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Assessing the viability of first-party data

data privacy

In the wake of expanding regulations surrounding the use of consumer data for unprecedented purposes, the digital advertising industry is in for a massive overhaul. Google has announced the removal of third-party cookies and, although they have pushed the date of obsolescence back to 2023, companies are now forced to reckon with a future devoid of third-party data collection. Big Tech is looking to lead the rest of the industry in the development of innovative alternatives.

Unsurprisingly, Google has been at the front of these efforts thus far. The technology giant controls the largest browser, adtech, and search engine products in the industry, a powerful trio that leaves them perfectly positioned to navigate the digital advertising industry through uncharted territory. In addition to removing third-party cookies from their Chrome browser, Google is also fostering the development of responsible adtech in their Privacy Sandbox.

Google Privacy Sandbox and Consumer Data Protection

In many ways the highly-profitable digital advertising boon is now giving way to the era of consumer privacy protection. Companies are no longer able to shadow consumers across the web, collecting their personal information and exposing individual data to potentially harmful actors. Google’s Privacy Sandbox, with its objective of fundamentally enhancing user privacy, serves as an incubator for the next generation of programmatic advertising methods that uphold consumer privacy protection.

The Privacy Sandbox has three main objectives when it comes to addressing the needs of both consumers and advertisers:

  • Finding a suitable replacement for cross-site user tracking

Cross-site user tracking has been a crucial component of publishing monetization and advertiser funding for the last few decades. It’s also spawned a whole host of down-stream technologies that are used extensively across the web, including single sign-on access and targeted advertising. In Google’s opinion, the ideal replacement for third-party cookies will be one that does not change the experience of users but still affords them enhanced security.

One such option is the development of Federated Learning algorithms, or FLoCs, that theoretically aggregate user behaviors without scraping individual identifiers. However, there is lots of pushback on this practice from other industry enterprises and it appears it’s implementation is still a ways down the road.

  • Responsibly scaling down the use of third-party cookies

Given how integrated third-party cookies are and the immense value they bring to the digital advertising industry, it’s understandable that Google wants to deprecate this technology correctly. This requires a fine balancing act of upholding obligations to consumer privacy protection while also separating mass stores of user data into first- and third-party sets.

  • Reducing the ability for third parties to work around protective measures

One of the largest challenges being faced by the Privacy Sandbox is ensuring that third-party developers don’t create their own ways of tracking user data. The practices of digital fingerprinting, network level tracking, and leveraging Caches all allow outside parties to collect individual user data and necessitate the implementation of specific protective measures.

Google is constantly reiterating their confidence in the ability of the digital ad industry to successfully pivot away from cookies. Although some of their high-profile Sandbox projects are still very much in development, another promising option is presenting itself in the form of organic insights through first-party data. 

First-Party Data for Consumer Privacy Protection

Although tracking through third-party cookies is the most notorious method of consumer data collection, it is by no means the only one. First- and second-party data also provide highly actionable insights, with the former being one of the most powerful ways of creating informed advertising while also protecting the privacy of consumers.

What is First-Party Data?

First-party data refers to organic audience insights that are collected directly from a company’s digital resources. There are numerous ways for a company to gain information about existing and potential customers, including:

  • Consumer behavior and action that occurs directly on a company’s website or application
  • Information collected via the company’s Customer Relationship Management platform
  • Data collected through social media engagement
  • Correspondences with email and product subscribers
  • Other forms of direct customer feedback like polls and surveys

Digital advertising via first-party data is somewhat more time-consuming, but it is also much less harmful to their relationship with a brand. Because a customer is showing direct interest in the company’s content, services, or products, there is no ethical grey area surrounding the handling of their personal data. Similar to the information collected via cookies, first-party data includes information about demography, website visits and behavior, buyer history, time spent on a platform, and much more.

When a business adds Google Analytics or a pixel-based tool to their various websites and platforms, they begin collecting behavioral information directly from their customers. Unlike third party cookies, this information is not scraped by an outside firm. These organic insights are collected during direct customer participation within the sales funnel and are used to improve their experience with the specific brand they are visiting.

Is First-Party Data Viable?

The major question that publishers and programmatic advertising experts have surrounding first-party data is in regard to its viability. The highly-profitable use of cookies has raised industry expectations surrounding profits, with direct tracking often regarded as an archaic tactic. But industry specialists and other experts believe that the organic insights that direct customer interactions provide will reign supreme in the new era of consumer privacy protection. And for those who require more insight than their customer base can provide, a supplementary option is available. 

Second-party data, the process of limited data exchange between partnered enterprises, allows companies to bolster their own data sets with information from another consumer context. Although this once again brings data collection closer to the ethical grey zone, businesses are confident that this can be accomplished within a framework that upholds the privacy of individuals.

Photo credit: Rawpixel.com / Shutterstock

Debra Fleenor is the current President of Adapex LLC, a digital advertising company that connects advertisers to publishers and streamlines the monetization process. Ms. Fleenor has over 20 years of experience founding and consulting for several internet start-ups with the ongoing objective to drive innovation that disrupts, and grows new opportunities.