In the last several years, ‘data clean rooms’ have become a hot topic in the digital advertising industry. According to Exploding Topics, between July 2021 and July 2023, the interest in the query has grown by a staggering 4,900%, with the majority of searches coming from within the United States and European Union. What’s more, 80% of companies spending at least $1 billion on media each year are set to use data clean rooms for advertising by the end of 2023.
In this article, we shed light on what data clean rooms are and how they help advertisers gain a competitive edge and adjust to the changing data privacy landscape.
What are data clean rooms?
To understand what a data clean room is and how it works, let’s refer to its real-life counterpart. “Traditional” cleanrooms are isolated environments free from any external factors that could disrupt their sound functioning and results’ reliability. These include airborne contaminants like bacteria and fungi in medical labs or dust in hardware factories. Ultimately, the goal is to maintain the most intact, ‘neutral’ environment possible to prevent errors or false results.
Data clean rooms (or DCRs) are like that but in the digital realm. It’s a space where data is protected in a secure and legally compliant manner, keeping it safely away from unwarranted access. By entering a data clean room, two or more authorized parties can safely exchange sensitive data without the risk of it “leaking” beyond it. As personally-identifiable information is hashed (i.e., pseudo-anonymized), no one who lacks the hash (or key) can decode customers’ details. This creates a safe space where enterprises can build better customer segments, engage in co-marketing initiatives, and run other data collaboration initiatives.
Why are data clean rooms the future of data collaboration?
When assessing the future of data collaboration and the role DCRs are set to play, it’s worth looking at two factors – maintaining market relevance and ensuring data privacy.
Companies operating in competitive industries work themselves to the bone to make their offer better than that of others in the field. To do so, they must embrace a truly customer-centric approach in their marketing and advertising strategy. On the one hand, they have to respect their customers’ privacy. On the other, they need to have the ability to collect and analyze data in a comprehensive manner.
Sometimes, this requires supplementing their first-party data with that from carefully selected third parties and building an intimate customer profile collaboratively. When working together, partners can uncover not only more information on their existing customers one-by-one but also how they could ‘block’ them into customer segments. Data clean rooms give companies the liberty to explore their data potential, all the while preventing personally identifiable information (PII) from falling into the wrong hands.
Another important factor contributing to the rising popularity of DCRs is the ongoing process of cookie deprecation. In recent years, Apple has decided to reduce the lifespan of the Safari browser cookie to as little as seven days. This means that any customer visiting a website less frequently than once a week is seen as a new user. This significantly affects your first-party cookie relevance and hinders your customer profile building.
Furthermore, major browser operators are planning to deprecate third-party cookies from mid-2024 onward, with mobile IDs scheduled to follow suit. Without a solution that would take over for these valuable data sources, running effective advertising will be difficult, if not entirely impossible.
Adjusting to the privacy changes that affected the advertising industry
To understand just how far spanning the changes in consumer privacy have become, it’s worth referring to data from the United Nations Conference on Trade and Development (UNCTAD). According to the organization, as many as 71% of all countries have data protection and privacy legislation in place, with another 9% currently drafting laws.
The first law to truly shake up the consumer data privacy landscape was the EU’s General Data Protection Regulation (GDPR). The legislation not only outlines data collection and usage in Europe’s member states but also in any other country that gathers information on those residing in the union. All commercial and public websites need to be GDPR-compliant in order to cater to traffic from the EU. This tightened the policies for any marketing and advertising businesses targeting and/or analyzing information pertaining to European users.
The United States, however, has also seen stricter policies appear on a state and federal level. California passed the California Consumer Privacy Act (CCPA) around the same time GDPR came into life, i.e., in mid-2018. The state law came into effect on January 1st, 2020, being the first of its kind in the country. Among others, it outlined:
- What personal data means for consumers
- The right to control what data is passed on to third parties
- The right to deny granting access to personal information, without being discriminated against due to executing their privacy rights.
Within the next two years, Utah, Colorado, and Virginia all passed similar laws. While as of mid-2023 there were no federal privacy laws, legislators are working to codify a bill similar to the EU’s GDPR in nature.
What are the consequences for marketers and advertisers?
Consumers are now not only legally entitled to control how their personally-identifiable information is used. They’re also incomparably better informed on their rights, how they can execute them, and what constitutes a ‘safe’ data collaboration and sharing practice. They can also report any party that they suspect of putting their sensitive information in jeopardy.
Data privacy regulations allow customers to submit a data access request. For instance, under GDPR, it obliges the company that holds, uses, or shares their data to provide a list of all the records at their disposal. The information must be delivered in a legible format, making it easy for the consumer to understand what kind of information the company has collected thus far. Let’s assume you have your customer’s name, address, and a list of all on-site activities linked to their personal details on file. If your client prohibits you from sharing such data with third parties, you won’t be able to use personally identifiable information anywhere outside your organization, including commercial B2B software already in your tool stack. If you don’t use a data clean room that pseudonymizes their data, you will be blocked from any marketing and advertising initiatives that happen with the involvement of third parties.
The lack of preparedness for these new obligations is wreaking havoc on many advertisers, who now need to revisit their ad and marketing revenue generation models. That’s why many advertisers are now turning to data clean room advertising solutions.
