S3 #13 Addressing data privacy issues in the marketing landscape

[00:00:00] KRISTINA: The cookieless future is approaching with the deportation of cookies; the industry is shifting to cookieless, but what does that mean?

[00:00:07] INTRO: Welcome to The Power of Digital Policy, a show that helps digital marketers, online communications directors, and others throughout the organization balance out risks and opportunities created by using digital channels. Here's your host, Kristina Podnar.

[00:00:26] KRISTINA: If you're one of the many marketers around the globe struggling to balance the increasing privacy laws and engaging consumers, today's conversation is for you. With us today to shed light on all things we need to think about in a privacy-first marketing world are Dan Aks, President at Undertone, a Perion company, and Kim Leone, who is VP of Emerging Business, Marketing & Strategic Services also at Undertone. Welcome, Dan and Kim; it's great to have you here.

[00:00:51] DAN: It's great to be here, and thank you so much for the opportunity to contribute.

[00:00:55] KIM: Thank you for having us.

[00:00:57] KRISTINA: Thank you. I'm so excited because I know the two of you, as well as Perion specialize in delivering solutions across three main pillars, which are of key interest to everybody listening today; we're talking about ad search, social media, and display video, CTV advertising, and cookieless advertising. Why don't you kick us off first by ensuring that we're all talking in the same terminology here? What is cookieless advertising?

[00:01:25] DAN: So, by our definition, as you know, there's been a great talk about the surveillance economy. Shoshana Zuboff from Harvard business school has written quite extensively about that. And the notion is that advertisers essentially are creating a system where they like to reduce people to a historical dataset. And through the use of little software programs called cookies attracts what people do through a browser. And it makes the fundamental assumption that you are a historical data set. So if you purchased pair of underwear three weeks ago, then you must be in the market for socks or something like that. And this is creepy to people because either, you know, it's, you don't feel comfortable when it's like, someone's following you around the place. You don't know where your data is, what people are doing, or if your data it's being sold. There are hacks that happen all the time. So, people find out more about you. So, there's an overall view to moving away from this notion of tracking people via some sort of cookie or some sort of software program to eliminate the ability for companies to track you and reduce you to a data set.

[00:02:38] KRISTINA: So, Kim, I'm curious from your perspective to hear about this because I think about what Dan just said in terms of tracking me around; sometimes it can be creepy, right? Like I went to Saudi Arabia in February. I was looking for some outfits; here I am, I'm still being tracked when I'm not going to be making any trips anytime soon to Saudi Arabia; I'm not going to be buying those clothes. But I also think it's helpful sometimes if you can target me in the right way to tell me things; I do want to know. How do we balance out this notion with consumers because it's not always bad, right? Targeting isn't bad. It's the fact that, as Dan mentioned, it is creepy sometimes.

[00:03:12] KIM: Yeah, absolutely. And that's what we wanted to do when we looked at a cookieless solution. That was one of the main boxes that we needed to check. Ads still need to be relevant; without relevancy and without the proper way to target, then those ads mean nothing. So, a big part of our solution is about the real timeliness of it. When someone wants to see something, how they're feeling in that actual moment is that an ad they want to see, and our whole technology is built around that, about that relevancy.

[00:03:45] KRISTINA: So, Dan, what does that look like? I'm kind of trying to imagine this zero-party data because we've been talking third-party data for so long. Then we started talking about first-party data. Now we're at zero party. Do we go into negative numbers?

