Most businesses seem to be dreading the advent of the EU’s General Data Protection Regulation (GDPR), but they ought to be grateful that it’s coming. After all, it might help them to survive in the new data economy.
Data has been dubbed the “new oil” by The Economist, and you can see why. With a rich supply of customer data, and some decent machine learning technology, a business can optimise its pricing to such a degree as to blow its competitors out of the water. Or, based on the trillions of data points that can be analysed now, a company can vastly improve its services.
A positive feedback loop can emerge: having more customers leads to more data, leading to better services and pricing, and therefore more customers, until a business grows into a giant, too big for its rivals to truly compete.
Then there’s advertising – but this is where the uplifting part comes in.
The digital era of advertising is data-driven, but to be successful a business doesn’t need its own data. Obviously it helps, but it’s certainly not essential.
To run a successful digital ad campaign, a business can target customers using audiences from a third party data provider.
Media inventory such as display (ads that appear on websites), video and TV can be bought programmatically using automated bidding software which enables not only precise targeting, but also tracks performance to generate insights that can be used to optimise a campaign further. Instead of plonking a million on a TV spot or a billboard, advertisers can now achieve the same reach for a fraction of the cost, and they can actually measure performance. So much more cost-effective, so much better.
Where does GDPR come into this? Greater transparency means better quality data, and therefore better performance, allowing businesses of any size to compete.
As it stands, third party data providers have no obligation to disclose the provenance of their data. If a media agency buys an audience such as “in the market for a loan”, it’s not clear what the criteria are for that data-set: maybe they did an online search, or perhaps visited a loan provider’s website, or it could be they have the “typical” characteristics of someone who might need a loan – it’s impossible to know.
Digital advertisers have to estimate data quality, for the time being, purely in terms of its impact on performance. Without knowing the source, nature and quality of the data, marketers are not able to use it as efficiently as possible. In this climate, the ones with the vast amounts of first-party data have the upper hand. After GDPR, this advantage will be greatly diminished.
The great thing about digital advertising is that it levels the playing field. There’s no better example for this than AdWords, which is built upon an algorithm that prioritises relevance ahead of spend, and functions according to consumer intent. So even if you’re just a tiny independent sportswear manufacturer, so long as you get your ad copy and bid strategy right, you have the potential to out-rank Nike on your paid search campaign.
In promoting greater transparency, GDPR is undoubtedly an amazing driver of progress.
My only concern is that consumers will counter-productively implement their right to erasure, cutting off the very data that will improve their experience of advertising and help to preserve the best market conditions for a consumer – i.e. one in which businesses still need to compete. The media needs to make sure consumers are fully aware of the trade-off inherent to greater digital privacy.
The rise of big data and big analytics presents risks in terms of maintaining economic competition, and we should all be vigilant. At the same time, it is fuelling the most democratic form of advertising we have ever known. Platforms such as Google and Facebook, which are already monopolising ad revenue, are nonetheless supporting an ad industry that promotes better competition.
In my opinion, there are far worse organisations that might dominate the digital world.