Walled gardens as a response to privacy restrictions
Walled gardens are a popular type of data clean rooms among advertisers. They let companies looking to access more information on their target audience gather insights from external sources. All while staying compliant with data privacy regulations.
Several of the world’s largest tech companies, including Meta, Google, Apple, and Amazon, have set up these DCRs as a closed ecosystem for marketers and advertisers.
The term “walled gardens” perfectly reflects how they work. There’s a wealth of first-party data that belongs to the tech giants that advertisers can use, and it’s kept behind a ‘wall’ from unwarranted access. This means that it’s the tech giants who hold control over all the data, and to whom (and for what price) these assets are disclosed.
This leads us to a significant downside of this DCR subset. Namely, companies that rely on walled gardens are becoming overly dependent on an external partner. Not only does this mean that they need to pay hefty data access fees. More alarmingly, they put their revenue performance and lead generation strategy into third-party hands. In such a scenario, the data hegemony of tech giants will only become more prevalent, preventing data democratization and open data collaboration between parties.
Luckily, there is an alternative – turning to a solution that lets companies gather and use first-party data, as well collaborate on it with partners in a legally-compliant manner.
First-party data – an alternative to walled gardens
We’ve already briefly mentioned a type of first-party data earlier in this piece, i.e., cookies and mobile IDs, albeit ones that are set to be deprecated.
First-party is the data that your organization gathers straight from customers, website visitors, and other members of your audience. Since it comes directly from your users’ actions, its highly-reliable. Hence, its advertising value is undeniable. The more you know about your target client or leads who interact with your digital channels, the better you can get at your marketing and ad initiatives.
To make the most of your first-party data, however, it’s not only important that your organizaiton knows how to use it. To gather more of it over time, you must also build trust with customers and show your dedication to protecting their sensitive information.
The solution lies in removing the link between individuals’ personal information and their data. This gives you the opportunity to exchange and collect data from other companies in your sector. Best of all, with the right solution, you aren’t constricted to historical data only. You also access real-time data, which lets you make the most of time-sensitive opportunities in your real-time advertising.
All this is possible with a neutral data clean room.
Using neutral data clean rooms
Let’s clarify here that neutral data clean rooms are not another type of a walled garden. They are a neutral space where different organizations can safely exchange and collaborate on their respective first-party data. Unlike the case with AdTech giants, you aren’t granted information under Meta’s, Google’s, or Amazon’s terms and conditions. Instead, you build a sense of data independence through collaborating on data with partners, where each party grants their piece of the puzzle.
We discuss how neutral data clean rooms like Trusted Twin support advertisers further in this post. How about the types of initiatives you can engage by using the right clean room advertising solution? Let’s look at them next.
Data clean room use cases in advertising
Here is a brief summary of the biggest advantages of leveraging a data clean room in your advertising strategy:
- Target customer profile enrichment – undeniably, the most important data clean room use case. If you wish to launch an ad campaign but lack information, for example, on a specific lead segment, you can dive into your partners’ data. Using a mix of your first- and third-party data you can gain more context and build stronger ad and marketing strategies.
- Anonymizing your client details – here, we revert back to the requirements of GDPR and other privacy regulations. Before granting access to your customers’ data (or accessing that of partners), you can remove any information that could reveal identity – naturally, without losing the quality of insights themselves.
- Spotting data collaboration opportunities – this data clean room use case is perfect for companies that are open to more than data exchange. For example, a consumer electronic brand might want to find how many clients they share with a major retailer. In order to do so, they can remove any information that could reveal their clients’ identity, assign a temporary pseudonym, and input CRM data into the DCR. As a result, they will find out how much of the same customer base they share and decide on any co-marketing initiatives. Naturally, after each partner learns more about their clients, they can pull the newly-aquired information back into their database, re-identify each client, and enrich their profiles for the purpose of other activities.
How to choose a data clean room solution?
While each company is different, here are some questions you should ask yourself to ensure that you are using the best data clean room.
- Does the DCR allow for real-time advertising? Can you act on the events happening ‘here and now’, instead of just pull historical data?
- Does the data clean room provider guarantee GDPR and other data privacy law compliance?
- Can you exchange information with multiple partners simultaneously?
- How quickly can you set up your DCR?
- How easy is to to pseudonymize and re-identify your customer data?
In summary, regardless of your industry, it’s worth exploring the capabilities of a neutral data clean room solution. These solutions give you much more flexibility and a higher decision-making power than those governed by AdTech giants.
Make the most of your advertising potential with a data clean room
The future of the digital advertising industry comes down to more than guaranteeing data privacy compliance. From a business model perspective, it’s equally as important to maintain independence from huge enterprises currently dominating the scene with their walled garden DCRs.
To make the most of your advertising and marketing data collaboration, turn to a neutral data clean room – ideally, one that offers real-time data access and sparks actionability.
By choosing Trusted Twin as your DCR, you gain an advantage over competitors who currently rely on solutions that offer historical data only. Our data clean room solution operates in real-time, unlocking new opportunities for advertisers. You get to display the right message, to the right audience, at the right time.
Reach out to learn more about how you can optimize your advertising strategy with Trusted Twin.