Europe's looming privacy law GDPR may hand an advertising opportunity to two unexpected players
- European Union's General Data Protection Regulation (GDPR) could be good news for a pair of unexpected ad players: Target and Walmart.
- That's because while advertisers plan to keep spending on digital media, they're likely to turn to companies that have direct data relationships with consumers.
- Otherwise, most advertisers are not planning big ad spending changes, even as publishers and ad tech companies are scrambling to establish sound data storage practices.
It looks like there could be two surprise beneficiaries of the European Union's sweeping General Data Protection Regulation: Walmart and Target.
That's because advertisers are likely to be more selective in where they run digital ads, and will favor companies that have clear and direct data relationships with consumers. Target and Walmart fit the bill.
Indeed, retailers that have long wanted a piece of the advertising business may be the surprise winners of GDPR, said Guillaume Lelait, US CEO of Fetch, a mobile-focused agency owned by Dentsu.
He said that because of GDPR's emphasis on consumers providing permission for data use, he's open to investing more in the media businesses that retailers like Walmart and Target have built out over the past few years that place targeted ads on their e-commerce sites.
Unlike ad exchanges that work with multiple publishers and sources to collect all kinds of data, profiles of consumers on Walmart and Target's platforms are collected with loyalty card data that consumers have signed up for and they have opted in to receive information on.
"I see a trend towards maybe greater investment in those media platforms where consumers see the benefits," he said.
Advertisers will keep spending, but will rethink how they spend thanks to GDPR
Publishers and tech companies have spent the past few months scrambling to assemble new privacy and data policies that meet the requirements of GDPR that begins rolling out on Friday. The new regulations have also been a headache for ad-tech and data firms that sell software and tools for advertisers to target ads with sophisticated bits of code.
However, marketers don't expect to slash digital budgets because of GDPR concerns. Instead, agencies say that they will be pickier over how they divvy up ad budgets to avoid any potential risks.
Agency holding companies like WPP, Publicis and Omnicom are requiring employees to undergo crash courses in GDPR in the US and Europe to better understand the legislation, for example.
GDPR "has changed our process when placing media buys or considering new vendors," Shruti Tiwari, group media director at Publicis.Sapient, told Business Insider.
"Vendors that are failing to comply to the terms are being re-evaluated from the media mix-it definitely encourages us to be aware and bring forward good advertising practices."
According to a survey of 40-plus advertisers published by UBS on Monday:
- 31% said that GDPR "will not change my digital budget allocation because of these issues."
- Another 30% of advertisers said that their "budgets are still being evaluated."
- Only 5% of marketers said that GDPR has caused them to cut their digital budget by 20% or more and 8% said that they plan to cut less than 20%.
The stakes are high with GDPR, and the penalties serious
Under GDPR, any company that has customers in Europe needs to prove that its data storage practices are compliant with the European Union's regulations. In exchange, consumers can request for companies to not collect their personal data.
Companies that are found in violation of the regulation face a fine of 20 million Euros or 4 percent of a company's global revenue, depending on which is bigger.
Those hefty fees mean that for tech firms and publishers that have long pitched reams of data to advertisers, the upcoming regulation has caused plenty of hand-wringing and legal work to tweak privacy policies.
"It's such a drastic change that certain vendors can't take any risks," Fetch's Lelait said. At the same time, looming challenges in advertising like data misuse, measurement and fraud means that "there's lower trust for advertisers," he said.
While GDRP is shaking up ad tech, it may be helping the duopoly
The duopoly of Facebook and Google still looks well placed under GDPR, according to marketers, thanks to their massive size and their ability to pour teams of people, technology and money into compliance.
For the past couple of years, one of advertisers' main qualms with Facebook and Google is a lack of data and insights about their campaigns because of so-called walled gardens. Under GDPR, agencies say that it will get harder to extract data from Google and Facebook.
"[Facebook and Google] are using GDPR to be able to justify taking more control of the advertising environment," said Robin O'Neill, managing director of digital trading at WPP-owned GroupM UK. "In my mind, they're publishers because they're delivering content and have control over content."
We're about to find out who's not compliant
O'Neil estimated that 90% of the publishers and media partners that GroupM works with will be compliant under GDPR ahead of Friday. By next week, he expects to know which media partners are not compliant.
When it comes to ad-tech companies and publishers that collect and track pieces of data anonymously across the internet to serve ads, "that obviously becomes a bit more complicated-that is what we'll see unravel over the next few weeks."
Already, companies like Drawbridge, Kargo and Verve have shut their European offices over concerns they may not be able to meet the compliance regulations because they use third-party data to serve ads instead of data collected directly by media owners.
"The strategy behind targeted campaigns will adjust in the short-term until the industry sees how this new regulation is enforced but the largest impact will be on the scale of third-party data due to the new requirement of explicit consent," said Amanda Martin, director of enterprise partnerships at Goodway Group.