• by Adam Broitman , Op-Ed Contributor, July 12, 2022

Personal data use is a significant driver of consumer experience in our increasingly digital world, but the data landscape has become fragmented.

Marketers and experience designers looking to continuously improve digital experiences must use personal data in an appropriate and respectful way — because consumers demand it.

In May, we covered the three prevailing approaches to privacy-centered growth: anonymous, direct first-party and federated identity.

The anonymous approach does not use personal identifiers for ad targeting or personalization. Direct first-party data relies on users explicitly granting access to their personally identifiable data for personalization, ad targeting, measurement and product features.

This month, we will explore federated identity in greater detail, which represents the area of greatest activity in the past year, thanks to the pending demise of third-party cookies and privacy initiatives by major technology companies.

A federated ID is one collected by a first party and leveraged -- with proper consent -- by an external entity (a second party) in a highly secure, encrypted manner.

Much of the advertising ID innovation is occurring within the federated identity space — so it's key to dig deeper and unpack the various ways federated identity is activated, as well as how it can enhance consumer experiences.

Three Ways to Leverage Federated Identity

The three most common means of leveraging federated identity are in traditional walled gardens, through commerce media,and as asynthetic identity layer.

Traditional walled gardens collect identities as part of their core offerings or via a login, and share this ID with their advertising customers.

Traditional walled gardens have long used the federated identity concept to create highly relevant advertising experiences for users.

Commerce media represents a key trend, and includes retail media networks (RMN) as well as the growing number of businesses with both a captive audience and direct sales channels.

Like traditional walled gardens, commerce media identity collection occurs at login, during payment or via loyalty program resulting in a first-party data set that can be federated to advertisers.

The closed loop of these networks make them a significant part of most modern media strategies, with RMNs offering advertisers a $100B opportunity by 2024. Commerce media also enhances the consumer experience through highly relevant and timely advertising.

The third method involves a synthetic identity layer (SIL), which is typically collected from various sources and combined into a common, durable ID such as an email address, which can be used within walled gardens or across the open web.

While traditional walled gardens and commerce media are relatively effective turnkey ways to drive performance, a SIL is an impactful way to apply an identity to inexpensive and/or “long tail inventory.”

As media find it increasingly challenging to compete with identity-rich systems on the open web, the use of synthetic identity will likely become more important.

Marketers should consider building first-party data sets and explore the use of cleanroom technology to build rich sets of synthetic identity/second-party data partnerships.

Handle Consumer Data with Care

While synthetic identity represents the most innovative area within federated identity, marketers and publishers must exercise caution and be diligent in the selection of their ecosystem partnerships.

When collecting data for “synthetic” use, it’s important to respectfully request explicit permission and provide transparency regarding data storage and usage.

A double opt-in is optimal -- one for direct use, and one for partners. Disrespectful or unexpected targeting could result in poor customer experiences and reputational damage.

It's not only incumbent on industry participants to abide by identity regulations — it's absolutely critical to observe standards of consumer permission and respect.

As marketers enter the era of privacy-centered growth, they should never forget how misuse of personal data resulted in more stringent standards for the advertising and marketing industries.

The identity landscape is in constant flux. Marketers must stay on top of the various ways to leverage data in a manner that is both compliant and enhances the overall consumer experience.

A thoughtful, modern marketing program could include anonymous, direct first-party, and the various synthetic identity approaches.

Fluid use of available federated identity options may also help ensure a sustainable marketing strategy.