First, let’s tackle the challenge that has arisen in the last three weeks. Facebook is the company currently in the cross-hairs, but the entire industry is under debate these days.
I’ve personally never seen so many people from outside the world of advertising asking so many questions as I have lately. There have been privacy and data-related stories in the past, but this story has more legs and teeth than anything previously, and it’s going to have lasting impact. It’s natural to assume there will be some kind of next step from Washington, which over-indexes on the side of consumers and their own ability to control and/or monetize their digital data.
Washington will undoubtedly move forward with some type of proposed legislation that either mirrors GDPR or comes close. After the hearings, it was pretty universally agreed that nobody in Congress has any understanding whatsoever of how technology works, or the business models for an advertising-supported media or technology company.
That being the case, Congress will hopefully tap into someone with a clue, maybe even a consortium of the strongest digital companies, to draft a version of legislation rather than going their own way.
That brings us to the repercussions of said legislation.
The ad industry is currently dominated by two digital companies and a handful of offline ones. In digital it’s Facebook and Google. In the offline world it’s the large media companies like Disney, Time Warner, etc. When you factor in Verizon and AT&T, whom I would consider the upstarts in the digital ad space — but who own more of the platforms than anyone else — you see a limited list of companies with a majority of power.
This oligopoly owns the lion’s share of your attention and therefore the dollars that are being spent. This makes it easier for advertisers and it massively reduces the footprint for the tech landscape that serves to splinter and confuse the market. Compound this with the clear leaders in the rest of the market who focus on the open web, and it’s a finite list.
I am a fan of enabling consumer control over their data. I’m also a fan of consolidation and simplification of the landscape.
The concern I have is that both steps, along with the announcement that Facebook was limiting third-party data brokers from its platform, will have a dramatic impact on the third-party data business as a whole.
Here’s the concern; Facebook limits the access to third-party data. Advertisers know they can’t use it, so they stop asking for it and searching for it on their campaigns, instead focusing on the data provided by Facebook which in this case is almost considered first-party data.
Now imagine those campaigns work as well, or better, then the ones with the third-party broker data? If that’s the case, why buy the third-party data from brokers? Does that have a perceptual spillover effect on the rest of the third-party data used on the open web?
This last scenario, if applied to Google and some of the other companies in that short list oligopoly, means advertisers would start to question third-party data as a whole when they could simply use the data supplied by Facebook, or Google, Verizon or a limited few.
What happens then to the smaller companies that fit into the bucket of third-party providers? They fade away quickly, like ad networks and ad rep firms before them (both of which became the category currently known as demand-side platforms).
This is an important question that I haven’t seen anyone ask yet — I think because they truly fear the answer. The companies who offer this data now will have to pivot into more services and enable other offerings beyond simply accessibility to data.
Of course, all of this depends on how quickly the previously mentioned legislation gets worked out. How long do you think that will take?