“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Erik Matlick, CEO and founder of Bombora.
Marketers around the world are struggling with two competing truths. First, audience data has never been more important for delivering successful campaigns. At the same time, however, collecting, purchasing and using audience data has never been more fraught with danger.
It feels impossible that both of these things could be true at the same time, yet here we are.
Third-party data is a $12 billion market. There are many companies angling for a piece of that pie. And when you get a competitive market, you get companies that start testing the limits of what’s acceptable. That’s how our industry ended up with laws, regulations and potentially crippling fines for breaking established rules.
As a result, by now, advertisers that use audience data are aware of the need for GDPR and CCPA compliance. What many may not know, however, is that another nefarious practice runs rampant in the audience ecosystem and poses a host of problems.
This issue – terms and conditions violations – is a ticking time bomb. Yet many in the industry are either oblivious or convinced they won’t be harmed when the bomb finally goes off.
The untold story of derivative works
It may come as a surprise, but a high percentage of available audience data segments are assembled in direct violation of the terms and conditions of the platforms that own the data.
The heart of this issue is bidstream data, the log-level data generated by the tech platform partners involved in a programmatic transaction. Information like location, device, the URL that the impression appears on and anonymous audience information are made available via the bidstream. While this is useful for the advertiser that ultimately wins a bid, bidstream data is available even to tech companies that don’t make the winning bid.
Tech companies then use this access to build their own audience models. This is commonly known as derivative works. Most programmatic platform T&Cs prohibit this practice, which means any bidstream-informed audience products are in direct violation of ad inventory contracts. Still, audiences built on bidstream exhaust run rampant.
The reason so few advertisers are aware of this potential landmine is that it’s rarely treated as a danger at all. But if the past few years of privacy regulation have taught us anything, it’s that no brand can get complacent with its strategy. Bidstream-derived audiences are built on an unstable foundation, and there are a number of ways the house could come down.
- Legal action will set an example
T&C violations provide companies with grounds to sue if their data is repurposed to build derivative works. The resulting lawsuits would then disincentivize other companies from going this route in the future. It would also lead to companies quickly pulling their bidstream-based products from the market. While this would immediately clean up the ecosystem, it would also leave many advertisers in the lurch, especially those that had built their entire strategy on derivative works.
- Regulation is inevitable
Regulation looms over any kind of third-party data. Tighter EU restrictions on behavior-based consumer ad targeting may be on the horizon. We still can’t rule out national privacy laws here in the US. Tighter regulation could also lead to bidstream players pulling their products from the market in order to comply. Again, the result here would be brands scrambling to adopt products that are both effective and compliant.
- Penalties are possible
With both legal and regulatory action comes the possibility of monetary penalties. Absolutely no brand or agency wants to get fined for violating GDPR and CCPA. No one should want to face a fine or legal settlement for using bidstream-derived works, either. Because these works are indeed built in violation of T&Cs, there remains the possibility that any brand or agency knowingly purchasing these products is also in violation and open to a suit.
Clearly, there’s no economic incentive to use data products derived from the bidstream. Even if the data is currently delivering more effective performance, no brand can afford to build their audience strategy on top of a house of cards.