Data clean rooms (DCRs) are all the buzz in the martech space at the moment. But do they truly warrant the hype as the “it” solution to the identity challenges marketers face against the backdrop of increasingly strict privacy regulations?

What is a DCR?

Generally speaking, a DCR is a secure and compliant data-sharing solution that a brand can leverage to learn more about another brand’s customer data. It fosters collaboration among brands similar to the way platforms like Google and Facebook have long provided, enabling them to form audiences, advertise and gain insights into their direct user base.

Why would brands want to share data?

If a brand doesn’t have enough first-party data and can’t find reliable third-party data, there may be a partner in their ecosystem who potentially has the information they need to keep their business thriving. Second-party data is defined as strategic partners working together to collaborate with each other’s first-party data in a mutually beneficial way born out of a new need for controlled, privacy-conscious, sharing of information.

DCR guidelines and regulations keep data usage in line with today’s evolving privacy laws. As an example, just recently, the Australian Attorney-General’s Department released its highly anticipated review of the Privacy Act 1988, which aims to align Australia’s laws with global standards of information privacy protection and properly protect Australians’ privacy.

The potential reforms cover an expansive range of issues from implementing new limits on targeted advertising (particularly, ads aimed at children) to including a suite of individual privacy rights, like the “right of erasure” and deindexing search results with sensitive or inaccurate information, among others.

The rise of data clean rooms

Major changes to consumer tracking and consent-first policies have led to the degradation of the third-party ecosystem that has powered media buying for two decades. In fact, 64% of advertisers recently shared that Apple ATT, which requires user permission to track their behaviours, is hurting their results. Now is the time for brands to run, not walk, toward first- and second-party data strategies. This will be key to uncovering valuable and useful insights.

This helps to explain why DCRs, which enable collaboration between brands, are quickly becoming an avenue to discover interested high-value audiences. Recent predictions indicate that 80% of advertisers with media buying budgets over AU$1.43 billion will use DCRs by 2023, estimating that there are currently between 250 to 500 data clean room deployments that are either active or in various development stages.

However, despite their swift rise to fame, they’re not exactly the ‘superhero’ that can save marketing strategies in the face of a looming recession like some in the media have made them out to be. At least, not on their own.

How first-party data customer data platforms (CDPs) enable second-party data collaboration

While a DCR is good at what it does, matching audiences and allowing brands to find the segments they want to target; it’s a moot point if the data it’s fed isn’t in a workable state in the first place. A DCR cannot provide value without trustworthy, unified data.

After all, good data powers good marketing. If the data on both sides is unreliable and outdated, then neither brand will get the results they desire. ‘Garbage in equals garbage out,’ and no amount of marketing or money will change that.

That’s where a customer data platform (CDP) comes into the equation and second-party data collaboration can be maximised.

Second-party data and data collaboration scenario

A brand turns to a partner in its ecosystem to ‘fill the gaps’ where it lacks the data needed to thrive. Consider this:

Company A is a clothing manufacturer that specialises in brightly coloured tropical shirts and thongs. It wants to reach audiences that are about to embark on a sunny holiday.

Company B is a travel agency that helps customers book and plan their journeys. Company B can choose to work together with Company A by collaborating on parts of its first-party data, so Company A can display complementary offers for its signature clothing to those who are about to take a relaxing holiday.

Second-party DCR examples:

• Partnership with external brands to provide innovative customer experiences and grow loyalty
• Working internally within a multi-faceted enterprise with disparate sub-brands
• Alliances with publishers, advertising partners, programmatic ecosystems, retail media networks and social media platforms to deliver better advertising outcomes
• Retail & CPG. Working with a supply-chain partnership to increase the effectiveness of brand and performance marketing with stronger insights, accurate targeting, measurement and attribution
• Co-marketing partnerships
• Customer and market overlap analysis in merger and acquisition situations

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How first-party data CDPs enable second-party data collaboration

A tremendous amount of effort can go into the planning and execution of a data collaboration (with or without a DCR), but there are obstacles that arise that can easily be solved with a CDP.

A CDP is a SaaS technology platform that creates a persistent, unified, omnichannel view of the customer. Data for a CDP is traditionally pulled from multiple online and offline sources where it is then cleaned, combined and intelligence applied to create a single customer profile for analytics, measurement and customer engagement across loyalty and engagement scenarios.

Technical barriers a CDP solves for:

• Flexibility: The ability to easily manage different views of customer data eg. lists, audiences, segments, and transactional and behavioural market data is needed to be able to work smoothly with partners.
• Unification: Bringing complete, standardised, and the most up-to-date customer profiles will maximise the value a brand can bring to a data collaboration.
• Agility: Fast data orchestration. CDPs are purpose-built for sending and receiving data inside and outside an organisation.
• Auditability: The careful and controlled tracking of first-party data to any internal or external destination has always been a fundamental part of CDPs, and the increased need for an external second-party data collaboration is the next logical step.

Business barriers a CDP solves for:

• Funding: Resources needed to engage in a second-party data collaboration are substantial, and often not feasible due to the value derived, or frequency of use.
• Trust: Implicit trust is needed when managing sensitive (and valuable) first-party customer data.
• Relatability: The most common use cases around second-party data collaboration are the sharing of contact and market insights. Organisations already specialise in the management of sensitive first-party data and understand the business use cases that are needed for success.

The future of data clean rooms

As the advertising technology ecosystem evolves, organisations and brands must rethink how first-party data is integrated due to third-party identity graph and cookie deterioration, government legislation and the increasing consumer demand in a privacy-first data world.

For marketers, that means building a flexible foundation to unify, activate and acquire new and existing customers based on a consistent view of their first-party data. With this, navigating the complex MarTech landscape is simpler than you think.

Join Amperity Area Manager Billy Loizou for a deep-dive into the current MarTech landscape, the challenges with the ever-growing tech stack and how they’re tackling these challenges in their own organisations with first-party data at Marketing Live 2023, held the 20-21 March.

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About Amperity

Amperity is the leading customer data platform provider that helps companies use data to improve marketing performance, build long-term customer loyalty and drive growth. Amperity’s flagship enterprise CDP is used by many of the world’s best-loved brands, such as Alaska Airlines, Endeavour Drinks, Kendra Scott, Lucky Brand, Planet Fitness, Seattle Sounders FC, Under Armour and Wyndham Hotels & Resorts. For more information, please visit amperity.com or follow @Amperity.