The risks and rewards of the 2020 regulatory landscape

By Dan MacKeigan of Spring Lake Equity Partners

A year ago, the industry expected a debate in support of federal data privacy laws. While that debate rages on, it has taken shape as a patchwork of state regulations, influenced by big tech heavyweights like Facebook and Google. And their influence steers the rules in their favor — edging out competitors and stifling innovation through the acquisition of smaller players.

Absent a federal law like Europe’s GDPR, companies that deal in consumer data — and the brands that rely on them — are forced to prepare for a variety of new consumer privacy statutes including consent management and the “right to be forgotten.” 2020’s regulatory landscape will be rife with risks and rewards — and inevitable winners and losers. Here’s what to expect:

Disruption to traditional advertising and agency models
Advertisers have long facilitated the demand side of platforms, while publishers have fueled the supply side. However, major players like Google and Amazon have created walled gardens, and current agency models are becoming harder to scale with the proliferation of new channels that connect brands to consumers. While these allow brands to advertise outside of traditional mediums like television, it has made the ecosystem much more complex. There is no one vendor that serves as the central supply-side source to keep the ecosystem for brands and advertisers running smoothly — and given the way we consume media, brands need to be able to see across these walled gardens through to all of their other advertising channels.

By the end of 2020, we’ll see a major change in how the ecosystem is plumbed, with adtech integrating into one system for advertisers — or one system for publishers. As big brands come to terms with the demand for transparency, and regulations foster the need for a simpler ecosystem, we can expect significant disruption to existing advertising models. The ideal system will be one that provides a higher level of transparency and accuracy for measurement.

The impact on platform innovation
As brands buy more highly-targeted inventory, platform innovation will also be impacted. In truth, direct marketing platforms were built for one function: advertising. They run on third-party data (that brands use for ad targeting), but they haven’t evolved quickly enough for digital-native brands or to facilitate access to the massive amounts of data that exist. Compare that to a customer data platform, or CDP, which capitalizes on first-party data and makes it possible for brands to reach customers on a much more targeted level. Even companies like Salesforce and Adobe are getting on the CDP bandwagon, validating this trend.

 

However, the introduction of data privacy regulations creates a double-edged sword of risk and reward for platforms leveraging data. Take location intelligence, for example. It has become an important source of consumer insights for brands and advertisers. Location data continues to be captured at the first-party and third-party levels, but in the EU, GDPR has forced many suppliers into compliance — and out of business.

Data service companies, like Gravy Analytics, are in a unique position because they don’t actually collect data. Rather, they serve as refineries for location insights, cleaning up the raw data to ensure accuracy and mitigate fraud. Whether servicing data at a first-party or third-party level, consent management will be the most important feature for consumer data platforms in 2020 (and beyond), so brands and advertisers can be compliant directly within these platforms.

Regulation is also heightening the need for transparency across the adtech data supply chain, so expect initiatives to clean up the entire ecosystem in 2020. Technologies and services like blockchain and artificial intelligence will influence these kinds of platform innovations.

Compliance as a new opportunity for startups
Not every enterprise needs a robust customer data platform, but all companies need rich consumer insights to inform strategy and decision-making. This will be the year that regulation and compliance evolves from angst and risk to opportunity and reward, especially for investors and startups entering the space. Data companies that prioritize consumer privacy and are prepared to comply with new regulations will be most attractive to investors — and have more staying power. I foresee a gold rush-like effect in which big data is the gold, for those that are bold enough to dare.

We’re at a crossroads. Ahead of regulations like CCPA taking effect next year, companies are grappling with how to take on big tech’s efforts to dictate new legislation and not get squeezed out of existence — while investors are adjusting their strategies to account for the ambiguity of foreshadowed consumer privacy regulations. Brands too should take this opportunity to re-think customer engagement in an environment where trust is earned and compliance is a functional byproduct rather than the end product. As with any new regulations, there are risks and rewards for all involved.

Source: https://digiday.com/sponsored/risks-rewards-2020-regulatory-landscape/?utm_content=107699316&utm_medium=social&utm_source=linkedin&hss_channel=lcp-2847608