It's not an if, it's a when.
Browsers are going more private, entire operating systems are being updated as we speak in the name of providing more privacy. The shift is real and it's happening right now.
So let's talk about a few things:
- How will this affect marketing as we move forward?
- Where is the market headed?
- What can we do about it?
Let's break down the difference between 3rd party data, 1st party data, and zero-party data.
- 3rd party data is data companies collect from following you around the internet
- 1st party data is data you collect from your website when a visitor spends time on it
- Zero-party data is the data provided to you by the customer via a form, service ticket, etc.
So what’s all this talk about 3rd party data going away?
It’s actually the tracking cookies that have been met with a slow death. All the major platforms have decided to work towards eliminating the tracking cookies across the web - some would say this is in the name of privacy.
All in the name of privacy. Sounds good, doesn’t it?
Well, sort of...
These large companies already have all the data they need and are hedging massively into what comes next that benefits them directly. Who will be impacted the most by this? Small businesses.
To a small business:
- 3rd party data is easy to get and very easy to rely on
- 1st party data requires some thought process and analyzation
- Zero party data requires a lot of effort and the patience to structure the data to make use of it
3rd party data has never been the best source of data. It's always just been the easiest because it doesn't require more than putting in a credit card and running an ad on Facebook.
This isn't the same case for both 1st party and Zero party data.
The problem is that in order to accurately capture both 1st party and Zero party data it requires experience and the right tool. 1st Party and Zero Party data are harder to obtain because they rely on people actually visiting your website and taking action.
Then once you have the information and data, you need to do something with it.
For most small businesses this falls outside of what they are capable of or have time for, from an operational standpoint.
So you’re stuck as a small business owner having to create content to buy ads to drive customers and convert them into 1st party data and zero party data just to hedge against the death of 3rd party cookies.
As a small brand, you now are reliant on a two-step conversion process.
- You have to buy or drive traffic to convert it into data, build up a data set large enough to make actionable decisions
- then you need to use that data set to create revenue by selling your products
Complicating things even more, this requires skilled workers that are trained to analyze this data and who can interpret it. After you’re done interpreting it, you need to make business decisions based on those interpretations.
The vast majority of businesses know that data is important, but don’t understand what to collect and how to use it properly.
This is a huge gap, the problem is there's a lot of new tools out there that are aimed at collecting the data, but the gap still remains.
It's not about the data, but what you can do with it.
The shift to 3rd party data
The rise of 3rd party data was a combination of convenience and entertainment.
Between Google, in search, and Facebook in social, the two giants have accumulated equal sides of the market for intent-based data in Google’s search and predictive-based data from Facebook’s graph.
Both of these platforms on their own can manipulate the results for you and show you the ads that they believe you would be most interested in. They are constantly personalizing and experimenting with you.
Both of these systems are what advertisers rely on for driving traffic to websites. So what happens if the quality of their ability to target is reduced?
It will make it harder for small businesses to advertise using their platforms on a granular level. So a change of approach and more heavy lifting will be required on the company’s side.
The tools that the large companies have aren’t available to small companies and where large companies have entire teams dedicated to understanding data, a smaller company might not have a single person.
If you can’t change the rules, change the playing field.
Both Google and Facebook are getting more involved in eCommerce.
They are in a transition to own the complete experience, Google has started its Buy on Google Program and Facebook has opened up selling on Facebook Shops and through Instagram. Both have teamed up with Shopify in direct competition with Amazon.
So what does this shift signal for the eCommerce space as a whole?
If you don’t own your audience, someone else is going to be looking to take a cut really soon.
Both Google and Facebook mint money through their advertising businesses, though there are other options, they are by far the most dominant. The long-term strategic play for them is to change the way people purchase.
Google is the search engine that powers intent-based shopping and Facebook operates as a media company to push out more visual-focused content for brands with the convenience of easily purchased from an ad.
Because of their cash reserves, they can allow people to use their services for free to sell their goods in order to gain market share, collect more purchasing data, and build out more robust systems. Remember, they already can control what individual people see.
The long-term play is always the same, acquire users at all costs then figure out ways to monetize their data later.
If people are able to make the transition to completing purchases via Buy on Google or Facebook Shops or through Instagram it’s going to be nearly impossible to sell on the internet without paying them both for ads and a percentage of the sale.
This is a fact.
Today, most eCommerce brands rely on Facebook and Google Ads to reach and stay top of mind with their customers, they’ve watched as prices have increased and reach has been reduced. This isn’t an accident.
The latest moves to own the entire experience are Facebook and Google hedging against the end of 3rd party data as we know it.
If you can’t track people around the internet, you need to prevent them from leaving your web properties. The solution is to reduce friction and allow people to purchase without having to visit another website.
The longer they can track the entire transaction on their properties, the more powerful they become. Large amounts of data are necessary to create accurate predictions and adding these purchasing signals on the property will just add to the targeting abilities.
Amazon has followed this playbook to the letter but in reverse.
Recent changes worth noting here, companies are now advertising on Amazon to drive traffic to their websites off Amazon, Tiktok is now working on selling directly through their platform and Google is letting people see products featured in YouTube videos right below the video.
So what do you do if you’re a small company or an independent brand?
Focus 100% on building your owned audience and double down on tracking your website visitors to create a great experience. Further, as a brand you need to view yourself as a micro media company, content is king, and finding engaging ways to attract users to come to visit your website will become a necessity.
There isn’t a future where you can completely decouple from advertising, but there are ways to ensure that your advertising dollars are being well spent.
Focus on the Customer Journey
Marketing is changing, the methods will continue to change, but the companies that can make the adjustments now that focus on the customer journey and collection of 1st party and Zero party data will be the ones to adapt and overcome.
Or at least have a fighting chance...