First-party Data Needs High Frequency Data Infrastructure

The ad industry is currently looking for the best path forward into the post-cookie era. Many companies are still looking for a quick fix to solve the issue of cookie deprecation. Whether it’s a new product or strategic shift, they want to find the missing link between this era and the next one, so that they can carry out their campaigns uninterrupted.

This mindset – hunting for the one magic fix that will make the future manageable – is a big reason why the industry hasn’t adopted clear solutions in the past few years. Now, of course, we’re on the eve of cookie support ending for a portion of Chrome users, and Google is holding to its deadline

We’ve known for some time that first-party data is the way of the future, but it’s not a simple fix, where brands and publishers can simply use the same systems as today, only substituting first-party data for third-party cookies. The current ecosystem is built to support third-party data and cannot handle the high-frequency data movement needed for the first-party data era. Successfully moving to first party data requires brands to construct private data networks, which is only possible with a drastic shift in the infrastructure underlying all of ad tech. 

Why PDNs matter

For decades the cookie has essentially been the connecting agent that lets data flow between platforms. For first-party data to be truly effective, brands need an ecosystem that allows multiple parties to access this data where it rests. The challenge is that first-party data is more heavily regulated, so every single partner that touches the data in a transfer has to be a licensed platform that is approved to handle the data in the appropriate fashion. That’s the “private” piece of the data networks. 

Then comes the actual transfer back and forth between platforms, which, without a standardized mechanism similar to a cookie, gets complicated. The only real way to transfer this data is for platforms to connect directly to one another. We’re already seeing this with early adoption of clean rooms, where brands, media owners and data companies leave their connections open so that data can stream back and forth between parties. This is the foundation of a private data network (PDN), where authorized parties can share data while adhering to predetermined hygiene rules and regulations.

While many brands have PDNs in place, there should be far greater industry adoption. A third of all companies are using clean rooms extensively, and early reports predicted that 80% of advertisers with media budgets of $1 billion or more planned to use them this year. Brands that spend heavily on media are clearly going to invest in making sure their media buys continue to perform and drive sales in the long term. Without a PDN in place, these brands aren’t able to use clean rooms to their full potential.

Evolving ad tech’s underlying infrastructure

PDNs are one example of how technology solutions can directly integrate to collaborate on large amounts of data in a privacy sensitive fashion. For first-party data to become a viable solution, brands and publishers need to use a lot of technology solutions that help achieve scale in a privacy-sensitive fashion. That means more than just clean rooms.

While many companies in the ad industry are on a quest to find the one product that will guide them into the post-cookie era, the truth is that most companies will license and use several different platforms in order to thrive in this era.

Brands that want a 360-degree view of their customers will rely on a mix of probabilistic and deterministic data, and likely license more than one identity partner. In order to be truly interoperable, a publisher will need to transact on multiple alternate IDs to maintain or increase their market share. Both buyer and seller  will need to license 10 or so platforms, at a minimum, with some licensing closer to 30 in order to run effectively targeted and measured ad campaigns.

True interoperability isn’t going to come from brands building out several PDNs on their own. It’s only possible if the industry builds a new fabric of underlying infrastructure, different from how ad tech was originally constructed. To execute campaigns that rely on first-party data insights, the platforms that brands, publishers and agencies deploy have to be physically connected and communicate with each other for the data to flow back and forth. 

Those connections need to be set up for the new paradigm of advertising. That means accessing data where it rests as well as transferring smaller subsets of IDs. Of course, they also need to facilitate large data transfers as insights from hundreds of millions of anonymous audience members go from CDP to clean room to enrichment provider and back again.  If this data cannot be connected out to other platforms that the brands use, then they’re not being utilized to the fullest extent. That money is therefore wasted.

This integration challenge has bled into the industry’s conversion to alternative currencies. Without direct integrations, the process of incorporating data from a new currency is arduous. Marketers want to use these currencies, but they have to wait for technical integrations to be in place.

Paving the way toward the future

To be clear, this is an industry-wide issue, not just a problem for brands. Platforms are in a bind as well. They are all aware that they need to build out direct integrations in order to serve their brand and publisher customers in the future, but they also need to devote engineering resources to innovation, lest they fall behind the competition right now, while cookies are still operational.

This should not dissuade anyone from starting right now. The ad industry will eventually develop best practices for building out this infrastructure and linking together all of these platforms. First, we need to see a bit of trial and error to determine the best path forward, then continue to iterate on what works. Solving the direct integration issue will help create the new infrastructure that allows for PDNs to become a reality.