[00:03:58] DAN: That's very funny. So, let's talk here about the third-party data because that's going to go away. And obviously, there's lots of concern about being able to sort of ads that are relevant. So, what we did, we took a, I hate to use such a, you know, a trite expression like a paradigm shift, but this is, in a sense, a paradigm shift. So, sort, this sort of new technology, smart optimization of responsive traits, what this does, it doesn't look at you as a data set, a historical data set. What it says is we are getting signals from what you, the user, are doing in real-time, just because, as Kim always says, I'm a mom, but that doesn't mean I always am on the web as a mom. Sometimes I want to go on vacation. Sometimes I buy gifts for friends. Sometimes I'm treating my husband to something. So, the idea of a sort is that based on the signals that we are getting, and these are no, there are no PII. It's about what you're reading, what your mouse is doing, what device you're using, and a whole host of signals that we use we're able to categorize on a completely private basis, what you're doing, and then put you into a group, which we know will respond, for example, to travel ads better. This is all done. Lots of AI, lots of algorithms. But it doesn't track anyone. And now, you might say that this is certainly a change in the way, and there's no browser history being managed. No PII, no hashed email address that's needed, but does that work? And when we kicked off this project, I have to tell you; that I was nervous about the elimination of cookies. I mean, the charge to the team was to find something that equals third-party cookies, so our targeting doesn't disappear in the ability to deliver relevant ads. We were shocked at what we actually got back. We're getting minimally two often, three times the amount of engagement. Measured by all kinds of KPIs. And so, so this was astounding to us. And what it turns out is we may have, you know, let's say, Edison always said the best inventions where the kind of stumbled on. We didn't know we were going to get this sort of response, but it turns out treating people in real-time. What, you know, because we know you're not one thing, your desires change your needs, change your emotions change. So, the notion that sort actually changes with them is turning out to be a better targeting technique than the historical third-party way. Our numbers now are getting to the point where we're actually rivaling first-party data. Now first-party data is valuable. Obviously, there's no reason to serve me, you know, ads for diapers, right. That would be a complete waste. And so, you know, third, so first-party data, at least not yet. But first-party data has great use, but the fact that we can rival first-party data results using this approach is astonishing. And we think this is now going to be, first of all, the future because we can now go back to the ad tech industry and say, you know, you don't have to get PII from people to get extraordinarily useful results for your advertising customers who obviously want to reach the right users, and to your point earlier, users actually look to be educated on things they want, enjoy buying things as part of life. It's enjoyable; you just don't like it when you get things that are utterly irrelevant; that's annoying. I think we've found a new future in the way that ads are going to be developed and delivered.

[00:07:42] KRISTINA: So, what does that look like from a digital marketer's perspective or a lot of the folks that are listening are part of a larger digital team? What should they be doing in terms of adjusting their processes or their focus? Because this is a little bit of a shift from where we've been historically.

[00:07:57] KIM: So, that's exactly what we're talking to marketers about every day. We're saying the time is now. Don't wait till the last minute when cookies are officially off the table; start testing solutions and start seeing what else is out there. Everyone is so hung up on their tried and true methods, right? They've always used these X, Y, and Z behavioral segments. But they need to branch out, and it's a good thing to branch out. This is where the industry is going. And as Dan mentioned, it actually, in the end, will produce higher results than what they're used to. So right now, we're in the test-and-see phase. We're trying to showcase to all of our advertisers the comparison between cookieless, sort technology versus what they're used to. And everyone's leaning in. I will say that I have conversations with advertisers every day, and they know that they need to. They need to start adding these things in. They need to be ahead of the curve. You know you don't want to be the last advertiser standing that never looked into cookieless solutions. So they're certainly leaning in more now than ever as the time is getting closer and closer.

[00:09:06] KRISTINA: I'm curious, Kim, what does that look like tactically, because I'll tell you something really funny happened to me last week. I got an email. I'm not going to name and shame the company, but I got an email. And what really dawned on me is this company knows nothing about me. I mean, if anything, they're starting to make me angry rather than meeting me where I am. And so you're talking about something that's a little bit more futuristic forward-leaning, a way to engage. And I'm wondering, do you have this great Lamborghini ready for the industry and yet marketers are still driving a Honda. Where are we at? And so is there a fundamental shift in how we're thinking and behaving on the marketing side that also needs to change and ramp-up to take advantage of the solution and this way of working in a cookieless world?.

