step back and look at the bigger picture. The challenge is not inherently with the 1P data or the technology, but instead the enormous gap in the ability of organizations to effectively use their first party data. The promise of having all customer data at a Marketer’s fingertips has run into the reality of organizational challenges such as data ownership, data quality, business operations, privacy management, and gaps in skill sets.
Not to mention challenges with gross underinvestment – especially after a decade of being sold false promises and implicitly accepting billions of waste in 3P cookie targeting. Another Marketing “easy” button! As industry evangelists, it disappoints us to see Marketers become glorified vendor managers, outsourcing rather than breaking down silos with their IT counterparts.
“1st Party Data Was Supposed to Be Everything”
Hercher falls into a trap that we see over and over. It’s not about the 1P data, or the CDP, or the MarTech acronym or about the shiny object. It’s about defining (and measuring) business value, understanding your customer, and letting Marketers be better Marketers. The technology and data support capabilities and use cases, of which if there isn’t clear business value, any initiative is destined to fail. We, at minimum, advocate calculating Total Cost of Ownership (TCO) before investing in large technology projects, and comparing it against expected business value.
This is where we fully embrace Google, Amazon, or other tech giants ability to provide capabilities at a reduced cost. To us, the argument that managing 1P data is too expensive with the supporting evidence of… low cost data solutions… doesn’t pass the sniff test. The winners of a “free” identity tool like AWS Entity Resolution are enterprise clients, who can demonstrate a lower TCO with expanded capabilities. SaaS MadTech providers are forced to diversify their offerings to protect their business.
The business school case is straight forward. For example, if Habu (a “no-code”, business friendly Data Clean Room) is able to add additional value on top of technical clean room services that Snowflake already provides, it’s a great thing for enterprises that demand that capability. Vertical integration of digital products is a trend that isn’t going away, and we’re bullish on “composable” CDP architectures in which the CDP is the data warehouse. See the U of Digital’s “Warehouse Native model” presentation for foundational understanding, or our John Lillard’s excellent, detailed overview on the future of CDPs for more information.
A Quick Note on Data Usage for CPGs
In our experience, the question of business value of 1P data for CPG companies is a significant one and rightfully questioned. As Conagra’s Alex Birchmeier brings up, a strategy of efficient reach instead of expensive “1:1 personalization” can often be a better route. Certainly as a consumer, I would question the need for Birds Eye Vegetables to have and leverage data on me for targeting. However, leveraging a Retailer’s segment to make me aware of a new product in a category I’m already buying might be.
At Transparent, we’re experts in modern approaches to Data, Technology, and Marketing Operations. We specialize in making sure businesses get the most from their data and technology investments, ensuring our clients are equipped to steward through inevitable challenges.
Oliver Amidei, Sr. Director, Data & Analytics
