How Big Tech Is Using Data Privacy Concerns For Market Dominance

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As the global pandemic continues and even more of our daily lives move online, there are mounting concerns about consumer data privacy as more people realize that their online activities — from search history to website visits to online purchases and more — are being recorded and used by businesses. for countless purposes. Consumer data privacy is a top priority among consumers, regulators and legislators today.

Amid calls for more privacy protections, big tech companies like Apple and Google have made great strides. For example, in April 2021, Apple introduced App Tracking Transparency, a feature that requires app makers to ask users for permission to track them in iPhone apps and services. In addition, Google plans to phase out third-party cookies in Chrome by 2023, which are used to track users online, target ads and measure ad performance.

While both steps seem in the right direction for consumer privacy, there’s a lot more to it. The privacy features of Apple and Google will give both companies a competitive advantage over other tech giants and countless other companies in the digital advertising space. With these changes, Big Tech retains but restricts its customers’ use of consumer data, all under the guise of consumer privacy.

Amazon shows where all this can lead. While most of the industry has focused on using consumer data for ad targeting, Amazon has spent the better part of two decades collecting and using this data for digital marketing and e-commerce. In the process, it has built up a wealth of AI experience and cornered a whopping 41% of the US e-commerce market.

How Big Tech Benefits From Privacy Protection

By using the cornerstone issue of consumer privacy to limit access to consumer data, Big Tech is not only polishing its privacy-friendly image but also improving its competitiveness against other tech titans. Consider the outrageous impact of Apple’s App Tracking Transparency feature on Facebook: At first glance, it seems harmless enough. Why shouldn’t app users be asked for their consent and given the chance to opt out?

However, when users opt out, the app loses access to the device’s IDFA, an industry-standard unique identifier required to target ads to mobile devices. Apple’s App Tracking Transparency effectively ends IDFA and impacts Facebook and every other company – large and small – with a business model based on mobile advertising. It also impacts any business that depends on digital advertising to reach prospects and grow their business.

Facebook has said Apple’s commitment to data privacy is being used to advance its own business model for profit, especially amid reports that Apple plans to expand its advertising business. Other critics have questioned whether Apple’s data privacy feature is trying to get app developers to monetize through in-app purchases and subscriptions — for which Apple charges a percentage. In any case, Apple will retain access to and use of its first-party data, while the app developers who depend on its app store pay the price.

Google’s plan to remove third-party cookies from its Chrome browser by 2023 is under similar investigation. By removing third-party cookies in Chrome, Google stifles competition in digital advertising that relies on cookies, while at the same time reinforcing its dominance, as the elimination of cookies does not affect Google’s ability to transfer data from the first party through its own services, such as Google Search, Gmail, Maps or YouTube. In addition, Google’s privacy protections are likely to make the company’s own data more valuable as companies struggle to find third-party ad targeting data.

Brands and marketers take matters into their own hands

In the face of consumer privacy protections that are rocking the advertising industry, brands and marketers have sprung into action. To reduce their reliance on third-party data, companies have started investing in their own first-party databases, which can contain tens or even hundreds of data points for each customer — information such as demographics, the store locations they visit, the products they buy. buy, how often they come back, which competitors they shop with, and so on.

This may sound exaggerated, but detailed customer data is essential not only for ad targeting but, more importantly, for all digital marketing. As companies across all industries invest more in digital customer experiences and consumers engage with those experiences, data is generated as a by-product. Over time, companies can use this data to develop complete behavioral profiles of their customers, learn more about them and their interactions with the brand. That same data then provides the fuel needed to acquire new customers, retain existing customers, and win back those at risk of leaving.

Knowing that a customer is a sports enthusiast and parent of teens, for example, a hotel company could tailor all communications accordingly, offer vacation packages during school holidays, lead with family- or sports-oriented destinations, and add tickets to a favorite team or sports experience while you’re in town. This is increasingly the kind of hyper-personalized “I want what I want, when I want it” experience that modern consumers expect, and one that’s virtually impossible to create without a lot of consumer data behind the scenes.

While the tactics companies use to collect this data vary, customers almost always provide this data themselves. Information about, for example, products purchased and dollars spent is registered during the checkout process and ends up in a customer database. Even more data is collected when that person signs up for a loyalty program, enters a raffle, takes an online quiz, or uses a company’s app. It has long been the case that people readily share their personal information if they want to get something in return. What is new is the magnitude of the data being collected and the sheer magnitude of its use.

The changing digital marketing landscape

Bringing all this consumer data in-house not only allows brands to target new prospects with confidence, but inform every touchpoint in the customer journey. Building robust first-party databases is a long-term investment of time and capital, but provides the foundation for future marketing strategies and reduces reliance on external data sources. In addition, because the source and veracity of the data is known, brands can actually improve campaign performance. We are on the cusp of an explosion in data usage that will only grow, especially as AI evolves and can be used to create smarter databases over time.

What does all this mean for consumer data privacy? Whether the consumers who voluntarily share their data fully understand how their data is used remains a real question. While most companies will serve as good stewards of the data their customers share, others will fail to properly secure that data or sell it indiscriminately. Regardless, consumer personal data is on track to get into the hands of many more private entities, despite Big Tech’s privacy efforts.

For digital marketers — and pretty much every marketer aspires to be one given the acceleration of e-commerce due to the pandemic — access to consumer behavioral data will become even more important, going well beyond the ability to simply target ads. . Consumer data makes it possible to predict what their customers will want to do, see or buy, sometimes even before they know it. In the very near future, whether or not marketers have access to high-quality consumer data will mean the difference between growing a healthy business and barely surviving.

This brings us back to Amazon, long the northern star of first-party consumer data collection. Their e-commerce dominance has been fueled by massive amounts of data collected as consumers browse Amazon’s endless supply, compare options, consider alternatives, and make one-click purchases. Yes, Amazon uses its vast wealth of consumer data to better serve its customers and has created the purest example of one-stop shopping today. At the same time, Amazon is accused of using the same data, over which they have a virtual monopoly, to compete with the sellers who rely on its platform. These outside vendors — along with regulators and legislators — have now noticed, almost certainly ensuring some degree of intervention.

A few years ago I wrote that companies should become more like Amazon to stay competitive. What I didn’t anticipate was that Big Tech would use the very real issue of consumer privacy to try to monopolize consumer data, giving them an inordinate advantage in the new economy.

Rick Braddock is executive chairman of several data analytics companies, including Gravy Analytics and Video Storm.

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