November 28, 2022

Business Update Blog

What The Digital Markets Act Means To US Brands and

Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Chris Comstock, chief product officer of Claravine.

The Digital Markets Act (DMA) is coming to the European Union. But rest assured – it will have implications for United States brands, too. While it seems that the act aims to create a fair playing field, the actual outcomes may be more nuanced.

The DMA will implement a clear set of rules prohibiting tech giants, including Google, Meta, Amazon and Apple, from engaging in specific practices that might be viewed as “anti-competitive.” 

However, these new attempts to regulate the marketplace can have both positive and negative effects.

Privacy pros and cons

Even before the DMA, GDPR and US-based data privacy legislation had already been in place for years. One outcome thus far is that marketers are leaning more on walled gardens for their digital campaigns, seeing them as an optimal place to reach and acquire customers. By supporting walled gardens, advertisers put more control into the hands of the most powerful companies. 

But with the addition of the DMA, walled gardens will be forced to interoperate with the internet in full respect of privacy and data protection rights. For example, WhatsApp, or Facebook, will become interoperable with smaller service providers, allowing users to exchange messages, send files or make video calls across applications.

However, one risk is that as data intersects across multiple systems, there will be increased risks for data breaches.

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Small business impacts

When Apple’s AppTrackingTransparency feature made it possible for users to opt-out of tracking, advertisers had to change their tactics. Mid-sized and smaller businesses that rely on Facebook as their primary sales and growth engine now have far less data. Plus, Facebook’s CPMs have gone up.   

The DMA will continue to limit data and drive costs further up, since large brands will continue to spend even without precise targeting. In fact, the DMA could inadvertently increase customer acquisition costs for smaller brands, decreasing their current economic footprint.  

Small companies do not have the capital to weather this type of change. Adjusting to tactics like media mix modeling and spending more on advertising might simply not be an option. 

Consumer impacts

Brands that are able to adopt first-party data strategies in response to cookie deprecation will have access to more consumer data than ever before. Customers expect the brand to use that personal information in a meaningful way, creating a more relevant experience and more value in return. Brands will need to demonstrate the payoff to the customer through unique offers and updated loyalty programs. 

Still, the DMA may improve the user experience by improving data interoperability, but it will not eliminate every consumer inconvenience. Because the act encourages cross-platform data sharing, consumers may have a more fragmented user experience. And brands may even increase their own costs to implement first-party data strategies, which will ultimately increase the cost of goods and services for consumers, an often-overlooked side effect of antitrust legislation.

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The need to prioritize first-party data

In short, the DMA could be a headache for marketers lacking a diversified media plan that includes more than just the big platforms. Marketing teams will need to be aligned as they create customer experiences to maintain visibility into performance. 

With the demise of the third-party cookie, global marketers that can no longer personalize their outreach at scale may spend nearly 20% more on marketing and sales to achieve their current level of returns. The DMA ups these stakes. 

The act gives a strong signal to brands to accelerate prioritizing first-party data strategies in the year ahead. This shift is well on its way, and the added push from the DMA helps the industry evolve into a new phase. 

Brands must now embrace new marketing and measurement methodologies that don’t require exact precision and optimization against user or device-level identifiers. 

Though the implications of the DMA are complex, marketers must be aware of the changes coming their way. By relying on first-party data, putting privacy first, diversifying their media and thinking about consumer experience, they can stay ahead of the curve.

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