Privacy Issues for Digital Advertising

Retail Media

7 min read

Globally, data privacy is getting more and more essential, creating new consumer rights and raising the expectations for businesses.

High protection of data and privacy along with the changes in governance legislation is becoming a constant agenda in the world of advertising, with renewed laws and tightening rules, there is an increasing concern among advertisers. Globally, data privacy is getting more and more essential, creating new consumer rights and raising the expectations for businesses.

New regulations, which will benefit customers and users’ privacy create an obstacle, especially for advertisers. Companies that want to be affected by the regulations in the least negative way are turning to different strategies and giving their full efforts to make their existing advertising platforms safe. Tech companies utilizing user data started to make extensive changes focused on privacy protection.

At this point, it should be noted that there are practices and sanctions within different regulations for regions. Today, most advertisers are aware of the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), but it should not be ignored that different states are subject to different laws according to their region. Any developer, advertiser, or publisher who still thinks that the GDPR of the EU and California’s CCPA are the only privacy rules that will likely have an impact on their company is definitely not prepared for the challenges ahead. Because new concerns, difficulties, and developments are presented by legal changes every year for those involved in the global advertising landscape.

The attention is on companies that use customized advertising extensively. All businesses handling substantial amounts of consumer data must take action to ensure compliance with current laws and to review their data privacy policies.

Overview of Trending Legislation

General Data Protection Regulation (GDPR)

The EU’s GDPR has evolved into a sort of global standard for other privacy regulations, offering extensive consumer protections.

One of the businesses most heavily impacted by the GDPR is digital advertising. Heavy penalties have already been imposed on advertisers for breaking the legislation and it’s likely that the GDPR will have an impact on your business practices if you use direct marketing or personalized ads to advertise your brand. Therefore, you must comply even if you are a small tech company. It should be noted that any business (or person, or organization) that provides goods or services to individuals in the EU or checks up on their activity is subject to the GDPR, not just those located there. So, either of these two actions requires your business to adhere to the GDPR.

California Consumer Privacy Act (CCPA)

Many Americans are becoming increasingly concerned about cyber security and their privacy rights. The California Consumer Privacy Act (CCPA), a data privacy law that defines numerous rights for residents of California, is one of the most recent privacy-related measures that has received considerable attention and it has long-term consequences for the world of digital marketing and advertising. The CCPA aims to safeguard the digital security of Californians and improve transparency about personal data collection. At its foundation, this law prohibits corporations and digital marketers from collecting and using personal data of California citizens without their permission. We shouldn’t forget about the fact that the internet does not have a physical and geographical entity, if a user from California is visiting your site, that means you may also be subject to CCPA fines. That means most firms are left with little choice but to abide by the CCPA’s limitations in this situation.

Cookies on the way out

Banning the use of third-party cookies creates a big challenge for advertisers in displaying personalized ads to users. Because for years, advertisers have been able to track customers thanks to third-party cookies. For a very long time, the only way to comprehend and interact with customers was through this data collected.

Cookies allow them to track which websites users visit and utilize that information to create user profiles, including their interests, which aids advertisers in creating more precise advertisements. As you can see, advertisers are in desperate need of it to engage consumers and offer them individualized experiences. Most businesses will be significantly impacted when these cookies will no longer be available. A recent study found that 81% of businesses still rely entirely or largely on third-party cookies.

Losing access to these cookies can be detrimental since it would make it harder to show the proper advertisements to the right customers, which would reduce ROI, in the end. 42% of businesses believe that the upcoming changes would result in weaker ad spend ROI and less accurate campaign efficiency. Thus, it’s critical to adjust to this change before it’s too late. 85% of consumers want brands to use exclusively first-party data when developing customized ads. That’s why companies can no longer put off getting ready for this world without cookies.

Google’s depreciation of third-party cookies

Google stated in January 2020 that the third-party cookies would be removed from Chrome by the year 2022 and in June 2021 that further time would be required to implement the cookie ban. And again, Google had extended the date on the ban of third-party cookies for Chrome from its previous deadline to the end of 2023. The reason behind this decision was to give publishers, developers, and advertisers more time to come up with solutions for a privacy-secured digital environment. It was clear that most companies were not ready for this yet and no effective concrete solution had been offered, so the date of banning cookies had to be delayed several times. We will eventually face the reality of living in a cookie-less world, but for the moment, Google is only giving publishers, developers, and marketers more time.

