The Loss of Third-Party Data and How Marketers Can Respond
Between the demise of third-party cookies, the increase in privacy regulations, and rapidly changing consumer attitudes on data privacy, marketers today are facing less access to consumer data and thus more challenges with hitting their numbers.
We’re experiencing a seismic shift in how brands can collect, use, and report on customer data. The impacts of third-party data deprecation are significant—and becoming more apparent every day.
So let’s take a deep dive into the latest research around third-party data deprecation: what’s driving it, how brands will feel its impacts, and how marketers can respond.
What is Third-Party Data Deprecation—and Why is it Happening?
Third-party data is any information collected by a company or entity that doesn’t have a direct relationship with consumers, like an ad tech provider or aggregator. These companies would collect data provided by tech platforms like Apple, Google and other sources across various websites, and then use that data to build profiles of individuals.
This kind of data has powered digital advertising for years, but is now going away. A Forrester Consulting study attributes this disappearance to four key drivers:
- Consumers’ privacy-protecting behavior
- Privacy laws
- Browser and OS restrictions (including third-party cookies)
- The proliferation of “walled gardens”
Each of these drivers will impact your brand differently, depending on the marketing channels and tactics you use. Understanding why and how these changes are taking place will help you develop a plan of action to respond.
01 Consumers’ Privacy-Protecting Behaviors are Blocking Access to Data
Consumers are growing increasingly savvy—and worried—about how companies are collecting, using, and sharing personal information online. Eighty-six percent of Americans name data privacy as a growing concern, and 62% of consumers claim that protecting data and cybersecurity is the most important factor in whether or not they trust a business.
And consumers aren’t just expressing concerns. They’re taking concrete actions to protect their own privacy, including:
- Opting out of third-party data storage.
- Installing ad blockers.
- Regularly clearing web browser history and cookie caches.
These habits aren’t new, but they are growing. For example, estimates now suggest 37% of consumers use an ad blocker on their desktop. As this increase in privacy-protecting behaviors grows, your ability to access third-party data will continue to decline.
02 Privacy Laws Like GDPR are Reducing Third-Party Data Collection
Government agencies are slowly but surely taking steps to protect consumer privacy. In recent years, legislation like the European Union’s GDPR (General Data Protection Regulation) and California’s CPRA (California Consumer Privacy Act) has introduced new requirements for businesses to safeguard personally identifiable information.
These laws have led to changes like the rise of the now-ubiquitous cookie consent banners and the creation of new pathways for customers to opt-out of sharing data. Consumers can now exercise their “right to be forgotten” by requesting that a company delete their personal information, including backups, altogether.
New protections like these make it easy for consumers to more easily opt-out of third-party data sharing, which reduces your ability to track and collect behavioral data for your website visitors.
03 Browser and OS Restrictions—Including Third-Party Cookies—Are Deprecating Data
To get ahead of further government legislation and prove their ability to self-regulate, tech companies have begun introducing their own privacy-first policies and features over the last few years. Here’s a quick overview of a few ways tech giants like Apple and Google are changing their approaches to third-party cookies, mobile ad identifiers, and email privacy in the name of consumer data protection.
The Death of Third-Party Cookies
Browser-based third-party cookies—the kind Google Ads and other digital ad providers use to monitor consumers’ website behavior and follow them around the internet with ads—are being phased out. Google Chrome is joining Safari and Mozilla in ending support for these cookies by the end of 2023, which means ad buyers will lose the ability to target a specific individual across multiple websites. Considering this kind of programmatic advertising accounted for over 78% of U.S. spending on display and video ads in 2020, that’s a pretty big deal.
Mobile Ad Identifiers
Mobile ad identifiers (MAIDs) are numbers assigned to mobile devices by providers, like Apple and Android. MAIDs enable data providers and marketers to target and track mobile users across apps, much like how cookies track website users across desktop browsers. And just like third-party cookies, MAIDs are being restricted by tech companies in the name of privacy—at least to some extent.
In April 2021, Apple announced a small but significant change to its mobile ad identification system, or ID for Advertisers (IDFA). Under its new operating system, users would be asked via pop-ups if they wanted to allow apps on their phones to target them for ads. Rather than navigating through cumbersome settings menus, the new feature—App Tracking Transparency (ATT)—means consumers can now opt-out by simply tapping a button.
Other mobile providers, like Google’s Android, are rolling out their own mobile ad ID modifications to stay ahead of the curve on user privacy. But since Google relies heavily on ad revenue, the changes likely won’t be as broad and blunt as Apple’s ATT.
Mail Privacy Protection
Apple, yet again, rolled out a new security feature in September 2021 that protects consumer privacy while leading to further data deprecation. When users opt-in to Apple’s Mail Privacy Protection (MPP) as part of their iOS 15 update, they effectively choose to hide their IP addresses from email senders and privately load all remote content received through the Apple Mail app.
