The GDPR And Facebook Fallout: Short-Term Pain, Long-Term Gain For Data-Driven Advertising

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In the blink of an eye, the third-party data landscape has dramatically shifted under the feet of marketers. For many, now is a time of turmoil, uncertainty and loss of support that was previously taken for granted. But this time of short-term pain promises to give way to long-term benefits for data-driven marketers and the competitive industry landscape as a whole.

The headline threads around data privacy and new restrictions have become inextricably intertwined. On one hand, Facebook continues to dominate the news cycle in the wake of Cambridge Analytica and its seemingly never-ending fallout.

Facebook’s seemingly abrupt announcement that it would be shutting down Partner Categories, which enabled third-party data providers to offer their targeting directly on Facebook, represents one of the most dramatic short-term blows to the advertising community. The announcement, in the wake of the Cambridge Analytica scandal, was widely seen as damage control. But in all likelihood, the shift—or at least a similar one—was already one of many maneuvers being planned by Facebook in response to GDPR.

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The pressure of GDPR is forcing major changes in the the adtech and martech ecosystems. Google has announced a whole host of new changes and restrictions in light of GDPR, many of which have not gone over well with the broader online community. Of course, juggernauts like Google have the resources to weather a storm like GDPR. Others find compliance more debilitating, given the estimated six-month, six-figure commitment to get it right.

GDPR’s regulatory dominion does not extend to the United States. But make no mistake, even if no copycat legislation is introduced stateside, the downstream effects of GDPR will be felt by U.S. advertisers, publishers and providers, particularly as it relates to the sweeping changes being made by Facebook and Google.

In the short term, the dual tidal waves of GDPR and Facebook’s recent policy shifts are going to hit two parties hardest: small to mid-sized data providers and small to mid-market advertisers. The former will bear a disproportionately heavy burden in complying with the new EU regulations. Meanwhile, the latter—advertisers that rely on third-party data and lack their own CRM, have been set adrift by Facebook’s recent shifts. As such, the Goliaths of data brokerage and advertising will become even stronger, while the Davids struggle harder than ever to survive.

But there is a light at the end of the tunnel for those with the fortitude to proceed. In the next 18 to 24 months, the data landscape will again have shifted dramatically—this time in a way that restores power to the mid-tier players in the industry, advertisers and data brokers alike.

For one, GDPR is going to necessarily weed out many of the bad actors within the data landscape in the coming months. Even for U.S.-only firms, the increased measures from advertisers to control the data they use to target—even third-party data—will coalesce into a crackdown that will force bad actors to go straight or out of the U.S. market entirely. The barrier to compliance is high, and for those firms built around unsavory data collection and management processes, survival in this brave new privacy-driven world will not be feasible over the long-term. As a result, small and mid-tier advertisers will have access to a more-reliable set of data partners going forward.

Furthermore, while small and mid-market advertisers might currently feel left out in the cold by Facebook’s Partner Categories shutdown, the move will prompt two industry improvements:

  • Marketers will necessarily double-down on their own first-party and third-party data management practices, reclaiming control of their investments and the ability to make ROI comparisons more easily across all channels.
  • Innovative data and technology providers will rise to the challenge of serving the advertisers displaced by Facebook’s Partner Categories shutdown. They will do so by being nimble enough to weather the changes and sophisticated enough to take on and uphold data compliance. After all, while the largest data providers might emerge relatively unscathed from this period of transformation, they are and will continue to be built to serve large organizations. Innovative data and technology providers will be the ones to assist small and mid-market advertisers, whose combined spending power represents a Goliath in its own right.

With change comes pain, but that pain will give way to strength in the longer-term. Now is a time of transformation for our industry’s middle class, and the tough shifts being forced by recent events are necessary, healthy ones. When our industry emerges on the other side of today’s turmoil, we’ll find a brighter, more sustainable future lies before us, for small and large players alike.

Originally published 06/12/18 in MediaPost

David Dowhan

About David Dowhan

As CEO and founder of TruSignal, David leads business strategy and product development efforts and is keen to create innovative, customer-centric solutions using data and analytics.
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