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BizReport : Internet : May 10, 2017

Expert: What the data privacy repeal means for people, brands

Just a month ago, Congress voted to repeal a law protecting the privacy of digital customer data, making it possible, in effect, for brands to sell their shoppers' data to other businesses. We asked Greg Portell what this means to both consumers and businesses.

by Kristina Knight

Kristina: Last month the rule protecting online consumer data privacy was repealed. What does this mean for consumers?

Greg Portell, Lead Partner, Consumer Practice, A.T. Kearney: In the near term, it doesn't mean much for consumers. The rules that were repealed hadn't gone into effect yet. In the longer term, you can expect to see internet service providers (ISPs) accelerate their investments in personalizing content and ad targeting based on behaviors. In a broad sense, most consumers have given up on the belief that anything online is private. The big change caused by the repeal is the number of people who can monetize your data. Instead of just being tracked by individual media companies via cookies and pixels on your browser, ISPs can track behavior at the macro level.

Kristina: What about for brands in the digital space?

Greg: The balance between data access and expectations is tricky. If consumers know marketers are capable of accessing all of this information, they will expect that data to be used in a way that enhances their experiences. At a basic level, that would be via targeted advertising. At a more advanced level, it is about anticipating what a consumer will need. Traditional direct marketing has worked on a 1 to 2 percent response rate with a very scattered approach. If brands know everything about a consumer, response rates should be closer to 90+ percent. The model flips.

Kristina: What led this rule change?

Greg: The economic models in media are changing quickly. At the same time, consumer data is emerging as a viable currency. With these trends converging, the various players in the industry have incentive to keep their access to consumer data. In particular, this type of data that can be collected at a census level rather than a sampling level is particularly valuable.

Kristina: What impact do you see this repeal having on the digital space?

Greg: There will be another investment spike for data tools. While there is a lot of data available, the challenge has remained of how to make it actionable. Improved tools in terms of speed and flexibility will become even more valuable. The telecom and cable providers will lead the next investment surge in this industry.

Kristina: How does this repeal impact the state of the ad industry?

Greg: There is pressure in the industry to improve the ad units being sold. Traditional "impressions" continue to become less and less valuable. Meanwhile, the value of improved targeting hasn't produced higher CPMs (cost per thousand impressions). We'd anticipate unfettered access to the data to increase the incentive for media companies to improve the ad units. The additional data provides the missing link between impression and purchase. Bridging this gap will allow media companies to make a play for a "commission" model rather than an "impression" model.

Tags: A.T. Kearney, advertising, data privacy, data privacy repeal, ecommerce

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