Featured in MediaPost by Bob Gaito
Putting aside any debate about whether governments should legislate consumer privacy, the more pressing question is this: Will a government enforce legislation that unintentionally creates a duopoly? Unfortunately, with the GDPR, the answer seems to be yes.
The GDPR is supposed to stop tech companies from pressuring consumers to relinquish control of their personal data in exchange for services. But Google and Facebook are uniquely suited to comply with GDPR’s requirements for obtaining consumer permissions. They have the world's largest membership bases, and offer benefits in exchange for permission that smaller companies cannot. They also have an army of lawyers and technicians to interpret GDPR regulations and enact them.
As a result, these behemoths are setting compliance standards that are difficult for other companies to meet. Retailers, fearful of the potential risks of not complying, will do almost anything (other than stop advertising) to avoid them. As a result, they will likely double down their advertising budgets with Google and Facebook, driving other advertising tech companies out of business.
The irony here is that the GDPR (and other privacy legislation) was designed to protect the consumer, but in the end, will likely drive up prices and limit selection. According to the Wall Street Journal, in 2017, Google and Facebook already accounted for 84% of all global digital advertising outside of China. It was already hard enough for other companies to compete without the GDPR driving another nail into the coffin.
What’s at stake? With so much control over pricing and profit margins, Google and Facebook could gain almost unilateral control of digital advertising. Maybe they’ll decide to change their advertising model to favor brands that provide commissions. Or maybe they’ll decide to launch their own shopping brands, maximizing ad costs for competitors. The point is, they’ll be able to do pretty much whatever they want. Advertisers could end up like the Scottie Dog on a fully leveraged Monopoly board, paying outrageous fees wherever they land. Also ironic, this kind of control is something governments actively try to prevent (remember AT&T and the Baby Bells?).
What can you do? Your best defense is to limit your reliance on digital ads as much as possible by dedicating more of your marketing dollars to direct communications with your customers. Don’t let all the noise about privacy scare you away from capturing website visit data and using it to fuel your marketing. Today’s consumers expect personalized interactions that improve the shopping experience and save them time and money, and it’s the capture and analysis of personal shopping data that makes this happen.
The key is to develop clear privacy policies and adhere to them, obtaining permissions from geographic locations where required. Also key is maximizing web visitor identification and capturing related session data. This enables you to build website and email marketing programs based on your own data, reducing your reliance on ads. It also lets you define your own ad audiences (assuming the behemoths still allow it), ensuring you get the most bang for your digital advertising buck.
Defining your own custom audiences saves on ad spending because site visit data lets you determine members in real-time, based on attributes known only to you. For example, if a customer abandoning a cart is opted-in to your email list, you can send them a triggered email and don’t need to incur the expense of an ad for this customer. In addition, defining your own audiences enables measurability that the ad platforms don’t provide, addressing a problematic lack of accountability. When you determine who is in each audience and measure results compared to control groups, you gain visibility into true ad performance.
The game is changing for digital advertising, and no one likes to circle around the board shelling out money while someone else gets rich. Do what you can now to limit your future reliance on digital ads and maximize the benefits of your ad spends.