Companies are concerned about recent regulations because “managing slightly different privacy laws is becoming exceedingly challenging.”

On the other hand, growing regulatory pressure is reportedly being felt in the US by Google and other ad providers. With its CCPA and CPRA privacy regulations, California has set the standard. States like Virginia, Colorado, Connecticut, and Utah all have various state privacy laws. For instance, Virginia Consumer Data Protection Act (VCDPA), Colorado Privacy Act (CPA), Utah Consumer Privacy Act (UCPA), and Connecticut Data Privacy Act (CTPA) are some of the several state privacy laws that will take effect in 2023 demonstrating the diversity of laws within different states.

Independence from third-party cookies: First-party solution

The ban on third-party cookies led advertisers towards the use of first-party data. 43% of business leaders are already embracing first-party data because it provides better privacy for customers. However, the majority of businesses lack a customer data platform that can be used to manage and activate first-party data in order to create campaigns that are personalized. They need a platform in order to gather customers’ data from various sources in a safe way and combine it into a single Retail Media platform. So, after learning that third-party cookies will no longer be used, the number of advertisers who are looking for platforms where they can take advantage of first-party data and partners for a workaround has increased a lot. For example, Walmart stated that, in a single year, the number of ad clients increased by 121%. Seth Dallaire, chief revenue officer at Walmart, explained the growth by saying that more advertisers are choosing them since they have a wide audience.

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Besides Walmart, Melanie Babcock-Brown, vice president of integrated media at Home Depot states that the decline in third-party data availability is certainly one of the key reasons why they engaged in the business of Retail Media advertising.

“Companies that keep up with the continuous developments in data privacy and protection will surely flourish in the years to come.”

Retailers and sellers are enthusiastically approaching ad partners with Retail Media systems where they can make use of first-party data to create personalized advertisements while strengthening the customer base. With the help of Retail Media, advertisers may reach consumers in highly advanced ways across different media channels. As they increase sales and provide long-term value for their companies, retailers and sellers can gain consumers’ trust by using a first-party data approach.

As was already indicated, companies who want to run customized ads face numerous obstacles today because of privacy issues. At the same time, generating long-term value from customers, conducting real-time marketing, and understanding consumer expectations are crucial. Implementing these changes in consumer data protection won’t be simple. However, retailers and advertisers will succeed if they adopt the right decisions like employing first-party data to target customers to create special, one-of-a-kind relationships with each of their consumers so that they may get ready for the cookie-less world quickly and avoid losing either clients or the profit from their ad revenues.

References:

Coffee, P. (2022, September 27). Brands Review Data Privacy Policies. Wall Street Journal. https://www.wsj.com/articles/brands-review-data-privacy-policies-after-1-2-million-sephora-settlement-11664272801

Cookies might not be tracking you, but some of your favorite brands do. (n.d.). NBC News. https://www.nbcnews.com/business/consumer/cookies-might-not-tracking-favorite-brands-are-rcna47657

Google Swears It’s Not Bluffing About Quitting Cookies | AdExchanger. (2022, October 19). AdExchanger. https://www.adexchanger.com/data-exchanges/google-swears-its-not-bluffing-about-quitting-cookies/

Legislative developments that will disrupt the global advertising ecosystem. (n.d.). The Drum. https://www.thedrum.com/news/2022/10/11/the-7-legislative-developments-will-disrupt-the-global-advertising-ecosystem

Morrison, S. (2021, June 24). Google’s plan to get rid of cookies isn’t going well. Vox. https://www.vox.com/recode/2021/6/24/22548700/google-cookies-ban-delay-floc-tracking

Yalçin, C. L.-D., & Abra, S. (2022, October 20). A brief overview of the current EU legislation on cookies. Lexology. https://www.lexology.com/library/detail.aspx?g=cce22ee7-cc84-4c10-a1ea-b4f42a1e2932