Go direct

First party data is mostly "meh" and third party data is deteriorating. The future of personalization? Let customers introduce themselves in a tap.

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For too long, brands have yielded control over personalized customer experiences to happenstance or misaligned or unconsented middlemen.

First party data strategy relies on what data a business happens to observe. And third party data from honeypots of data indirectly or unknowingly collected.

This year it’s all coming to a head.

This year Google had scheduled to deprecate cookies in its Google Chrome browser. Google Chrome is the most popular internet browser and delivers the internet to nearly 3.5bn people or 65% of the market.

While last month they delayed this action, the writing is on the wall: Browsers are moving against cross-site tracking and identifiers.

This includes both third party cookies and IP addresses. This challenges recent band-aid approaches like ID-bridging, that use coincidental observations of IP address and other identifiers like email to infer identity when only one is observed.

The old playbook of relying on first party data or third parties to supply “privacy-preserving” customer data through broken identifiers is obsolete.

Implicit identity is dead.

First party data is underwhelming

Five years ago, first party data strategy to

  • identify customers
  • track events (“account created” or “product viewed”) and
  • route events to activation destinations like Klaviyo, BigQuery, or Snowflake

were all the rage. Even before cookie deprecation, first-party data was the pathway to developing experiences that serve each customer individually.

But now, AdExchanger reports some are wondering if the first party data revolution is actually a dud. One Fortune 100 CPG executive now thinks the first party data strategy is – "meh."

A combination of unreliable identifiers and ballooning costs of CDP licenses and supporting data science and marketing headcount contribute to making using first-party data for granular personalization tough to pencil out.

But not for everyone.

First party data among scaled players like Walmart, Instacart and Doordash have proven to be incredibly valuable. These retailers have scaled their visibility into user behavior – in particular, action events like purchases – to create lucrative ad networks.

It seems first party data, like everything else on the internet, experience a barbell effect: Those with the most attention and transaction data are best positioned to activate it into efficient personalization and advertising.

Of course, as we’ve noted previously, even these scaled players have a context that’s limited to the universe of activities that their customers happen to do with them. DoorDash knows your burrito order, Walmart knows the staples you sometimes buy, and Lowes knows about some of the home improvement projects you work on.

No one today has the full picture of a consumer – only pieces.

Third party aggregators are unlikely to help.

Third party data is misaligned and degrading

Data aggregation is big business. Last month rewards company iBotta raised nearly $600mm in its IPO, valuing the company at over $3bn. Fetch Rewards was last valued at $2.5bn. Publicis Groupe bought Epsilon for $4.4bn in 2019.  

Data aggregators come in two flavors: those

  1. with a relationship with a customer (“rewards”)  and
  2. those without (“data brokers”)

Companies like iBotta and Fetch are in the former category. Each have an app that allows consumers to trade purchase data for personalized offers from partner brands, whether in their app or a partner retailer or publisher. Of course, the quality of aggregator data is only as good as the consistency of users in inputting data (e.g., snapping pictures of receipts).

The other class of data aggregators acquire data via partnership deals with companies that do have a customer relationship and flexible terms of service that most consumers do not read. Since their relationship with the customer is once-removed, they have an additional problem of reconciling customer identities across partners.

That is, if you have accounts with two different businesses under different email addresses, it’s harder for these aggregators to see that it’s you at both businesses. And with identity like cookies and IP address now harder to observe, this identity reconciliation has gotten harder and less reliable. In the last few years we’ve heard (and seen for ourselves) that the quality of data broker data is degrading.

In both cases, the data-value exchange is either high-friction, complicated or a little creepy. In the rewards case, apps either require users to take pictures of receipts for specific rewards (e.g., $1.50 off Axe Hair Care) or connect data for the promise of points, with variable conversion to rewards. The data connection is specifically for multi-brand rewards or payouts, not to strengthen a direct customer relationship. In the data broker case, often the customer isn’t even aware that this exchange is going on. Data broker data are usually de-identified or aggregated to navigate the awkwardness of sharing data that a consumer doesn't know about.

While iBotta’s core B2C rewards business is growing 19% year over year, its performance network, enabling brands to white-label iBotta rewards technology and offer rewards directly to their customers (even those without an iBotta account), grew over 700%, according to their S1 filing. This growth suggests that consumers are eager for direct, frictionless experiences with brands they love, rather than going through misaligned intermediaries.  

Go direct (or go home)

In the early days of the consumer internet, brands had little choice but to rely on intermediaries and aggregators to deliver frictionless personalized experiences. The infrastructure for direct digital relationships simply didn't exist.

But now, we have the tools to build something far more powerful: an open identity layer that empowers consumers to connect directly with the brands they love, on their own terms.

This is the vision behind Crosshatch.

For us, going direct doesn’t mean more rigorous event instrumentation. It doesn’t mean longer customer Typeform onboardings. And it certainly doesn’t mean delaying personalized experiences until you’ve collected enough first party data to deliver something meaningful.

Going direct means showing and delivering clear value from connecting data.

Crosshatch provides the infrastructure for direct and frictionless value-driven relationships between brands and consumers.

With Crosshatch, brands can deliver hyper-personalized experiences by connecting directly with consumers and their data, without relying on unreliable third-party identifiers or opaque data brokers. For consumers, Crosshatch offers a simple, secure way to share data selectively in exchange for tangible value.

Shifting to this new paradigm won't be easy - it requires rethinking long-held assumptions and accepting some short-term friction. But the brands that embrace this shift will be rewarded with greater trust and loyalty from hyper-personalized experiences they ship that truly anticipate their customers' needs.  

The alternative is to be left behind, relying on increasingly unreliable and inefficient intermediaries as the world moves on.

So go direct. Build experiences that respect consumers and reward them for sharing their data. Forge a new path in personalization, grounded in transparency and trust.

The future belongs to the brands that go direct - will you be among them?

[This post was inspired by Lulu Cheng's Go Direct manifesto.]

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