How New Privacy Restrictions Can Help Brands Rethink Customer Engagement

The ability of advertisers to have access to consumers’ online activity and behavior has been one of the most foundational drivers of the internet economy over the past two decades. It’s not a stretch to posit that online behemoths like Google, Facebook and Twitter wouldn’t be the juggernauts they are today without their ability to sell that data to advertisers. But that may all be about to change.

iOS14 and IDFA

The dominoes started to fall in June 2020 when Apple announced that the upcoming iOS 14 release would require every app developer to first ask for and obtain permission to track users’ activity across apps and websites. The new restrictions apply to Apple’s IDFA – an acronym for “Identifier for Advertisers,” which is an anonymous and unique identifier assigned to every iOS device and one of the primary mechanisms used to target mobile ads.

Until now, app developers, aggregators and websites could access users’ activity and behavior not just for their own apps or sites, but for every other app and website a user visits too. That meant that (unbeknownst to most consumers) your ridesharing app knows not just where your last pick-up was, but also what you ordered for dinner last night, what movie you watched afterward, and what banking app you used to pay for it all.

While it has always been a requirement for app developers to disclose cross-app and site tracking in their Terms of Service, those Terms usually go unread and almost never affect consumer behavior. Just about every mobile or online ad-based business model has been built on this murkiness, but the IDFA changes have the potential to throw a huge monkey wrench into that growth engine. Both developers and advertisers must now confront new rules of engagement with their audiences: If you want a user’s data, you have to get permission first.

Not surprisingly, the blowback was sudden and severe enough to cause Apple to delay the iOS 14 release. Opponents argued that app developers would be forced to introduce subscription fees and in-app purchases to offset the loss of advertising revenue. In other words, if you want to build a business model on iOS, you’ll have to convince consumers it’s worth paying for rather than surreptitiously monetizing their behavior. It bears noting that Apple receives a percentage of all subscription fees and in-app purchases associated with any app in its app store.

Chrome Crumbling The Cookies

While Google has not yet announced similar intentions to limit user tracking for apps on its Android mobile operating system, it did announce in March 2021 that its Chrome browser will soon stop supporting third-party cookies. What started in the mid-1990s as a mechanism to make online shopping more reliable has since become one of the primary tools for advertisers to target ads based on consumers’ behavior online. The result could be equally seismic since Chrome controls almost 65% of global browser market share.

But why the privacy crackdown in its browser, but not with its mobile OS? It might have to do with the fact that in addition to dominating the browser game, Google wields dominant market share positions in search, online video streaming and consumer email. So when advertisers can no longer use the ecosystem of cookie-enabled ad networks to reach their audiences, where might those dollars flow instead?

A Brave New (Old) World

While these changes are unambiguously positive from a privacy perspective because they each return control over online data back to its rightful owner — you and me — they will also no doubt bring the importance of building authentic customer relationships back into focus.

I’m old enough to remember when it meant something for a business owner or its employees to get to know you as a customer — to know what you liked, what you didn’t and why you were a repeat customer. In contrast to voyeuristic monetization strategies based on monitoring huge swaths of online user data, businesses prospered in large part because they built, nurtured and valued each of their customer relationships, and understood that those relationships were a critical pillar of their success.

Many consumers would say that having access to anything you want in the palm of your hand at any time of the day for prices that are historically lower than ever delivered to your front door in an hour is a worthy trade-off for that loss. But the byproduct of that trade-off is an ecosystem that is a breeding ground for misuse, fraud and massive privacy risk. The changes to IDFA and cookie policies are ostensibly designed to mitigate that risk but at the same time will force many online and mobile businesses to reassess their fundamental business models.

What if, instead of using technology to watch what customers do online and bombard them with offers for what the advertiser wants to sell, businesses could instead use technology to rebuild the understanding of each customer relationship and offer exactly what each customer wants or needs? User data isn’t going anywhere, but solutions now exist that enable businesses to ethically and responsibly use that data in the context of an opt-in, secure and private exchange that ultimately delivers value to every customer.

For example, if a restaurant knows your favorite dinner based on your purchase history, wouldn’t you value an offer to get that item half off on your next visit? Or, if you share your location data with your favorite spa app, wouldn’t it be great to get an offer for a special massage upgrade after getting off a five-hour flight?

The examples of how a business can deliver relevant and highly personalized value to each simply by using our data in a responsible and private way are innumerable. Furthermore, the technology exists today to do just that — just how it was in the “good ol’ days,” but digitally. Call me crazy, but isn’t that what we all want as consumers?

This content was also posted as an article on Forbes.com on 5/17/21 and on the LighthousePE Blog on 6/30/21