For marketers, this means the pixels contained within email content will be privately loaded, and every email will appear as an open—even if the recipient deletes or never looks at the message. While email open rates aren’t exactly considered third-party data, this once-standard email metric has become unreliable for Apple users, along with dynamic content and nurture campaign triggers that rely on accurate open data.
04 Walled Gardens Like Facebook Are Siloing Customer Data
Ad tech platforms may be dreading the loss of third-party cookies, but tech titans with closed data ecosystems—like Google, Facebook, and Amazon—still collect and control immense amounts of customer data. Thanks to their exclusive access to billions of users (and their proprietary data), these “walled gardens” don’t have to rely on third-party data to earn their two-thirds share of total US digital ad revenue.
For example, while Google may be responsible for the death of third-party cookies, it’s simultaneously developing an alternative approach to advertising called Federated Learning of Cohorts (FLoC). FLoC can continue to collect data at a reportedly more privacy-friendly cohort level—and continue showing targeted ads to relevant audiences.
Marketers at smaller companies can pay to leverage the data within these “walled gardens” to reach customers with tailored campaigns, but you won’t get access to the data to help inform your customer profiles, customer journeys, or other marketing activities. What happens in a walled garden stays in a walled garden—and that means further third-party data deprecation.
How Third-Party Data Deprecation Impacts Marketers
Obviously, less access to customer data means less insight into your customers. But according to the Forrester study, marketers report feeling the pain of data deprecation across many key functions:
- Acquiring new customers (69%) and their data (72%)
- Deriving customer insights and intelligence (69%) and using it for personalization (70%)
- Cross-selling and up-selling (71%)
These concerns are real. Measuring ad campaign success and maintaining multi-touch attribution models will become more and more challenging as third-party cookies disappear. Even as these developments are still being rolled out, benchmarks and earnings reports are reflecting the early impacts of third-party data deprecation.
Open rates have, as marketers predicted, become increasingly unreliable. By looking at adoption rates of iOS 15 and Apple privacy features, email providers are estimating that 40-50% of all email opens now come from MPP users. That’s translated to steep—and completely artificial—increases in open rates, according to benchmark reports.
While it can be difficult to tie specific privacy policies to the success of targeted ad campaigns, we can get an idea from one staggering number: $10 billion. That’s how much Meta, Facebook’s parent company, is estimated to lose in advertising revenue in 2022 as users have overwhelmingly opted out of data sharing through Apple’s App Tracking Transparency feature—all due to the increased challenge of accurately targeting and measuring advertisements. And of course, that overall loss of revenue ultimately flows from millions of brands that have previously relied on Facebook to deliver reliably targeted ads.
And Facebook is far from alone. In their earnings calls, brands like Snap and Peloton have blamed Apple’s ATT for lost revenue and lower-than-expected customer acquisition—even as they’re careful not to disparage a more privacy-friendly future, which is what their customers want.
How Can Marketers Respond to the Impact of Third-Party Data Deprecation?
While these developments may all seem like bad news, there is a silver lining: brands that invest in building direct relationships with their customers will flourish. The days of shopping and paying for third-party data are coming to a close, but your team can now focus on creating lasting connections that will make a far greater impact than programmatic ad dollars ever could.
Now is the time to stand apart from the crowd by adopting a new approach: collecting and leveraging your own first-party and zero-party data.
Understanding First-Party and Zero-Party Data
First-party data is information that you gather from user interactions, which is more reliable and accurate than data given or sold to you by another party. Purchase history, product preferences, and website behavioral data are all examples of first-party data that you passively—but directly—collect from your customers on your own website or app.
Zero-party data is even more reliable, and is often considered the gold standard of customer data. Customers proactively share this kind of information directly with your brand, usually because you’re offering them something valuable in exchange. Customer surveys, gated form fills, newsletter signups, and loyalty program preferences are all examples of zero-party data.
How to Harness Zero-Party Data
Giving your customers something of value in exchange for personal information like their email, profile details, preferences, or profession can actually help build trust and brand loyalty in the long run. But the key to harnessing zero-party data is to offer and deliver a clear, meaningful incentive for customers.
For example, nutrition brand Gainful wanted to reach new customers and increase retention. The Gainful marketing team implemented an identity marketing program that offered exclusive discounts to students and members of the military. To redeem the offer, customers enter basic information into a simple form, and Gainful confirms their eligibility by using SheerID’s Identity Marketing Platform to verify their data.
The program gave Gainful meaningful zero-party data about their customers’ life stages and affiliations, which it then used to target those customers with customized content. The campaigns were a massive success—Gainful saw a 30% conversion rate among students and a 25% increase in first-month retention for the military.
This is just one example of how zero-party data helps marketers overcome our current catch-22: respecting consumers’ desire for more privacy while providing the kinds of personalized experiences that drive conversions and loyalty over time.
Curious to dive deeper into the ways leading marketers are planning to use zero-party data to mitigate the impacts of third-party data deprecation? Read the full Forrester study to learn more.