How Retailers Can Navigate the Privacy Evolution and Thrive With First-Party Data

Now that Google’s Privacy Sandbox is officially open, it’s time to explore the implications it holds for the advertising world, especially for retailers. The recent updates to Android’s privacy guidelines, which restrict tracking across apps for Android devices, mark a pivotal shift in how retailers gather customer data for ad targeting.

These guidelines are reshaping how retailers develop an understanding of their customers. Consequently, there are essential measures they need to adopt. Below are four steps every retailer should take to adapt their data collection and usage practices.

Rethink Programmatic Ad Strategies

Historically, programmatic advertising has been the go-to strategy for businesses to reach potential customers. However, the landscape is evolving. It’s time for retailers to rethink their top-of-funnel strategies and adopt first-party data strategies to create ads that demonstrate an understanding of their customers.

Programmatic advertising cost-per-mille (CPM) in the U.S. saw an 8 percent decrease between November and December 2022. When conversion rates decrease, it can have several implications for businesses. It could imply less effective targeting, a saturated audience, or possible issues with ad content or placement, all impacting the return on investment for advertisers.

And because programmatic advertising is traditionally powered by third-party data, current data restrictions have led to a drop in data available to brands to support their ad strategy. In fact, it’s predicted that the loss of third-party cookies will cost U.S. publishers up to $10 billion in lost revenue.

Retailers should reconsider how they use their first-party data to gain insights into their customers’ preferences. By implementing this strategy, retailers can ensure ads are targeted, improving retention, conversions and return on ad spend.

Prioritize Privacy in Data Collection

As the industry prepares to take a more privacy-centric approach, it’s paramount that retailers adjust their advertising strategy to the shifting regulations and consumer preferences.

Third-party data is what’s tracked based on consumer behavior — with or without consent. It’s tracked unknowingly and doesn’t align with privacy regulations. Whereas first-party data is information that consumers willingly share with brands, making it more accurate and less affected by privacy restrictions.

While first-party data is poised to be the foundation for the future of advertising, it’s not easy to come by, especially in a retail landscape dominated by big tech companies.

Access Walled Gardens for Data Insights

Tech giants like Google, Meta, and Amazon.com hold vast amounts of first-party data, giving them a significant advantage over retail brands.

These conglomerates have the resources to build their own audience segments, leaving smaller retailers to fend for themselves. Monopolized data poses challenges for retailers navigating advertising strategies within these walled gardens. Not only is the data exclusive to the behemoths, but it’s also difficult to accumulate and translate into actionable insights.

However, these walled gardens have higher CPMs, which means that while tech giants have access to extensive amounts of first-party data, that doesn’t diminish first-party data’s worth for retail brands. As a result, it’s important that retailers find ways to access this information.

Brace for a Future Without Third-Party Data

As privacy regulations continue to be introduced, how advertisers secure and use customer data will continue to change. Retailers must proactively prepare for a future without third-party data by building out their first-party data strategies now.

Brands should assess how much their programmatic ad spend relies on third-party data and envision a world where it might disappear entirely — because it will. A/B testing can help determine whether conversion rates will suffer, providing valuable insights into the effectiveness of first-party data strategies.

In this ever-changing landscape, investing in a company’s first-party data capabilities isn't just a suggestion; it’s a necessity. Those that can adapt to these changes, maximize the potential of first-party data and stay ahead of the privacy curve will be well-positioned to thrive in this new era of advertising.

Peter Ibarra is the head of AdTech solutions for Amperity, a customer data platform company that uses AI to deliver a comprehensive and actionable Customer 360.