What Are Data Clean Rooms?
The famous organizational theorist and management consultant Geoffrey Moore once said, “Without big data, you are blind and deaf and in the middle of a freeway.”
Consumer data is the lifeblood of our modern, digitized economy. It drives product life cycles, feeds marketing campaigns, and improves customer experiences across every industry and every country.
There used to be very few rules governing how and when companies could collect personal data from consumers. Third-party cookies would track users’ online behavior and mine their browsing history for details that could be used to create audience profiles.
Companies then bought and sold these profiles so frequently that data brokering became a billion-dollar industry.
It may not come as a surprise, but times are rapidly changing.
Welcome to the new privacy world
After the Facebook/Cambridge Analytica scandal revealed just how pervasive and invasive online data collection had become, consumer rights advocates finally had the leverage they needed to get aggressive privacy legislation passed.
In 2016, the European Union passed the General Data Protection Regulation (GDPR), the first and most strict privacy law in the world. Since then, governments around the world have enacted similar regulations that severely restrict what types of personally identifiable information can be collected and how it can be used.
As consumers became more protective of their personal information, all the major internet browsers saw the writing on the wall and rewrote the rule book. Safari (Apple) and Firefox (Mozilla) have already stopped supporting third-party cookies, and Chrome (Google) will phase them out by the end of 2023.
The death of third-party cookies shook Madison Avenue as advertisers panicked over losing the ability to track and analyze performance data.
But necessity is the mother of invention, and it didn’t take long for tech companies to create a solution.
Enter the data clean room.
How does a clean room work?
A data clean room is a software platform that allows advertisers to compare their user-level, first-party data (data they’ve collected themselves) and campaign performance against aggregated data from the platform they’re using.
Clean rooms work within the framework of new privacy laws because the data is encrypted and anonymized, which means no personally identifiable data is ever shared with anyone.
What are the types of clean rooms?
There are two main types of clean rooms: media and partner.
A media clean room is a platform-level clean room that typically operates within a walled garden. For example, a company that advertises on Facebook could use Facebook’s clean room to analyze how their ads are performing.
Media clean rooms provide powerful, large-scale analytics, but they’re usually limited to a single platform. You can’t use Facebook’s clean room to analyze your Amazon or Google performance, for instance.
Image via Search Engine Journal
By contrast, a partner clean room is created when two partners (publisher/advertiser, consumer packaged goods/retailer, etc.) agree to share and compare their data. While controls for a media clean room are often set by the platform, each partner in a private clean room is in charge of how their data can be shared and used. These rooms provide a privacy-centric way to analyze how customers are interacting with your brand across multiple touchpoints.
Image via ShareThis
A few companies like Unilever and Procter & Gamble are working on an independent, omnichannel clean room that focuses on studying consumer behavior by cohort instead of user-level data.
The structure of clean rooms has evolved alongside technical capabilities and privacy needs. Alice Stratton, Chief Revenue Officer at Habu notes that:
“While clean room software is still a new category of technology, we are already seeing an important evolution in the way the technology is architected. Early clean room companies focused on both parties sending their data to a centralized, neutral location – thus providing a Switzerland where parties can collaborate. Modern-day clean room solutions focus on connecting data where it resides – removing friction that comes with the requirement of moving data to and from an external location.”
Benefits of using a clean room
Clean rooms, especially partner clean rooms, aren’t the simple or inexpensive solution that third-party cookies used to be. But the increased investment can bring increased benefits, including:
- Better first-party data analytics
- Improved partnerships
- Increased agility in the face of change
- New revenue streams
1. Better first-party data analytics
First-party data is the king of all consumer data. It’s harder to get, but it’s also more accurate and indicative of a higher level of consumer trust. While first-party data is a powerful decision-making tool, first-party data leveraged against data points from your partners is a super-power.
2. Improved partnerships
A willingness to carefully and ethically share your data will not only cement your existing partnership but is also almost guaranteed to result in potential suitors lining up to knock on your door.
3. Better customer relationships
Delivering a good customer experience is, well, a good thing. But you know what's even better? A customer experience that uses data intelligently to deliver a targeted, personalized marketing WHILE respecting your customers privacy. Your customers will trust you more over other companies by simply being a good steward of their data.
4. Increased agility in the face of change
Because clean rooms can only be used if you have an in-depth understanding of your data, using them can help you future-proof your data collection and management program.
It will force your company to invest in building a compliant privacy program founded on best practices, and that type of program is far more likely to be able to adapt to changes in privacy legislation and consumer expectations.
Something to keep in mind
The quality of the analysis coming out of a clean room directly correlates to the quality of data being put into it. To get the most bang for your buck, it’s important to invest in your first-party data collection capabilities by completing a data map and creating a preference center.
A data map, sometimes called a data inventory, documents a data record’s journey through your system from collection to storage. It will tell you what types of data you’re collecting and why, what you’re doing with it, who you’re sharing it with, where and how long you’re storing it, and where it’s at risk of exposure.
Once you know the nitty-gritty of your data, creating a preference center increases the likelihood your users will trust you enough to share their data.
A preference center is a dedicated page on your website or in your app that describes your privacy practices. More importantly, a preference center allows your customers to dictate how and when you can use their sensitive personal information.
This kind of personalized control ensures compliance with privacy laws and gives users the confidence they need to give up their deets.
Let’s clean house together
If you need help figuring out which type of clean room is best for your company, let us help you. Our knowledge and experience can make the sometimes overwhelming world of data privacy simple.