This article originally appeared on Think with Google U.S. and was updated for Think with Google Canada in February 2021.
As digital advertising is reshaped by a number of significant, privacy-driven changes, investment in first-party data is emerging as a key strategy that can help marketers and publishers adapt.
People prefer ads that are relevant and helpful, but they also want more transparency into how their data is being used online and more control over their experiences with digital advertising. Regulations like the EU’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and Canada's proposed Consumer Privacy Protection Act will provide people with new ways to manage how businesses use their data. At the same time, web browsers and mobile operating systems have begun restricting the use of third-party cookies and mobile identifiers, which have been used for years to deliver relevant ads and enable critical measurement use cases.
This can put marketers and publishers in a tough spot. How can you grow your business with the kind of tailored advertising consumers prefer — and that delivers stronger performance — while also respecting their wishes when it comes to privacy?
First-party data can help you do just that.
Build direct relationships
At its core, first-party data signifies a direct relationship between a person and a business. At key moments along the customer journey — whether a purchase, an account creation, or a subscription sign-up — people share information about themselves and trust that the other party will protect it and use it responsibly. Over time, as people engage regularly with their preferred providers, those businesses learn more about their customers or audiences, and can use those insights to serve them better.
In fact, research shows that people expect businesses to use information about them to personalize their experiences, and that they are willing to share more under the right circumstances. A 2019 survey conducted by Harris Poll for RedPoint Global found that 63% of consumers surveyed across the U.S., Canada, and the U.K. expect personalization as a standard of service. The study also found that a majority (54%) of the 3,000 participants expressed a willingness to share personal information if it would be used to create personalized experiences; that number jumped to 70% and 72% when focused on millennials and Gen Zers, respectively.
Offer value in exchange for data
You learn more about your customers and audiences through each interaction you have. But there are also deliberate steps you can take to collect the information you need to deliver great experiences or provide great service.
For example, brands might offer a loyalty program that provides customers with exclusive content, personalized recommendations, and merchandise rewards. Or they could simply offer a coupon or deal if people provide their email address or phone number.
Mondelēz is an example, found in our recent marketer privacy playbook, of a brand that recognized early the importance of building direct customer relationships. In the past, candy shoppers have made their purchases in-store or on retailer sites. But as the marketing landscape shifted, Mondelēz worked to develop a direct relationship with shoppers and a first-party data strategy. That strategy carefully considered the value being offered in exchange for establishing a relationship. Take the company’s Sour Patch Kids brand: Fans of the candy can go to a website, handpick flavors, customize the packaging with their names, and order their own unique box of the multicoloured, sugar-coated candies.
“When people choose to connect with us directly and share information, we ensure that a high bar is met in terms of the value they get in return,” explained Jonathan Halvorson, VP of global media, digital, and data at Mondelēz.
Boost advertising performance
Perhaps the most appealing benefit of investing in a first-party data strategy is the performance lift. According to a 2020 Boston Consulting Group study commissioned by Google, marketers that use all of the first-party data available to them can generate double the incremental revenue from a single ad placement, communication, or outreach.
Personalization has led … to higher engagement and additional first-party data assets, while giving customers what they want and building trust.
First-party data holds promise for ad monetization as well. This is why digitally mature publishers like Condé Nast are doubling down on efforts to responsibly collect and deploy first-party data. In our publisher privacy playbook, we share how Condé Nast uses its Spire data platform to collect and organize audience data from multiple touchpoints, including offline, digital, websites, apps, and social, which then allows Condé Nast to personalize its digital experiences.
According to research commissioned by Condé Nast, brands that deploy advertising campaigns using Spire data enjoy a 15% lift in brand awareness, a 17% lift in favorability, and a 13% gain in purchase intent on average compared to brands that don’t. The overall result was a return of $3.32 for every ad dollar spent.
“First-party data enables us to improve customer experiences across our properties by increasing advertising performance and providing content recommendations, while respecting consumer opt-outs,” said Karthic Bala, Condé Nast’s chief data officer. “The virtuous cycle of personalization has, in turn, led to higher engagement and additional first-party data assets, while giving our customers what they want and building trust.”
Relevant ads are preferred by consumers, more effective for brands, and more profitable for publishers. But businesses today have to be more careful than ever to use personalization in a thoughtful way that respects people’s privacy choices.