This article is part of a VB special issue. Read the full series here: How Data Privacy Is Transforming Marketing.

For more than two decades, the holy grail of marketing has been focused on one-on-one connections between brands and shoppers. Companies that previously used television commercials to target the masses raced to take advantage of technologies like third-party cookies that tracked consumers across the internet — sweeping up vast swaths of easy-access data in order to serve precise ads to potential customers who might be interested in that very thing at that very moment. 

Now, the marketing landscape is in the midst of another near-total transformation, thanks to a growing focus — by consumers, regulators and Big Tech companies — on data privacy

By 2023, 65% of the world’s population will have modern privacy regulations protecting personal data, according to Gartner, while only 10% had those protections in 2010. The EU’s GDPR and California’s CCPA have led the way. Meanwhile, in late June, the Energy and Commerce Committee formally introduced the American Data Privacy and Protection Act (ADPPA) to the U.S. House, marking a major step forward for congressional data privacy negotiations.

It’s getting real

“I think the wake-up call is here,” Anthony Katsur, CEO of IAB Tech Lab, told VentureBeat.

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IAB Tech Lab is a nonprofit consortium with a global member community, created to develop foundational digital media technology and standards. “The industry is starting to react to the fact that this is real, and it’s going to become more real with real penalties, real fines, real ramifications for your business,” he said.  

Beauty retailer Sephora is one company that is already feeling the heat, with a $1.2 million settlement with the State of California announced last month. 

Meanwhile, third-party cookies have been almost completely phased out. Chrome, the most popular browser, remains the last major holdout, as Google recently announced it won’t get rid of third-party cookies in Chrome until the second half of 2024. But while this gives marketers a reprieve, advertisers see the writing on the wall about the deprecation of third-party cookies and most major brands have long been testing other options. 

In addition, some Big Tech companies have changed their privacy policies. Tim Cook, Apple CEO, has called protecting privacy “the most essential battle of our time” and Apple released App Tracking Transparency in its April 2021 mobile software update. Meanwhile, Google announced a multiyear plan to update Android privacy policies in February 2022, in order to catch up to Apple in limiting third-party data sharing on its devices. 

Marketers are second-guessing individual targeting

All of this has led to a dizzying sea change for marketers, experts say, who have to adjust to a new age of marketing in a world focused on data privacy.

“I think for the first time in 10 years, we see marketers second-guessing whether or not one-to-one communication and personalization is actually what they should strive for any longer,” said Samrat Sharma, global marketing transformation leader at PwC. “The reality is it’s not clear that will be possible or necessary.” 

Audience-based communication will still be the norm, he emphasized, “The question will be how to do that in a way that’s still personalized because we do know people don’t want to feel individually targeted.” 

The trick is, consumers want it all, which means marketers have to walk an increasingly treacherous tightrope to meet their expectations. According to Boston Consulting Group (BCG) research, two-thirds of consumers want ads that are personalized to their interests, yet nearly half are uncomfortable sharing data to create personalized ads. 

“At the core of it, the consumer is getting more aware of their privacy and demanding more from the value exchange around providing more privileged access to the brands,” said Sharma. “That’s what’s driving regulators to act, but then, in turn, manufacturers and publishers can respond to that,” he explained. 

A new marketing direction

In a shifting marketing universe where shoppers crave personalization but also want privacy protection, what is a marketer to do? The answer, experts say, is to market smarter, with different formats and even newer technologies that help maximize conversion while keeping data privacy at the forefront. 

“​​It’s not going to be as simple as just targeting people based on third-party data,” said Andrew Frank, VP analyst at Gartner. “If you are a retailer or financial services company and you have a direct relationship with your customers, you have a lot more opportunities to solicit consent for personalized services.” 

Companies that have an indirect relationship with consumers, such as in consumer packaged goods, will have to start looking at more subtle efforts, like contextual targeting, an emphasis on tailored creative, and advanced artificial intelligence (AI) and analytics capabilities that can optimize based on non-personal signals, he explained. 

That has led to many, many efforts to replace third-party cookies with privacy-focused alternatives. Frank says he’s bullish on recent innovations such as IAB Tech Lab’s seller-defined audiences, in which rather than publishers sharing person-specific identifiers with advertisers like a cookie-based ID or an email address — audiences are grouped into categories based on demographics, interests and purchase intents using IAB Tech Lab’s Audience Taxonomy standard. 

“This enables publishers and retailers to define audiences for brands in a constructive way that doesn’t violate privacy,” Frank said. “I think they’re still working on modifications to the transparency and consent framework that would enable some kind of secure market for conceptual data in the advertising space.” 

