Why Acquiring First-Party Data is Not an Easy Substitute to Third-Party Cookies

“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 Seraj Bharwani, Chief Strategy Officer at AcuityAds.

There is no shortage of advice on alternatives to third-party cookies these days. The most frequently cited advice goes something like, if you can't use third-party cookies, then acquire your own first-party data. Problem solved. That is easier said than done.

For starters, it is one thing for Nike to build its own consumer-facing, online business and acquire first-party data through direct-to-consumer (DTC) relationships; it's another for Philadelphia Cream Cheese to do the same. Nike has tremendous expertise in the sports and fitness category and has plenty of related content that could help improve a consumer’s daily workout routine. A relationship with Nike brand is worth sharing personal information in exchange for relevant content and new product offers. I am not so sure I need such a relationship with Philly Cream Cheese.

To actively engage consumers and build DTC relationships at scale, brands typically need extensive investments in content, solutions, and services. Travel, hospitality, and retail brands have made substantial investments in loyalty programs over the past two decades to enroll frequent users/buyers of their products and services.

Delta Airlines, Walmart and CVS Health have more than 40% of their customers enrolled in their respective loyalty programs. These programs allow for active collection of user preferences and purchase behaviors, giving brands the ability to personalize customer experience based on first-party data.

For most consumer brands though, acquiring their own first-party data would be a major distraction and involve considerable investments in new capabilities that could drag profitability for many years. Large portfolio brands like Kraft Heinz, PepsiCo, and Clorox have made multiple attempts in the past few decades to aggregate key content assets like recipes and solutions into online sites/services (MyFoodAndFamily, PantryShop, and Bleach Solutions, etc.), newsletters, and catalogs to develop DTC relationships.

What these mega brands have proven is that success in this area requires leveraging media spend with publishers to create active partnerships and develop unique, compelling solutions for consumers. Acquiring scalable first-party data, requires substantive resource commitment, typically including years of experimentation.

Advertisers need clear guidance on brands that would be ideally suited for building DTC relationships to acquire first-party data at scale. As an initial test of viability, advertisers need to answer three questions to assess if a brand (or a brand portfolio) is best suited for a first-party, data relationship:

Does your brand have authority?

Brands with a strong authority in a specific category or lifestyle have a better chance at creating content that target consumers would value in exchange for sharing personal information and preferences. Red Bull, for example, has become an authority on adventurous lifestyle. The brand has become a publishing giant, with content relevant to a wide range of audiences seeking information on bold and risky sporting events.

Is your brand known for new products & frequent innovation?

Brands with a broad portfolio of innovative products, services, content, or bundled offerings have a better shot at acquiring a diverse range of behavior data by keeping the target audience engaged across a wider footprint of use cases. Netflix offers a wide range of programming attracting audiences with diverse interests and tastes for content. Viewers have a good reason to share personal information to get more relevant and new content. Glossier, Tarte Cosmetics and other personal care brands have a similar advantage due to frequent product introductions, and a product selection that is highly customizable based on consumer-expressed needs.

Do consumers have reasons to interact with your brand frequently?

Repeat use is critical for consumers to personalize their relationships with a brand. Frequent interactions allow brands to build a loyalty or subscription program, giving target consumers more reasons to share their data in exchange for compelling rewards. DD Perks is a highly successful loyalty program from Dunkin' Brands that engages consumers through the company's mobile app, helping users customize the selection, ordering and pickup as well as earn reward points for free products and discounts. DD Perks has 14 million members who are sharing valuable information daily with Dunkin' Brands.

There is no question that first-party data would be highly advantageous for targeting and measurement in the absence of third-party cookies. Unfortunately, most brands don’t have legitimate reasons to frequently interact with their target consumers unless they create new content, solutions, and services that consumers would value in exchange for first-party data. Advertisers should carefully assess the key strengths of their respective brands with regard to authority, product innovation, and interaction frequency to assess the viability of aggregating first-party data through DTC relationships.

Follow AcuityAds (@AcuityAds) and AdExchanger (@adexchanger) on Twitter.

 

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