The Marketing Dive Outlook on 2021

Even as vaccine developments provide a clearer timeline for a pandemic recovery, 2021 is set to be another volatile year for marketers. If anything, the digital ecosystem is primed for a bigger shakeup as Apple's controversial tracking changes go into effect, multiple Big Tech antitrust suits take shape and Google formally starts to sunset third-party cookies.

On the consumer end, marketers must contend with a fractious public that remains sour over the thorniest presidential race in modern memory. Chief marketing officers, put through a ringer of a year marked by a brutal health crisis and mass protests for racial justice, will need to balance purpose-minded tendencies with intensified mandates around areas like data and commerce — all on shorter timelines than in the past.

"[2020] did potentially stretch people beyond what they thought they had in them, and now that can carry over into a year where maybe things slow down a little bit," said Beth Superfin, senior vice president of client experience at the agency Known. "The notion of being able to plan out past a certain time is done."

New tensions are apparent in the tech sector as well, as Facebook and Apple duke it out over the latter's plans to require opt-in consent to its Identifier for Advertisers (IDFA), a policy change Facebook says will kill free apps. The public spat is emblematic of a shifting balance of power in the media sphere. Elsewhere, digital channels like streaming and gaming have become enshrined as consumer favorites by the pandemic, while traditional media gatekeepers experience a steep downgrade from which they may not recover.

While hope is on the horizon in combating COVID-19, brands will continue to feel pressure to fill in the gaps during a patchwork recovery. Below, Marketing Dive breaks down eight trends that will reshape the industry in 2021 as the aftereffects of an unprecedented year cast a long shadow.

One step forward, two steps back for fixing digital complexity

Outside of pandemic demands, marketers made one item a top priority in 2020: first-party data. As cookies and mainstay methods of in-app tracking go the way of the dinosaur, forging a personal connection with consumers has become essential, but will prove more challenging than conducting digital marketing the old way.

"It was definitely simpler to collect that [third-party] data," said Raphael Ravilla, partner of media and connections planning at Marcus Thomas. "It's going to be harder to collect first-party data that's authenticated and whatnot, but it's going to: 1.) make marketers try harder to get that data, but 2.) it's also going to be cleaner data than what we were using."

Marketers face no shortage of options in picking from partners and solutions. Even as the antitrust hammer lands on Google and Facebook, the duopoly faces a fresh crop of competition in apps like TikTok and a proliferation of retail media networks from companies including Walmart, Target, Walgreens and Kroger.

"It creates much-needed competition in the ecosystem when we see other brands and companies coming out with platforms of their own," said Orchid Richardson, vice president of global partnerships and product marketing at the IAB Tech Lab. "That's all really positive because competition drives innovation."

But if greater choice in advertising platforms ultimately benefits the industry, it also requires dealing with more gatekeepers.

"It used to be Facebook and our [demand-side platform]," Ravilla said. "Now, it's Facebook, our DSP, plus anyone else who has their own walled garden ... But again, the data's better."

Similarly, ad-tech firms and media companies are vying to create the true alternative to the cookie — the list includes Lotame, The Trade Desk and Verizon, to name a few. While the prospect of forging fresh standards for online advertising is exciting, marketers might need to keep more balls in the air — and grow more selective about their partners.

"It definitely creates unnecessary complexity," Richardson said. "If everyone has their own solution, then it becomes harder to transact media across platforms, across media types."

Internally and externally, an activist mindset should stick

Proclamations of "Black Lives Matter" from the corporate sector cooled as the protests that inspired them grew less frequent in 2020. But last year's swelling civil rights movement reset the equation for what's expected of brands on the purpose front, both in terms of consumer-facing messages and in their internal practices.

"It only takes, unfortunately, one more thing happening — one more event that falls under the title of police brutality or racism in a systemic way — for that to really come surging back," said Lindsey Roeschke, a director analyst at Gartner.

Many companies that chimed in on the protests were caught flat-footed when consumers did the homework and exposed poor hiring track records or problematic pasts, leading to a reckoning with racist corporate mascots. Marketers have taken important steps to remedy those issues, but a broader overhaul of marketing to be more authentic and representative will be an ongoing project for the industry in 2021 and beyond.

"This is actually the time for brands to be putting all the building blocks in place to be able to agilely respond to those sorts of things," Roeschke said. "The expectation is going to be there and to be taking a stand and playing a part in making the world a better place."