[00:10:15] KIM: Absolutely. I mean, you said it perfectly. I think we use an analogy similar, similar to that many times with a Honda versus a Lamborghini. We need to take that step forward, and, as many advertisers that are leaning in there are still the ones that are sticking with their old ways. And I think they're going to find out sooner rather than later that they're behind. And the ones that are behind are going to make those mistakes as they did with you. And they may very well lose you as a customer. And that's actually a big thing we're talking to advertisers about as well. As you said, consumers are more aware than ever before of what advertisers are doing. I'm aware that if a brand is following me online about the bag I didn't purchase, it creeps me out. You're aware that they send you an email every day with different coupon codes. Consumers are aware; they're watching brands more than ever. And they're favoring brands that are, one, delivering relevant ads to them and, two, protecting their privacy. Five years ago, maybe even three, two years ago, we didn't think about this as much, but it's very front and center to everyone today. So, I think that brand needs to catch onto that.

[00:11:22] DAN: And I'd like to add a practice that we we're observing around this. Retailers are, are doing what I'm about to describe; some do it extraordinarily well, some do less, but what they're doing is they're using first-party data. Obviously, they have endless loyalty card information, so they have some of the best data there is. They're doing so very smart. I don't know if you. People who remember their days. And, and when they get the marketing 101, they used to say, uh, you know, what, what are the three most important things in marketing? The answer was to segment your market, segment, your market, segment, your market. What they're doing now is they're creating basically personas. So, they're saying, value people. And then they're saying, at home cooking with hyper-expensive ingredient people; they're getting extremely smart about figuring what offers should be given to what segment? So the notion of you getting three blind emails. That's bad practice. What they should have been doing is having you in one of those segments because not only does it confuse you, but it's bad in a couple of ways. If we give you a 10% discount and you need a 20%, you won't be motivated, and that opportunity is lost, but something else is going on. That's not a lot talked about. Sometimes they give people a 20% discount when 10% would've been more than enough. And that doesn't get talked about, as I said very much, but it's literally tens of billions of dollars lost by overstimulating when they could have gotten by with less. And so what's happening is the use of first-party data, creating personas and then advertising to those personas with specific selections of prices and items is going to be the future. So, and so that's a very special thing that retailers are waking up to. So, you know that, and they'll do this in conjunction with obviously the manufacturers who decide on market development funds and who to focus on. And what they're trying to do this is, this is very much the future of retailing.

[00:13:22] KRISTINA: That's interesting because it, I think, puts a spotlight, Dan, back on knowing your consumer and thinking about that consumer and stomping sort of that spray and pray mentality we've had for years, which is let's try for our best and keep our fingers crossed and see where it goes. And it does make me wonder, especially as we go to this consumer-centric approach and the ability to do things like location target. So real-time targeting, but also location targeting, which I think is something else you've been thinking about. So can you maybe tell us a little bit more about the possibilities of things like out-of-home media buying and how do we integrate sort of the online, offline experience that's surrounding the user in terms of leveraging billboards or transit shelters or buses and other types of advertising in context with online?

[00:14:09] KIM: At Undertone, while we don't do all of those things, we are known for really standing by a holistic strategy, a marketing strategy. We think that there is not, you shouldn't just be on display or just video or just CTV, and all of those things need to be weaved together. The message that you're portraying on your video ad can be completely missed on your billboard or out of a home; you need to have that consistency weave throughout so that people can remember you, that you're standing out, that they know that they, wow. I just saw them when I was on the website, I was just browsing, but wow, actually, when I got off the bus, I saw that same message. And the more they're seeing that consistency weaved in together, the more they're going to like your brand, they're going to respect the message that you're putting out there. And it's memorable.

[00:15:01] DAN: I tell you, Kristina, I wish I could give you, I've been searching for it, the holy grail, the equation, which says, you know, when do you hit someone with a display, a video, what device? Mobile, a billboard outside, but we do know this; we know that different or ad formats affect people in different ways. For example, one of the reasons that audio is rapidly growing only about depends on when you read it could be five, 6 billion, but it seems to be growing 25 to 40% a year. And there's a reason for that; audio affects people's brains differently than they receive messages when they see things. And so, in the media mix, you must have a multimedia mix, and you should be, uh, when you, and it also depends on what your brand objective is. So, if you're building awareness, there are certain things you do. You try to drive a transaction in a moment; certain formats work better at that moment. So, you know, billboards, for example, if you're not looking to buy something right now, you probably just ignore the billboard, but if it's been on your mind and suddenly you see a billboard, you go, ah, that's right. Got to do; I need to get that new car. And I just saw the advertisement. So, we have been, and many others are trying to find that mix that says, what is your brand objective, is it a new introduction? Is it a price cut? Is it you're reaching new markets, and what formula of devices and formats should you reach those people with? We know we have proof that the more varied the approach, the better you do; we know that, but we haven't been able to optimize that yet. And I'm waiting for. One of the business schools to come out and say, we've cracked the code. That would be just amazing, but it may be, it may be years until we see that. Unfortunately.