Zero-party data, which goes beyond first-party data to focus on data that consumers voluntarily and deliberately share through website activity, messages, profiles and quizzes is becoming an essential trend, according to Vivek Sharma, CEO and cofounder of Movable Ink, which uses AI to personalize marketing content. 

“If you fill out a wedding registry, that’s an example of zero-party data — you’re actively telling them what your preferences are and what you’re interested in,” said Vivek Sharma (no relation to PwC’s Samrat Sharma). “But this whole world of third-party data — where your information is broadcast — is over and done. No credible company is betting on that in the future.” 

Still, Katsur says he doesn’t think there will ever be a single solution to the future of addressability — the ability to target specific individuals — at scale for marketing purposes. 

“It’s going to be a portfolio solution, whether that be first-party identifiers or seller-defined audiences,” he said, adding that IAB Tech Lab also recently formed a working group to advance privacy enhancing technologies (PETs). This working group brings together developers working on advanced cryptography, data science and privacy, as well as security systems engineers, to develop privacy-enhancing standards and software tools using encryption, de-identification and machine learning.   

“That said, I think we’re on the cusp, perhaps, of a third act in digital marketing where I think there’s an opportunity for a renaissance in the ecosystem,” Katsur said. “There will be pain and turbulence, but I will not count out this industry in their ability to innovate to solve for the needs of marketers, media companies and consumers.” 

Things marketers should do

1. Evaluate your investments

“I think there is a need to invest in new technologies and reevaluate the investments you may have made three or four years ago because the landscape has changed and it will probably continue to change,” said Gartner’s Frank. 

This is a volatile period, he explained, with big shifts in regulatory constraints, technology and what marketers can expect to deliver in terms of data access.

“For some retailers and publishers, this looks like an opportunity because they have the capacity to capture data and use it as part of their relationship building, such as through a loyalty program,” he said. 

Others will need to invest in emerging technologies such as data clean rooms, which enable the secure collaboration of organizations around consumer data without leaking personal data to counterparties.

“I think those technologies hold a lot of promise and clearly require some investment and experimentation to get right,” he added.  

2. Work in partnership across the organization

If consumers value privacy, and that trend is growing, technology solutions have to be in service to customers, said PwC’s Samrat Sharma, adding that while it is easier said than done, it has to start with partnering across the organization.

“It’s about what you are trying to achieve,” he said. “If you don’t do it in partnership with IT or transformational teams, then you might stand up a DMP replacement, for example, but it won’t address broader business goals.” 

That means areas including analytics, IT, marketing and transformation need to come together so that everyone knows what the ultimate goals are, then ask “How are the technology and solutions we’re deploying in service of those goals?” 

3. Ask the right question

Frank added that one of the biggest questions he gets from marketers is, “How can we continue to target and measure our advertising in a way that keeps us accountable to the business under these increasingly restrictive constraints?” However, that may not be the right question, he explains. 

“I think the question that they should be asking is, how can we design a future that both respects consumer privacy and interests in general, and still enables us to deliver the best possible experience to our customers in a way that enhances the value of our brand, as opposed to genericizing it?” he said. Of course, these questions don’t have easy answers: “I think this is a problem that has a solution,” he said. “I think the road to the solution is very complicated and thorny.” 

Marketers won’t wait to take action

Today’s consumers, of course, can easily vote with their feet — or with a website click.

“So, it’s incumbent upon the marketing and advertising industries to figure out how to give consumers the privacy and data security they want, as well as the personalization they crave,” said Katsur. 

“If they’re going to be served ads, they might as well be relevant,” he added. “And let’s be clear: advertising isn’t going away. I think we all realize that.”

As the holiday season approaches, complying with the new world of data privacy is becoming table stakes, added Movable Ink’s Vivek Sharma.

“Marketers have to put on their thinking caps and go back to the drawing board about fundamentally creating value for their customers and earning their customers,” he said. 

Still, experts agree it is early days when it comes to solving issues related to marketing and data privacy. 

“I think I’m somewhat optimistic in the long term, but I think it’s one of those situations where you have to be careful not to confuse a clear view for a short distance,” said Frank. 

But marketers aren’t just going to wait for the final nail in the third-party cookie coffin to take action, emphasized PwC’s Samrat Sharma. “There’s still uncertainty, but they know they need to do something,” he said. “Everyone’s sick of kicking the can down the road. They’re moving forward with solutions.”

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