Digital Transformation

Why data unions are the optimal solution for a post-cookie world

By Shiv Malik | Founder and chief executive officer

July 14, 2022 | 8 min read

Data unions, being pioneered under new EU legal frameworks, offer the best of all worlds: consumers are empowered to control their data’s destiny while advertisers gain access to valuable information about potential customers in a privacy-respecting way.

Woman excited while looking at phone

Users want to be empowered by their data / Adobe Stock

It’s a scary time for digital advertisers. Leaving aside macro headwinds such as global inflation, the pandemic and war in Europe, the industry is itself undergoing a seismic overhaul in terms of how it does business. Rather like Ernest Hemmingway described how one goes bankrupt, the current model has crumbled gradually, and then suddenly, as huge shifts in public attitudes toward digital privacy have ultimately brought about the demise of the surveillance data economy that has dominated digital media for some twenty years.

The EU’s General Data Protection Regulation (GDPR) saw the ascent of the cookie banner. Data scandals began seeing entire companies – from Cambridge Analytica to Jumpshot – put out of business. Then last year, Apple introduced its iOS 14.5 update, which effectively shut down third-party monitoring of consumers through mobile apps – a move that Meta has said will cost it $10bn in revenue. (And Google has declared it will follow suit with a similar privacy framework for Android devices).

The next major focal point is the so-called cookie-pocalypse in 2023, the moment when the world’s largest internet browser, Google Chrome, will – like its smaller competitors – block third-party cookies. With that, the system of third-party tracking that has dominated digital advertising for the last two decades will be over. The question everyone is now asking is: “What comes next?”

Remarkably, Google itself seems not to have fully bottomed out an answer. Skipping from the disaster of its Federated Learning of Cohorts model to the newly-branded solution Topics, Google’s man in charge, David Temkin, seems unclear about whether servicing ads through bucketing Google users in cohorts will deliver better returns than the current cookie-based system. “Until actual real-world data can be shared [on how this works],” he said in an interview with Campaign a few weeks back, “you’re going to see a fair amount of anxiety.”

It’s clear that in the name of furthering privacy, the Silicon Valley giants will be likely to garner ever-more control over ad delivery and audience measurement, which is remarkable given the amount of domination they already have. So, is there another way to replace the inflow of information that cookies and third-party tracking have, until late, so readily provided?

The EU is now in the final stages of legislating for something very different. Under new acts regulating the digital economy, its vision is of a European data economy that is far more interoperable – and one in which stakeholder power is much more evenly distributed.

The first part of that vision is contained within the provisions of the Digital Markets Act. Come March of 2024, the new legislation will give Europe’s 450 million residents far more control over their personal information. Like with Open Banking, any European user of Google, Apple, Facebook, Amazon or Microsoft will be able to transfer their data continuously, and in real-time, to any third-party provider they want. The Data Act will give the same rights to Europeans to transfer real-time data from smart devices such as wearables, smart speakers and cars.

This raises the question: where will all these people transfer their data? The EU’s answer: data intermediaries, or what the ecosystem itself is calling data unions. As outlined in the Data Governance Act (predecessor to both the Digital Markets Act and the Data Act), data unions serve as agents for people’s data, acting to protect members’ interests and navigate the deeply complex world of data brokering on their behalf. After commercializing members’ aggregated data sets, these unions remunerate their members. It’s a world in which people opt-in to share their digital stories with a partner that is acting in their interests, and get paid to do so.

If this sounds too theoretical, think again. Two years ago, Mozilla’s research arm counted over 40 such profit-motivated startups in the space. Now there are at least double that working to monetize financial, clickstream, mobility data and more. Expect that number to double or quadruple when data portability comes into effect.

The public’s desire to see ‘share and earn’ models is evident; recent research from the Global Data and Marketing Alliance reveals that people now expect their data to leverage better value. In the US, 55% agree that their personal information is an asset they can “use to negotiate better prices and offers with companies,” up from 48% four years ago. In the UK, that figure is around 60% among those aged 18 to 55, up from 40% a decade ago. The biggest motivators for sharing personal data? Direct cash payment, discounts or entirely free services. The public has begun to understand how much their data is worth, and they want in on the profits.

So, how will the rise of data in data unions affect advertising and marketing? Once data from millions of users of Google, Facebook and the like is de-siloed and packaged into data products that have zero provenance issues, expect to see a vast improvement in analytics and research. For example, media buyers desperate for clean, clear and well-governed data on Audible and iTunes audiences will be able to get it. Combining, say, clickstream, finance and geolocation data sets will no longer be a hassle. And all of this commerce will be guaranteed by an EU licensing framework.

Moreover, plenty of players are also working on data wallets that should allow data union members to copy and paste the data they already share into a singular digital data vault that they control.

Now imagine users of such data wallets turning up to any digital service provider, such as an insurance company, and signing in with a data vault that has a real depth and range of persistent information about that very user – data that’s not only derived from browsing behaviors, but also from IoT, mobility, wellness and many more verticals. If the brand trust is there, and the consumer deal fits, digital citizens will be able to choose whether to share that wealth of information or not.

Instead of piecing together the breadcrumb trail of user activities online, this model empowers individuals, enabled by professional data agents, to choose when, where and how they share their information. It’s a world in which advertisers and marketers can compete openly and fairly while respecting consumers’ privacy – by seeking permission to understand who their potential customers are, without fear of breaking the rules or violating individuals’ trust.

Whatever vision ultimately wins out – data unions backed by the EU or privacy-protecting centralized systems delivered by Silicon Valley – it’s clear that the next five years will be a dramatic time for advertisers. Let’s just hope that whatever solution rises to the top provides advertisers with the best returns on investment and the most innovative ways of revealing consumer demand. Only through that metric can everyone win.

Shiv Malik is founder and chief executive officer at Pool.

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