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Chapter IV: The Challenges of Building a First-Party Data Strategy (And How to Solve Them)
In the fourth chapter of our First-Party Data Programmatic Playbook, we’re taking some time to look at the challenges of developing your first-party data strategy – whether you’re on the buy side, sell side, or in the middle.
In chapter one, chapter two, and chapter three of this playbook, we were focused on either publishers or advertisers, but first-party data is really a cross-ecosystem concern. After all, any organization has the ability to connect and activate the first-party data they collect through the everyday process of running their business.
But actually carrying out that activation isn’t always easy – especially in a landscape which, come 2023, is going to look very different without the third-party cookie, not to mention the varying changes in access to mobile app identifiers, geo-location data (critical for digital out-of-home) and the proliferation of CTV targeting methods.
So, in this chapter, we’re going to do two things: a.) identify the key challenges of building a first-party data strategy; and b.) offer some solutions for working around these challenges to zero in on the outcomes your business needs from programmatic.
Challenge #1: Limited scale compared to third-party cookie targeting
Advertisers clearly benefit from the “limitless” scale offered by third-party cookie-based audience segments, but there are still some questions about the accuracy of those audiences.
For example, third-party technologies, such as mobile ad IDs or IP addresses, offer a degree of accuracy, but even these can be masked by VPNs in the case of IP addresses or removed from the bidstream as Apple did with iOS 14.5.
First-party data, on the other hand, is essentially verified at source. Whether that’s through a double opt-in, transactional data, or anything else, the first-party data you collect will generally be more accurate than any third-party segment you could buy. Of course, this also means that, assuming you only use this data, you can’t target more users than you’ve already collected information about, limiting scale and reach.
In the cookieless world, the various universal IDs are aiming to restore some of this scale, but they rely on widespread adoption to reach critical mass. In addition, differing rules about consent and data portability make it tricky to leverage your data across ID solutions.
Bottom line: utilizing only first-party data can limit your reach, but increases your targeting accuracy and consumer privacy.
Challenge #2: Problems actually collecting first-party data
Though it comes from different sources, actually collecting first-party data isn’t exactly an even playing field.
For some players in the programmatic ecosystem -- especially publishers on the sell side of the supply chain -- capturing information about their users is relatively straightforward. For publishers, this might be website analytics data, subscription information, or authenticated logins.
For others, however, the process isn’t as simple.
Some players, including many advertisers on the buy-side, might not have easy access to customer data -- at least not consent-granted data. CPG brands, for example, don’t traditionally engage directly with their customers or sell via their own e-commerce channels, making it more difficult to collect first-party data to use in their campaigns.
Challenge #3: Aggregating first-party data from multiple sources
Even when a business has access to a good source of first-party data, there are yet more challenges to overcome -- including the storing and aggregation of this data.
To deploy a reliable and consistent first-party strategy, businesses should aim to consolidate their data in a single silo, making it much easier to access and leverage in programmatic campaigns.
This aggregation doesn’t just mean data from online sources, either. Even first-party data that has been collected offline, such as via in-store purchases, can be turned into actionable online data using a data onboarding service.
While onboarding has traditionally referred to offline-to-online data transformation, it’s also worth mentioning that key pieces of first-party data -- like user email address -- can now be used as a “crosswalk” to enable onboarding to other digital channels. This opens the door to concepts like data clean rooms and curation, but we’ll come back to these concepts shortly.
Challenge #4: Resolving identity across platforms
Finally, and perhaps most importantly depending on your perspective, it can be a challenge to resolve user identity across channels. Even if it’s come from a single deterministic source, your first-party data is still not immune from some of the inaccuracies which impact third-party data.
For example, let’s say you’ve collected first-party data from the transactions made in your online store, your bricks-and-mortar location, your CRM system, social media engagement, as well as others. All of this needs to be aggregated as we mentioned above, but the identity of these users also needs to be matched up to avoid duplication and targeting discrepancies.
Beyond that, if you’re running a first-party segment against a third-party publisher, you’ll also need a way to locate that user on their site to match user identities against media owner audiences. Specific identity resolution solutions are needed to perform these matches and luckily, more are being developed all the time.
