Cookies have long enabled companies to track their customers’ web activity, and then use that data to personalize ads and product offerings. But they also pose serious issues when it comes to privacy, and regulators and tech leaders alike are starting to crack down. That’s why many companies are taking a new approach to collecting and leveraging customer information: zero-party data. Unlike third-party data, which is passively collected by cookies, zero-party data refers to information that is proactively shared by consumers through mechanisms like polls, sweepstakes, and interactive social media stories. This both allows consumers to retain control over and visibility into their data, and it enables companies to offer far more effective personalization. Ultimately, the author argues that zero-party data isn’t just a new way to do targeted ads or email campaigns — it’s about transforming how companies engage with their most valuable stakeholders: their customers.
For years, companies have been using cookies — that is, small text files stored on the browser that keep track of website visits — to monitor consumers’ online behavior. Cookies can provide rich data that helps brands get a better sense of who their customers are and enables them to target those customers with more relevant offerings. But this personalization comes at a cost: Consumers are increasingly concerned about who is collecting this data, how much of their behavior is being tracked, what companies are doing with that information, and who they may be selling it to.
In fact, a recent Pew report found that 79% of Americans are concerned about the way companies use their data. Forty-one percent of U.S. consumers regularly delete cookies, and 30% have installed an adblocker. And of course, this growing distrust has increasingly been reflected in government regulation. One of the most well-known pieces of legislation targeting cookies was the 2018 General Data Protection Regulation (GDPR), which substantially expanded data privacy requirements in the EU. More recently, European regulators have begun to call for a complete ban on ad targeting, both the states of Virginia and California have passed comprehensive privacy bills, and Google Chrome announced plans to end its support of third-party cookies altogether by 2022.
The era of cookies is coming to an end. But that doesn’t mean that companies should abandon personalization — it’s just time for a new, better approach.
The Rise of Zero-Party Data
So, what does it take to leverage the benefits of data-driven targeting without falling prey to the privacy issues (and mounting regulatory obstacles) that surround cookies? The answer lies in a concept known as zero-party data. In contrast to third-party data, which is passively collected from cookies and used by companies to make inferences about broad demographic segments of people, zero-party data refers to information that is intentionally and proactively shared directly by individual consumers.
Specifically, many brands have begun using mechanisms such as polls, quizzes, sweepstakes questionnaires, or interactive social media stories to collect explicitly opt-in data that provides highly specific insights into consumer preferences. This type of data collection is a win-win: It offer customers greater control and transparency into exactly what data is being collected, while giving companies access to much more useful information that enables them to target personalized offers much more effectively.
When setting up these systems, it’s important to remember that the problem with cookies isn’t personalization — it’s a lack of respect for consumer privacy, and an approach to personalization that often doesn’t actually deliver useful information to the customer or the company. Consumers are increasingly interested in personalized offers, and zero-party data makes it possible to offer much better personalization than cookies ever could (without the privacy issues). In fact, a recent survey of more than 5,000 global respondents found a 33% year-over-year increase between 2020 and 2021 in the number of consumers interested in personalized offers.
Customers are happy to receive ads and product offers that have been effectively matched to their needs — they just don’t want their data to be collected in an opaque, insecure manner and then sold to the highest bidder. Zero-party data puts customers in control of what information they share and who they share it with, enabling both greater transparency and more effective personalization.
For example, as VP of Content and Data for enterprise marketing platform Cheetah Digital, I worked with one company that pivoted from traditional targeted ads a to zero-party data strategy in early 2018. Over the course of three years, this company conducted more than 300 sweepstakes initiatives, reaching 750,000 unique entrants and gathering over 15 million data points. Consumers voluntarily provided information around which products they wanted to purchase, their budget for those products, which channels they’d prefer to purchase those products on, and when they’d like to purchase them, and the company then leveraged that detailed data set to develop dynamic, hyper-personalized email and SMS campaigns.
Those campaigns achieved open rates above 50% and click-to-buy rates nearing 20%, representing increases of 250% and 33% respectively compared to their prior cookies-based campaigns. They also used this data to define more than 50 incredibly granular audience segments for their ad campaigns, which resulted in engagement rates that were on average 5.7 times higher than campaigns using Google and Facebook’s interest-targeting tools (tools which primarily leverage data from cookies).
The Future of Customer Engagement
Zero-party data is here, today — and it’s only becoming more prevalent. Consumer demand for a more transparent and secure user experience is on the rise, while expectations for extremely personalized experiences are growing ever higher. At the same time, an increasingly stringent regulatory environment is making the status quo untenable. Cookies are on their way out, and marketers who want to stay relevant are increasingly investing in a zero-party data approach.
In fact, according to a recent report from Forrester, one in four CMOs will have adopted zero-party data capabilities by the end of 2021. I’ve worked with countless companies both large and small that are making the leap, re-envisioning their marketing campaigns to leverage detailed data that’s freely provided by customers rather than relying on cookies-driven targeting.
This may seem like a small technical shift, but it represents a fundamental philosophical change in how businesses think about their customers’ data. While cookies operate in the background, passively collecting information to be used in often unclear, unscrupulous ways, zero-party data enables both greater personalization and greater control for the end user. Ultimately, zero-party data isn’t just a new way to do targeted ads or email campaigns — it’s about transforming how companies engage with (and demonstrate respect for) their most valuable stakeholders: their customers.