How the data infrastructure stack will change this year

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In 2022, the digital advertising industry will experience a further depreciation of third-party identifiers. Brands, agencies, publishers and technology companies will make an effort to implement infrastructure to support the connectivity of approved data. As the need for data connectivity begins to accelerate, a new technology stack will emerge. This “data connectivity infrastructure” stack will become a key investment category and we can expect major consolidation (read: M&A and key partnerships) in 2022 as a result.

Components of the data connectivity infrastructure stack

There are currently three main types of data connectivity infrastructure:

CDPs and DMPs — the software to manage public data Data cleanrooms and data reserves — the software to securely transfer dataIdentity technology — tools that combine and enrich fragmented people data between silos and partners so that the data used is complete and correct.

In 2021, we started seeing these solutions together for the first time, which makes sense as they are all part of the same ‘data connectivity’ value chain. We are also already seeing a consolidation, or at least a partnership trend. LiveRamp already offers all three solutions: identity, Safe Haven (clean room) and Data Marketplace (DMP/CDP). It’s not a perfect trifecta by any means, but the three-in-one packaging makes it very competitive with the point solutions and will undoubtedly lead to consolidation from the other infrastructure competitors. Meanwhile cleanroom InfoSum Launched InfoSum Bridge to Connect with Identity Providers.

In 2022, the bigger players like Adobe, Oracle and Salesforce will begin to stack the deck in their favor by eating up companies to support their ability to enable end-to-end data connectivity for first-party data. Ultimately, these partnerships will lead to M&A. While the timeline will depend on when Google and Apple finally pull the plug on accelerating the need for first-party cookies, the change is already underway and will definitely peak in 2022.

M&A can dictate changes to the stack

For marketers, this means that the point solution data connectivity products they use today (currently offered by various providers) are likely to become features of a consolidated product tomorrow. Marketers will have to decide whether to stay with many partners or consolidate. Some brands will continue to work with multi-point solutions as they want to create their own custom stack, and consolidation will take away some of that flexibility. Other brands may eventually want a full suite, but will want more say in which suite they adopt and when.

There are certainly benefits to accepting where a consolidated offering emerges. A larger suite solution may provide a better exchange of customer data, for example an identifier such as a loyalty ID that can be used across all components of the solution. They may offer a higher frequency for data sharing as this will ultimately be the preferred system to build out real-time updates versus batch updates. This can be a big game changer for many brands that need real-time data for dynamic customer experiences, for example. And the larger solution is likely to provide a higher level of service and traction, based only on the complexity of their offerings and the likely larger size of their typical customer.

The downsides of accepting a full suite offering are mostly for brands with their own complex data needs that require a high degree of flexibility. Some large tech companies build for their average customer and offer turnkey options with little customization. While other companies like Adobe and Salesforce have great resources for custom builds and services, they would of course still be built from their own suite. Brands need to determine the level of customization, independence and flexibility they need and continue to recognize that they may need to find a new partner in the future as M&A changes.

Customers who build their own stacks and use parts of the consolidated offering as point solutions are likely to get the “Standard Package”. This equates to standard data integration with other point solutions, batch updates and much less hand-holding. That’s when data interoperability becomes a problem – one that we as an industry need to solve. For example, if a brand today uses LiveRamp for identity and Salesforce’s CDP, everything goes well together these days. But if Salesforce gets its own layer of identity, will it have the same incentive to play well with LiveRamp? It will likely build out better functionality for its own suite first.

When an independent player is bought by a larger technology company, it often adopts that larger company’s product and service approach. This can mean that customization becomes impossible, or there is little support for a specific industry, or little experience with a particular part of the business, such as loyalty data or non-programmatic marketing needs.

Brands need to know what matters most

While the ultimate endgame is impossible to predict, it’s clear that a big change is on the way. Brands of all sizes and of all levels of data maturity need to do scenario planning and prioritize what matters most to them when it comes to identity. These “must haves” will make it easier to make a decision in the event that one of their partners is acquired, or to deeply integrate with a specific partner.

The CIO and CMO must, of course, align on their priorities, but they must also work together to discuss the implications of different moves, for example estimating the cost of switching to a key component of their product, or estimating the reduction in ROI as dynamic advertising is no longer possible. All of these different what-if scenarios can help prepare the entire team to make smart decisions faster, before they become too entrenched in an approach that may or may not work in the future.

Nancy Marzouk is CEO and founder of MediaWallah.

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