Solving these first-party data challenges: a practical guide
Of course, explaining the challenges of building a first-party data strategy is the easy part. Actually solving them? That’s a challenge all of its own.
But don’t worry – we won’t leave you hanging. Below, we’ll offer up four potential solutions to the challenges we outlined above. No answer is definitive, of course, because every business is different, but it might just get you thinking in the right direction.
Solution #1: The problem of scale
It goes without saying that solving the scale problem won’t be a simple or singular solution. Instead, it’s most likely that programmatic players will need to leverage all available tools in the toolbox to bridge the scale gap left by the loss of the third-party cookie.
Solutions to scale might include expanding beyond just first-party data to include cohort targeting (as with Google’s FLoC), contextual signalling, and curation. This effectively solves the scale limitations of first-party data because it’s still possible to reap the accuracy benefits that brings but then amplify that reach using other cookieless solutions. In a world without third-party cookies, that’s a win-win.
In preparation for 2023, it’s a good idea for advertisers and publishers to begin testing out alternative solutions like these -- especially when the third-party cookie is still available to use as a benchmarking tool.
Solution #2: Collecting first-party data
As we discussed above, companies without adequate first-party touchpoints can struggle to collect enough data to gain a solid footing in programmatic. To solve this problem, these advertisers (and this issue generally is focused on the buy side) need to think outside the box a little when it comes to connecting with their customers.
Even if they have no direct line of communication with the customers they sell to (such as CPG brands), there are ways to get connected
- Social media engagement
- Adopting a Direct-to-Consumer (D2C) strategy
- Host real-world experiences
- Content and email marketing outreach
It’s worth noting that issues with collecting first-party data aren’t always limited to the buy side. Smaller publishers are increasingly pursuing collaborative or consortium-based Single Sign On solutions(such as NewsPassID and netID), creating scale by pooling audiences, to benefit from aggregated first-party data.
Solution #3: First-party data aggregation
If you’re familiar with third-party segmentation and retargeting, you’ll probably have used a DMP before to manage these audiences. While many DMPs are currently either creating their own ID frameworks or simply becoming ID-agnostic so audiences can be used across multiple IDs, programmatic players still need a reliable method to aggregate their own proprietary data.
As we covered above, disparate silos of first-party data can mean it’s difficult to collate, de-duplicate, and store your data when it’s coming from various sources, such as: online transactional data, offline sales, website analytics, social media engagement, and more. For the offline data, it’s easy enough to use a data onboarding service to digitize it and make it available for programmatic use, but in terms of storing it, you might consider a CDP.
A Customer Data Platform, or CDP, can aggregate first-party data from almost any source and transform it into a standardized format which is ready for use in programmatic campaigns. Managing first-party data via a CDP also enables more advanced strategies, including A/B testing and the creation of audiences.
Solution #4: Alternative identity solutions
As we covered above, even the most accurate source of first-party data can lose some of its value when it comes to matching those users across platforms. Without the ability to leverage cookie syncing technologies across the web, actually resolving the identity of a single user from one location to another isn’t easy.
Luckily, as we’ve covered in some depth in another article, the industry is stepping up to develop solutions which will enable programmatic players to tap into new methods of matching identity across the web. These alternative IDs, particularly deterministic options like Unified ID 2.0 and RampID, will allow advertisers and publishers alike to leverage their first-party data provided they secure audience consent -- which, let’s face it, isn’t always an easy thing to do.
Of course, one other possibility is that first-party data and 1:1 targeting take a back seat in the cookieless world, instead making way for alternative targeting solutions such as contextual targeting.
Not sure how to make the most of your first-party data?
The next chapter of the First-Party Data Programmatic Playbook will be published on the IPONWEB blog very soon, and we’ll link to it right here.
In the meantime, whether you’re a programmatic veteran or you’re just starting out, the programmatic pioneers at IPONWEB are here to help you tap into your first-party potential.
Simply click the button below to get in touch with our online advertising experts today and we’ll start building your first-party data strategy together.