Making the world a better place carries new considerations in the wake of the pandemic as economic inequity and food insecurity are amplified, adding to existing concerns around sustainability, diversity and inclusion. Though the Biden administration is looking to prioritize progressive issues, brands should be thinking of ways to fill the gaps where other institutions fail.

"Despite this next administration having more progressive or liberal views, it still won't take the pressure off of brands from a consumer perspective," said LaToya Robertson, cultural strategy director at the consultancy Sparks & Honey.

"It actually is a balancing act," Robertson said. "There are ways for brands to speak to areas in a way that brings people together rather than fueling the polarization or the divisiveness."

Spread-thin CMOs seize on leadership opportunities

E-commerce, data acquisition, timely messaging and accounting for internal diversity initiatives are just a handful of duties CMOs took greater responsibility over in 2020. The pull in multiple directions has been draining, but also a proving ground for the frequently embattled C-suite appointment to stake out a larger claim in leadership.

"It's a little bit overwhelming when you think about all that needs to be accomplished," said Laura Chiavone, managing partner of business transformation at Sparks & Honey. "At the same time, I think this is a unique opportunity, different from years past, for CMOs to really be part of the transformation of the organization."

The task ahead in 2021 remains daunting, as shorter planning and production schedules become the norm. And despite escalating technology demands, CMOs in 2021 should also anticipate reduced media budgets, fewer internal resources and less reliance on agencies and ad-tech companies, Forrester Research forecasts. HR-adjacent functions will also bleed into the CMO role as brands look to live up to messages shared in their purposeful advertising.

"The issues that are important to consumers are going to be the issues that are going to be important to employees as well," Gartner's Roeschke said. "How do you balance the willingness or ability to take a stand with all of the other things that you need to be doing as a CMO?"

That being said, the muscles built up in the gauntlet in 2020 will help savvy marketers stand out from the pack and guide their organizations into a new era.

"The notion of agility, not just in someone's personal characteristics, but also how they plan and market, will become much more of a norm," Known's Superfin said.

Balancing flexibility with long-term brand growth

Marketers historically map out campaigns months in advance, with bigger brand refreshes often taking a year or longer. COVID-19 bulldozed that practice, forcing brands to adapt by tweaking or axing entire campaigns on a dime. As 2020 played out, businesses across categories assembled fresh creative at lightning speed to ensure their campaigns matched the moment and aligned with consumers' rapidly shifting attitudes.

But as shorter planning and production schedules become the norm into 2021 and beyond, how can marketers adjust their campaigns and priorities on the fly while building on their longer-term brand equity?

"To meet this demand, marketing leaders must identify what truly matters most, create a short set of criteria to prioritize each request and identify how best to address it," Lizzy Foo Kune, senior director analyst at Gartner, said in emailed comments. "Marketing leaders look to data and analytics teams to offer insight into current trends and uncertainties to avoid making errors in decision making and help chart a clear way forward."

General Motors stands out as one example for how major businesses in 2020 embraced flexibility to swiftly cultivate new partnerships in response to consumer needs. Within 18 days, the company behind brands like Cadillac and Chevrolet evolved its operations — including within its marketing department — to help medical device firm Ventec Life Systems manufacture ventilators.

Other brands in 2020 reacted by tweaking messaging and using consumer data to inform campaign development. The ability for these brands to be more agile is vital for longer-term growth and will only materialize if marketers leverage predictive insights, according to Acquia CMO Lynne Capozzi.

"They should focus on making real-time use of customer data and content across all touch points to create experiences that provide strong value or strengthen an emotional connection to a brand," she said.

The evolving roles of brand spokespeople

A confluence of pandemic effects altered the role played by celebrities and influencers in their brand partnerships. The rise of influencers continued as brands sought partners who could elevate campaigns and deliver authentic, value-driven content, as the pandemic and the movement for social justice changed consumer behaviors — a trend likely to persist beyond 2021.

"Microinfluencers will continue to have more influence over lower-funnel activities like purchase and consideration," Jessica Bedussi, associate social strategy director at ad agency Muh-Tay-Zik / Hof-Fer, said over email. Beudssi noted that influencers with larger followings have even greater impact, pointing to Dunkin's tie-up with TikTok star Charli D'Amelio that led to a 57% increase in app downloads and 20% lift in cold brew sales. However, brands must be careful they're not valuing social media metrics over actual social networks.