[00:16:46] KRISTINA: You brought up a very interesting point that I've been wondering about: it seems to me that targeting consumers is just as important as understanding consumers and their sentiment once you do target them. So one of the things that have fascinated me is the CTV arena, and I take everything so personally. I personally take the Liberty mutual ads that are just annoying me. Suppose I must see the ostrich ad one more time. I'm just going to start screaming very loudly. It's horrible. Like I will never, ever, ever, ever switch to Liberty mutual just because of their advertising, which is fascinating because they used to be their customer. So, they managed to not just frustrate me at the moment, but literally annoy me and isolate me as a potential consumer in the future in a negative way. And yet I continue to see their ads, right. So, it's just reinforcing a lot of this extreme emotion, and it could just be me, but I'm wondering if there are others out there that are like me. And so how do you tell organizations like, hey, it's important to target people, but it's also important to understand the sentiment of the people that you're targeting and start to dive into what that means to the brand in the moment and in the future?

[00:17:54] DAN: We work with a company called System1 Research, and what we have found is creative drive something like 70%. This has been David poll track back in his day; confirm this for television. There's no reason it differs outside of anything other than, you know, other formats in television, creativity matters. So, what we do with system one research is we rate all commercials, and there's a variety of things, but what I'll, I'll try to, and it's a long theory. I'll try to reduce it quickly. But what says this, if you surprise and delight people through the use of creative, you get a higher share of voice. So people will talk about your commercial, just the way you just did, by the way. And the high share of voice leads to the high share of market. So, what we do, is we offer all of our advertisers the ability to run a System1 Research study, which creates them generally from one star to five stars amongst a number of criteria. There is no doubt when you produce extraordinarily good advertisements, you get more share of voice, and you get more share of the market. If you're low, the result could be what you've just described, is that you say, look, I, you know, I'm not interested in this product. It does not surprise me. It's not delighting me so that you've touched on a very, very important point, which is why Undertone has its own creative capability. One of the few companies that have that we have a staff that does creative, and we work closely with System1 Research to make sure that what we send out there. And of course, the client drives this, it's up to them, but we've had clients where we've said, look, I, we don't like what you're doing here. And we will show them the results of a System1 study before we go into flight, and they'll say, please change it. And then we do it, and they say, thank you for doing that. It's extraordinary; we must never forget about when it comes to ads. It's not just the targeting and the distribution and the creative timing that matters. It really does.

[00:19:53] KIM: Yeah, I was just going to hit on the last point; you said, um, creative above all else, right? You could hit the right person perfectly. I could be the perfect, perfect target for your business, but if you come at me with a message that is insulting in some way, it aggravates me in some way. You could lose me as a customer or potential customer. So, we definitely put creative first in our company, especially obviously with the studies, Dan just mentioned, it's all about the emotion that we can drive through that creative and then bring it to the right people. But creative is first and foremost.

[00:20:29] KRISTINA: Looking at martech and adtech, intersections in so many different areas. Some marketing industry professionals consider ad tech to be a subset of martech would be curious to hear what you say, but since there are 7,000 products as part of the marketing technology landscape, how do we start to make sense of all of that? Also, curious when we talk about it from a Perion perspective, where do you fit into that?

