How Does GDPR Impact Advertising And E-Commerce?
This article first appeared in Forbes.
Seven years ago, I predicted that the era of push advertising was over. With GDPR on the horizon, Zuckerberg testifying in Congress and Facebook users questioning their loyalty, the turning point seems closer than ever.
For you, like most consumers, the act of searching, using a third-party plugin or signing up on a site to buy products or read news might be a no-brainer. But the simple truth is some of those forms you fill out can further cement the sale of your soul to the devil and introduce the ubiquitous use of your data in ways you may not want or understand.
The cookies inserted in your browser can send your data to a common pool for anyone who can afford to bid on you so they can target you with tons of ads. Try an experiment: Erase the cookies from your browser and wait a few minutes. The malicious ones all come back, sometimes before your eyes. Persistent cookies sound shady because they are. And it’s happening despite the fact that respawning cookies is frowned upon in most cases by the FTCand DAA.
If you could translate some of the gibberish, you’d see that some of those deceitful publishers and advertisers even admit wrongdoing in the fine print buried deep in the terms and conditions of their websites, which is an inadequate practice against consumers.
For years, the advertising industry’s bad actors have been getting away with this behavior. As a result, consumers are overwhelmed and wary of advertisements that are chasing them everywhere, and advertisers waste 60% of their advertising dollars. But now, the EU is choosing to crack down on iniquitous practices in its new General Data Protection Regulation (GDPR) guidelines, which will make this ubiquitous form of advertising impossible. With it, EU users regain control over their data by obtaining the right to access their data, object to data processing and the right to be “forgotten.”
As of May 2018, the GDPR is set to not only impact European data security but also many businesses around the world.
How Will GDPR Affect U.S. Businesses?
According to Article 3 of the GDPR, if you collect personal data or behavioral information from a person in an EU country, your company is subject to the requirements of the GDPR. For U.S. companies, this means you can’t ask your European consumers to subscribe to a research study and then send product advertisements to them, and you can’t push ads based on their search history.
Businesses must also provide transparency to users in clear language — specifically, what you will be doing with their IP and email addresses, phone numbers and other personal data. Leveraging sensitive data related to medical or financial records or identifiers associated with children requires notification of an EU regulator or other relevant authority within 72 hours. Companies choosing not to report a breach within 72 hours may face the cost of 2% of its global revenue.
Lose Your Cookies?
While cookies are only mentioned briefly in the GDPR, under Recital 30, it’s an important update and requires robust opt-in consent. Basically, the EU has made it clear that if you’re using cookies, it knows you are collecting personal data. To stay compliant with the GDPR, you will either have to abandon the practice or obtain consent from your customers.
Surviving GDPR
Making matters more complicated is the massive shortage of GDPR-compliant advertising platforms available on the market right now. And unfortunately, this doesn’t appear to be changing anytime soon, as many programmatic advertising technology providers, ad and affiliate networks are clinging to phony marketing metrics like cost per click (CPC), click-through rates, cost per thousand (CPM) and more — all of which rely on cookies.
They’re hanging onto these metrics because they don’t know how else to proceed. The system they have been relying on for years — scamming countless organizations in the process — just hit a brick wall called GDPR.These companies simply aren’t built for change. They are too vested to cannibalize themselves.
GDPR Killed Cookies, Now What?
User-generated advertising, such as influencer marketing or sponsored content on consumer-facing sites, has the potential to grow exponentially. Why? The consumer-centric nature is aligned with the needs and trust of today’s shoppers and advertisers because it puts the consumers in the driver’s seat. If consumers are compelled enough, they would make a purchase and the influencers would get paid for that sale. It would be much more cost-effective for advertisers to share a percentage of the revenue with influencers than paying multiple intermediaries for producing noise that may not catch the attention of shoppers.
For the last seven years, my team and I have been doing something similar — developing groundbreaking consumer-centric technologies reliant on user-generated advertising and scaling influencer marketing. Our goal has always been to empower consumers, allowing them to create personal, store-agnostic mCarts (shopping carts), add content and media and share them with others. They get paid if any of those items get sold. We just added a blockchain layer to allow retailers to reward influencers for promoting products and reward shoppers for verifying their transactions in one decentralized network. There’s no need for ad networks, affiliate networks or other middlemen.
Retails and advertisers are trying to understand how blockchain can help them. Blockchain can bring more transparency to advertising, not simply scale the phony metrics and malfunctions dominating the programmatic space. Blockchain is here to disrupt antiquated attribution models, remove bad actors and middlemen as well as excess fees from the landscape. The goal of innovative, next-gen solutions must make advertising much more consumer-centric and transparent for shoppers and influencers, while also making it more secure, transparent and profitable for advertisers.
While GDPR and DAA may sound adversarial at first glance, they can spark innovation and a fresh start for much-needed consumer-centric advertising.