Data Clean Rooms Are Gaining Pace but Scalability Remains the Hurdle

The slow death of third-party cookies has pained the digital advertising industry, spurring marketers and tech companies to assess a number of options to figure out what audience targeting will look like. One such option gaining pace is data clean rooms, a privacy-compliant technology that lets separate companies combine data sets—to find matches in duplicated audiences or identify audiences—without the need for data to be shared or stored in a centralized location. “[A data] clean room facilitates that private data network,” said CEO of consultancy MadTech Advisors, Bob Walczak. “It’s a [relatively] new concept, but it's something where the market’s going.”Case in point, a study from May 2020 by Gartner said that 80% of advertisers with media budgets of $1 billion or more will utilize data clean rooms by 2023. Data clean room tech company Infosum has quadrupled the number of customers it's working with this year. Over the last year, more announcements emerge from brands and agencies like Disney and Omnicom Media Group show their interest in using clean room tech to share data. Why Google Divesting Its Ad-Tech Stack Won’t Dent Its Dominance Marketers have been working with major tech companies and their data clean room equivalents for some time, notably Google Ads Data Hub and Amazon Marketing Cloud, according to Eric Schmitt, the senior director analyst at Gartner. However, these big tech companies require the merging of brand advertisers' first-party data, like email addresses and purchase history, with their own data sets, such as ad impressions and clicks, into their interoperable IDs. The concern is this leads to a loss of control over the data and how it’s being used, spurring a number of other tech companies to enter the market over the last few years. “There’s a big growth, but there’s still a lot of headroom,” said Wayne Blodwell, CEO at consultancy TPA Digital. Publishers and retailers make way for brands Addressing the loss of cookies has seen publishers such as U.K. news publisher The Telegraph adopt data clean rooms as a part of its solution through partnerships with Infosum. By using data from the real-estate company Zoopla, the U.K. publisher ran campaigns to target potential home buyers on its site which resulted in winning new business and growth in ad revenue. Brands in the U.K., including energy providers and food delivery companies, have seen results with InfoSum's bunker technology. In one such case, a leading food delivery company’s campaign goals were to drive brand awareness, brand favorability and purchase intent among existing and dormant customers. After collaborating with U.K. broadcaster Channel 4's data-matching solution with InfoSum, the brand saw a 63% increase in brand awareness and a 38% increase in consideration by combining their data with Channel 4's audience data. This more accurate targeting led to increased sales. Concurrently, big companies that contain large data sets, such as retailers, are leaning into data clean rooms to make audience targeting more privacy-compliant. This motivates publishers and retailers to collaborate, paving a way for brands to follow through and leading to more adoption. “Brands will want to partner with both these constituents,” said Optable's chief revenue officer James Prudhomme. Scalability and privacy remain challenges A common challenge to the adoption of data clean rooms forecasted by Prudhomme is scalability. While the amount of data required depends on the match, however, if one or both sides don't have a decent-sized pool of first-party data that they can match on, “it becomes difficult to create scalable audiences,” he said. To supplement this, marketers can look at other cookieless solutions, like alternative IDs such as Unified ID 2.0 or solutions from companies like ID5. “Every brand will prioritize those different options and in different ways,” said Blodwell. Another potential challenge is privacy, Blodwell noted. While data clean rooms are still relatively in their infancy, some industry onlookers question whether their mechanisms use cross-site tracking, the practice that regulators and privacy-focused browsers are keen to crack down on. While clean rooms don’t consider themselves the controller of data, regulators may question their role in data handling in the future. “There will always be a privacy challenge,” Blodwell said. But this shouldn’t necessarily stall clean rooms from operating or growing.