[00:20:53] DAN: Firstly, martech and ad tech are blurring. For me, it's becoming increasingly hard to separate what you traditionally consider marketing and delivering of advertising because when you start looking at data and insights and making decisions about what creative to serve to who and when at what time of the day. What machine they're using that to me feels like you're almost talking about the same thing. So first I, I would say that secondly, on to address Perion more broadly, Perion as we like to say we serve the chief digital officer with whatever product that chief digital offer needs to time. So we have a very large search business. And then there's the advertising side of the business where we maintain a demand side, which is what Undertone does. And then we have a supply-side. We are able to aggregate demand, and we have a hub that in between that decides where to send impressions to maximize effectiveness for users for advertisers and frankly, it, it helps us with margin because it allows us to find an O and O capability, which saves us a little bit of money. So, we are trying to actually master this entire martech ad tech merge so we can be the preferred choice for a chief digital officer.

[00:22:13] KRISTINA: So that's helpful. I'm curious as we prepare for that privacy-first world and think about the technology space and the companies out there. What is the one piece of advice that each of you would give to teams right now? What is the thing of like, go do this today?

[00:22:30] KIM: Definitely, the time is now. Don't wait. Earlier in our conversation, I said there's no time to wait. You need to be at the forefront of this. You want to be a leader in the space. Then the time is now to start testing new technologies because it's going to be too late pretty soon.

[00:22:48] DAN: My advice isn't very different. I think privacy is becoming more and more important. I can tell you this, Kristina, we actually have a lobbyist firm that we work with. They have deep Washington DC contacts. In fact, we've had the privilege to be meeting with staff of senators and members of the house of representatives to talk about privacy and try to get a sense of what's on their minds, where things going. We have no trouble getting meetings. So in fact, I can tell you definitively, Congress has an ear towards privacy. How this will manifest itself in terms of regulation, that, I don't know the mind of Congress yet to be able to, and who knows, in November, there could be changes. It'll be very hard to say where this is all going to go, but I will tell you on both sides of the aisle, that there is extraordinary interest in privacy. If I had to take out, if forced to take out a crystal ball right now, I will tell you that there is going to be certainly the federal government's going to say, listen, we're going to start to advertise our own, broad advertising spend against privacy vehicles so we respect our voters. Now that's not a political appetite for candidates. They rely on. I'm very clear on that. They rely on very, very personal data to solicit donations. That's a different can of worms talking about advocacy, things like that. They will spend their money on privacy-based solutions. So that's going to drive the market because the federal and state government spend a lot of money. So this is going to end up dragging people in. The only question in my mind is when is that going to happen? So there is going to be a shift. People are going to have to do this. So, to Kim's point, you know, if you wait, then you're a follower. Why not right now, as a brand, tell your users, your customers, we respect you. And we want to reach you without appearing to be creepy. And so why not use it as a brand opportunity to enhance your own brand and say, we care about you, not only doing, to provide goods and services that enhance your life. But we're also going to carry that mission into the way we respect your privacy and see the alignment between the two. It seems to me that's only good for brands it would help them with their ESG initiatives. Remember now, everyone on the, their stocks are being rated. When you go on Yahoo if there's a rating for ESG, that S part, the social part; privacy plays a role. And so, I would urge brands take this seriously. It's going to happen; the sooner you do it, the more you'll learn about it and be better prepared if you wait till the last minute. You lose an opportunity to tell your customers how you care about them and respect them the way you reach them online. And then you'll be struggling the last minute to catch up. That's I hate catching up. I always like to be ahead of things.

[00:25:43] KRISTINA: I love that, Dan, and I appreciate that you brought out a very important aspect that we're always focused on here: how do you build trust? How do you build loyalty? Because at the end of the day, that's how brands win. And what we're talking about here is a way to win in an inevitable way because we are moving to a world where privacy matters. People are willing to share data, but not in creepy ways. And the sooner we can get to the point where we're meeting consumers, where they are, and where they want us to be, the sooner we win. Excellent. Appreciate your insights. Thanks for your time today, Dan and Kim; both looking forward to hearing more from you and certainly seeing how this plays out in the marketplace, but no doubt, it's going to change and shift and laid the way.

[00:26:25] DAN: Thank you. Good. And appreciate the interview you had. You made me think a lot, which I always appreciate.

[00:26:30] KIM: Thanks so much, Kristina.

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