A contrarian view on GDPR: How it will strengthen online advertising
Based in the UK, contributor Grace Kaye has given a lot of thought to how the General Data Protection Regulation will affect first-, second- and third-party data. Here's her analysis.
The General Data Protection Regulation (aka GDPR). It’s coming, in case you haven’t heard this a thousand times already. Still, nobody seems to be getting into the nitty-gritty of how it will affect the supply of data, i.e., the stuff we use to make advertising awesome. So here’s my take on that.
I can’t fully answer a question of this magnitude in this post, but I will try to summarize how I expect the three main types of data used in most programmatic campaigns will be affected: first-, second- and third-party data.
This is just a prediction but should help anyone doing programmatic advertising to prepare for the GDPR. Note that the GDPR theoretically applies only to data collected from European citizens, but it’s likely to force change in the business practices of companies in the US as well.
First-party data: Lower volume, better quality
The theory is: first-party data collection will decrease as users exercise their right to keep personal data from websites and social media platforms.
After the GDPR is implemented, personal data sharing will be opt-in, companies will need to obtain consent to process personal data, and there will be no punishment (i.e., not being able to use a service) for those that don’t share their data. Data collectors will need to be explicit about how they will be using data, which may also deter sharing.
Based on these changes, it seems probable that the supply of first-party data will decrease. A 2010 study by the European Commission (EC) found that “89% of respondents agreed that they avoid disclosing their personal information online.” GDPR will certainly increase people’s options in this respect, which many may take advantage of.
However, it’s worth keeping in mind that many people at the moment are sharing as little as possible and in some cases falsifying their data. According to the same study by the EC, to protect their identity in daily life, “62% of the Europeans give the minimum required information.” A survey of US internet users by the Pew Research Center found that 24% have “given inaccurate or misleading information about themselves.” And European research by Symantec found that 33% of respondents “admitted they provide false information [online] in order to protect their privacy.”
Because they will have greater knowledge and control within the data exchange, users are more likely to be honest and forthcoming in their data sharing. So, although fewer people may share their data, those that do are more likely to share accurately and thoroughly.
Second-party data: There will be more!
First of all, for those not in the know, the basic definition of second-party data is first-party data you get from someone else. It might sound weird that the GDPR ought to increase the supply of second-party data — surely the new regulations will restrict data collectors from sharing with others? In my opinion, it will actually free them up to do so.
Individuals need to opt-in, based on an explicit statement of what the data collector intends to do with their data. So long as websites and platforms are explicit about their intention to share with others, there is no legal reason why the GDPR can’t give a massive boost to the practice of sharing data (perhaps more accurate data) between similar organizations.
Imagine if it became common practice for all hotel websites to share their data with each other, for example. The stumbling block for second-party data, up until now, has been the ambiguity of existing data privacy laws. The GDPR will bring clarity and hopefully enable a much healthier data economy. Advertisers may be able to capitalize on high-quality, high-reach datasets from these sources.
On a separate point, social media platforms, along with major e-commerce sites like Amazon, have become some of the most prominent second-party data providers. Consumers are aware by now of the inevitability of encountering adverts on these platforms, and will, therefore, have an incentive to improve the personalization of these ads. Facebook’s improvements to transparency in this respect are a taste of things to come and demonstrate how positive the GDPR may be on second-party data.
Third-party data: Finally, a better general standard of quality
Anyone who has ever run a programmatic campaign will know how unreliable third-party data can be. Without knowing the provenance and exact nature of the data set, advertisers have had to initially rely on luck, and then gradually optimize their use of third-party data through testing. It’s wasteful and inefficient. The GDPR will cause a massive improvement to this.
When you consider that more than $20bn was spent on third-party data in 2017 in the US alone, according to a Winterberry Group study conducted for the Data Marketing Association and the Interactive Advertising Bureau, it’s about time we cleaned it up. Vendors who are not GDPR-compliant will be cut from data management platforms (DMPs) over time (not to mention heavily fined), and most of those will be using practices that don’t lead to reliable data.
Undoubtedly there’ll be an initial tentativeness –- of all the types of data, third-party is the most convoluted in terms of the network of parties it is liable to involve, and there are nuances between data processing and data holding which need to be clarified. But, eventually, it will lead to higher quality data.
The GDPR is awesome for digital advertising in general
The GDPR will certainly help to clean up the data supply. Perhaps even more importantly, instead of taking data covertly, using it mysteriously, and creeping out consumers, it will give us the opportunity to gain consumers’ consent and trust by improving our transparency.
In every academic study on this topic, there is consensus on at least one thing: greater transparency equals greater trust between the individual and the advertiser. And with greater trust, brands can expect a far better overall relationship with their customers.