Every year, LUMA Partners, the premier MarTech and Digital Media investment bank hosts several events to bring CEOs of relevant companies together. Last week’s Digital Media Summit in New York was hands down one of the most interesting yet.
- Privacy regulation (specifically GDPR) present the very real threat of disrupting the digital media and marketing industry as we know it.
- Apple, Amazon, Facebook and Google are becoming hegemonic, and the calls for regulatory action to curb their influence and stimulate competition are mounting.
- Companies are increasingly trying to stitch together their 1st party data to drive 1:1 personalization. This is giving rise to a new class of software called Customer Data Platforms, which purpose to aggregate data, provide robust analytical and predictive toolsets, and then make it simple to execute marketing programs based on the insights. (Disclosure: LUMA Partners places Windsor Circle in this classification).
- Contextual Advertising is re-emerging as a critical toolset given the challenges with accuracy, privacy and legal environment forming around digital advertising.
Privacy Regulation Could Disrupt the Industry
The General Data Protection Regulation (GDPR), which takes effect on May 25 (Friday) in Europe, is the latest wave of regulatory action designed to protect consumer privacy. There were at least two panels devoted to the topic, and every panel touched on it. One attendee exclaimed, “none of you will have jobs in a year if you don’t address privacy and ethics in a real way.” This might be a bit rich, but the message was clear… everyone is watching this new set of regulations very closely.
There is a corollary bill making its way through the state legislature in California, which, if enacted, has serious implications for the US market. First, it would lay additional (and potentially onerous) conditions on the use of data. Second, and perhaps more importantly, if this gets enacted at the state level (versus the federal level), it’s possible that all 50 states will pass laws of varying strengths and means, which would be a nightmare to comply with.
It was commented on several times that regulators do not care at all about efficiency, scale, or valuations, but rather the perception that they are taking on Big Brother MarTech firms on behalf of their constituents, and, as such, may have a vested interest in making things hard and unsavory for those who want to use data for targeting.
The Big Four Are Hegemonic, and Calls for Regulatory Action Are Mounting
Multiple keynote speakers and authors spoke to this dynamic. The first was serial entrepreneur, professor, and author, Scott Galloway, who argued clearly that “The Four”(Apple, Amazon, Facebook, and Google) have amassed such power and influence that it is time for regulators to break them up for the sake of competition.
Key insights that were proposed (and which I’ve tried to recapture here with supporting articles):
- Global Digital Advertising grew 21% to $88B in 2017, but 90% of that growth was from Facebook and Google. Source: https://adexchanger.com/online-advertising/digital-ad-market-soars-to-88-billion-facebook-and-google-contribute-90-of-growth/
- In 2017, Amazon captured:
- 44% of all online sales in the US
- 4% of all retail in the US
- Apple is on track to become the world’s first $1T company.
It was commented on several times that regulators are spending too much time in the wrong places, such as wringing hands about divestitures that AT&T needs to make, when, in reality, the Big Four are the most important mechanisms for making (or stifling) market innovation.
The Arrival of the Customer Data Platform
The vision of 1:1 marketing and identity graphs is facing a lot of challenges right now. Facebook’s troubles with Cambridge Analytica were front and center in these panels today, and this is drawing significant attention to the risks inherent in digital advertising given recent events. An attendee called out that Facebook deleted 583MM fake accounts in Q1 alone (https://www.recode.net/2018/5/15/17349790/facebook-mark-zuckerberg-fake-accounts-content-policy-update), and GDRP and privacy regulation could render much of digital advertising much less profitable.
As a result, companies are starting to turn inward. Jason Heller, of McKinsey, shared that they’ve seen a marked increase in companies who are trying to pull together their first party data and use it directly to achieve personalization goals that are proving elusive in the 3rd party, cookie-driven digital media space.
There seemed to be agreement in the panels (at the highest levels any way) that Customer Data Platforms do three things:
- Aggregate 1st party data from within a companies ecosystem
- Apply machine learning and data science (or provide a workbench to do so)
- Initiate actions throughout the marketing ecosystem (email, advertising, print, etc.)
An inherent limitation here is that these audiences are limited to known customers (and thus not applicable to prospects, which is where growth comes from), and privacy concerns make it hard to federate this very intimate data with other partners for the sake of creating new, very targeted, prospects.
Nonetheless, activation of 1:1 personalization through Customer Data Platforms was a hot topic.
The Reemergence of Contextual Advertising
Granted, this is a Digital Media Summit, so take it with a grain of salt that publishers, media and those who make money by providing great contextual advertising stand to gain from this perspective, but quite a lot of the panels mentioned the reemergence of contextual advertising. A former head of marketing from Bonobos was adamant that no one purposely clicks banner ads, and everyone hates the ads that roll in the middle of whatever video you’re trying to watch on YouTube. These interruptions are not customer centric, and he purported that they don’t perform well. He further argued that great commercials and memorable advertising across channels, that spoke contextually to what the consumer was experiencing, performed markedly better.
Similar to the arguments for the rise of the Customer Data Platforms, the pressures on digital media advertising from privacy and accuracy concerns are making it once again interesting to seek highly contextual communications to drive better performance.
All in all, it was a powerful day with intense debates about the disruptive forces that shape our industry. Marketers are going to need to watch regulation and privacy closely, and perhaps shift marketing priorities if these speakers are right about emerging trends.