Privacy Trends: The Impact on Digital Marketing
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Concerns over user privacy have been rising with increasing force since the earliest days of the internet. As new legislative frameworks and technologies that safeguard user data advance, businesses that rely on measurement models from a now bygone era are scrambling, hamstrung by signal loss. The models and practices that were once reliable now introduce ambiguities that drastically compromise campaign performance because they depend on direct access to unfettered consumer data.
Recent innovations in measurement, like advanced Marketing Mix Modeling platforms, are part of a new playbook for the new Privacy Era. These privacy-resilient, holistic platforms can powerfully exceed the capabilities of online attribution methods. They incorporate tested methodologies, now expected to reshape the advertising ecosystem for years to come.
Over the past two decades, big data has been doubling in size every three to four years, and today over 98% of the world's information is stored digitally. This contributed to significant advances everywhere. For one, data science has set new standards of excellence in almost every field. From healthcare and finance to genetics and environmental studies, the ability to analyse electronic information has led to ground breaking discoveries, more effective decision-making, and a deeper understanding of complex phenomena. This data was hyped as the 'new oil,' for a reason: its availability transformed commerce. Widespread access to user-level data provided even small businesses unprecedented access to consumer insights. As the proliferation of user-data ramped up alarms that started to ring every now and again as early as 1995, became louder and more constant. First in Europe then in the US, societies around the world contended with harmful externalities that gave rise to ethical questions about privacy, individual rights, and potential effects on society when every action and personal detail can be meticulously recorded and analysed.
(For a complete timeline, scroll down to the bottom of this article.)
Where did things go wrong?
If the alpha and the omega for user privacy is the third-party cookie (privacy concerns first arrived with the invention of the cookie in 1995, and next year cookies will be phased out entirely), the technologies and businesses that were fuelled by user data grew into an entire digital marketing ecosystem that overtook all of advertising. What followed were multiple privacy and security setbacks - from unauthorised collection of personal information to data breaches and widespread identity theft. These events grabbed headlines for over a decade and impacted millions. The writing was on the wall. As networked media became embedded in nearly every facet of daily life, the ongoing heated debates on ethical data usage were finally addressed in 2018 by legislation in Europe, the GDPR.
Major tech companies were also swept up in a fierce, public competition that drew a red line between privacy rights on one side and the ad platforms’ reliance on user-data on the other. Apple upended the entire ad ecosystem with the release of iOS 14.5 in 2021. The update deployed App Tracking Transparency that forced third-party apps to get user consent before tracking anyone on an Apple device. Widely seen as a shot at Meta and Google, whatever Apple CEO Tim Cook’s intentions, the new iOS derailed Apple’s rivals but it also dovetails with his strongly held beliefs. For years prior, Cook consistently took a vocal stance on the fundamental importance of privacy protections as a requirement for a prosperous society. He didn’t even relent FBI demands that Apple unlock a single iPhone. Undoubtedly, Apple’s customers now view security and privacy as an unbreakable brand promise.
Today, for most consumers, losing control of their personal information is no longer worth the convenience and other benefits that online platforms have provided, like new connections (with friends, family, or dating). Far from it. The growing awareness about online privacy has influenced consumer behaviour to take more proactive maintenance of personal information. Aside from voluntary 'Do Not Track' adoption, an increasing number of users have also made their desire for privacy clear by declining cookies whenever they are presented with the option.
This has cleared the way for Apple’s iOS 17, which disables URL link IDs for both Meta and Google, further diminishing their tracking services for advertisers. Google, for its part, is phasing out third-party cookies on Chrome sometime in 2024.
Welcome to the Privacy Era.
The legislative measures passed by the US and EU lay the groundwork for data privacy policy for the next century. The General Data Protection Regulation (GDPR) in Europe, the California Consumer Privacy Act (CCPA), and the upcoming American Data Privacy Protection Act (ADPPA) enshrine privacy rights; and they mandate strict data collection and storage rules for businesses, require explicit terms for consent from users, and drastically limit user tracking. The GDPR identified three fundamental privacy rights: the right to explicit consent (data opt-in), the right to be forgotten (data erasure), and the right to data portability (switch data to competitor). These regulatory frameworks mark a significant paradigm shift: now, and for the foreseeable future online privacy will be regarded as a fundamental human right.
While privacy legislation promotes a more ethical approach to data usage, these restrictions compounded existing challenges to online measurement methods that rely on granular user-level data to track customers. The increases in signal loss dealt repeated body blows to ad platforms and advertisers, many of whom still contend with profound new responsibilities and have been slapped with fines and audits, while racing to provide new solutions to help advertisers engage with their audiences. For businesses across the board, this has forced a re-evaluation of long-standing digital marketing strategies.
New Methods for Measurement
The area that is going through the most significant overhaul in recent months is measurement.
Though Multi Touch Attribution (MTA) rose in popularity as a functional, accessible foundation for measurement, now even robust MTA models are inadequate as stand-alone measurement systems. Signal loss has substantially compromised their precision and influence.
MTA works by attributing value to each touchpoint that leads to a conversion. Now, without user-level data, MTA models rely upon either rules-based or algorithmic allocations for the touchpoints that have become unobservable online. To provide marketers with more than just an approximate or theoretical reference, MTA models must be calibrated (for example, by using conversion lift studies). Without reliable data, it’s increasingly difficult to evaluate the ROI of campaigns. That uncertainty undermines planning, bidding strategies, and the validation of marketing channels.
Though attribution is still popular with the smaller, digitally native D2C marketers, this is because these businesses run small campaigns so tracking first-touch and last-click attribution suffices. Whether this can last and for how long, is up in the air. Regardless, once your advertising expands to UGC or podcasts, measuring how these marketing channels contribute to ROI is beyond reach for attribution modelling alone.
A more thorough measurement solution, like Marketing Mix Modeling is called for because it can capture the effects of real-world marketing channels, the impact of external factors, or cross-channel synergies activated across the entire 'marketing mix.'
Recently, MMM has re-emerged as a welcome, privacy-resilient solution for measurement and guidance. This is because MMM doesn’t rely on user-level attribution data. The latest marketing mix models work with aggregate information like advertising expenditure and sales figures. This aligns MMM with the demands of a privacy-first world.
At its core, MMM is a top-down statistical approach that quantifies the impact of marketing activities on target KPIs. What sets MMM apart is its ability to consider not just marketing channels, but also external factors like seasonal trends, economic shifts, and competitive behaviour. This provides a holistic view of the marketing environment that enables businesses to understand not just the impact of each dollar spent, but how those expenditures interact with one another, creating cross-channel synergies that generate sales, brand awareness, or whatever the target KPIs may be.
Privacy Timeline