"Reach does not necessarily mean influence," said Nic Allum, principal and senior vice president at creative agency the projects*.

That search for actual consumer influence is part of the renewed importance of celebrity partnerships. As the pandemic scuttled film and TV production, celebrity creatives had both time on their hands and financial needs that were increasingly met by brand partnerships. That could continue in 2021 until the vaccine is widely available and distributed.

"People that have that iconic status are going to keep commanding a larger share [of brand partnerships], and get more strategic as well. If you can't meet their quote, they'll start their own brand," said Josh Greenberg, managing director of creative agency Caveat.

But celebrity brand partnerships must meet the moment, whether that means coronavirus concerns, economic realities facing most consumers, racial justice or whatever else 2021 has in store.

"To be completely out of touch and tone deaf to what's happening is going to damage your brand," Allum warned.

Unlike Stories and TikTok-like videos, campaigns can't be copycats

After disrupting the marketing world in 2019, TikTok's rise continued in 2020, even as the app's U.S. operations were threatened by the Trump administration. As with Snapchat before it, social platforms raced to adopt TikTok's functionality — especially as the ByteDance-owned app faced an existential crisis. Copycat features were tested, acquired or rolled out by Facebook's Instagram, YouTube, Reddit and even Snap, while competitor Triller picked up momentum as a marketing platform as the year closed.

However, the surge in TikTok-like videos across social media — along with the ever-growing list of platforms that have copied Snapchat's popular Stories feature — does not necessarily streamline the work marketers must do to reach audiences who have overwhelmingly engaged with these formats.

"We strongly recommend that creative be customized for each platform because the user experience is so different ... we see the most success when marketers really tailor their creative to fit the environment," said Evan Horowitz, CEO and co-founder of Movers+Shakers, an agency that has worked extensively on TikTok.

Horowitz suggests that marketers not just understand the different consumer mindsets on each platform, but also work to translate their brand personalities in authentic ways by incorporating the different visual styles and cadences used on each platform. Plus, they must understand that part of the draw for consumers on TikTok and Triller is that they are not yet oversaturated with ads in the way mature platforms are, which presents a challenge for brands.

"There's still a massive amount of engagement and face time that people are giving to Stories," Horowitz said. "For marketers, you really want to balance the marketing mix to where consumers' eyeballs really are, and they're really enjoying Stories at the same time they're enjoying TikTok."

Connection, convenience and value will determine stickiness of behavior changes

The pandemic has fundamentally reshaped how consumers live, work, shop and play. COVID-driven behaviors such as attending virtual events and consuming digital media skyrocketed in popularity in 2020, rapidly accelerating underlying trends in the span of weeks. While some of these habit shifts will endure into 2021 and beyond, others may fizzle once the health crisis subsides.

Behavior changes are not linear, and their stickiness will depend on satisfaction of the experiences, according to a McKinsey report. Connection, convenience and value are three points that keep consumers coming back to a particular product or brand, pointing to key pillars marketers should focus on providing in 2021.

Just as the pandemic proved how quickly consumer behavior can change, it also is pushing marketers to understand the broader human experience — not just the "user" or "consumer" experience, according to Peter Hartzbech, CEO of iMotions.

"A person's world does not revolve around a brand's product, service or website… People are only 'users' and 'consumers' for small portions of the day," Hartzbech said in emailed comments. "Researching, thinking [and] designing around the whole human will provide new perspectives on products and services, and perhaps even the entire business."

Mondelez International is embracing this more human-centric approach with a new global marketing strategy to forge purposeful connections with people. The method will steer how the marketer listens, empathizes and adapts to consumer needs, and represents the pendulum swinging back from the data-driven tactics that have defined marketing for the past few years.

"Every marketer, especially in the tech industry, must focus on humanizing their value proposition," said Simon Mouyal, CMO of Athenahealth. "We need to shift away from talking to people's heads and instead start to reach people's hearts."

E-commerce continues to be a way of life for brands

Among the myriad consumer behavioral changes enshrined by the pandemic, the growing preference for e-commerce still stands out. On Black Friday, for example, online sales increased 21.6% from 2019 and hit $9 billion, while shopping on smartphones jumped 25% to $3.6 billion for 40% of the day's total online spending, according to Adobe Analytics.

Major brand marketers like PepsiCo and Clorox were already investing more heavily in e-commerce and DTC strategies both via owned channels and through online retailers and social media platforms, but they hit the gas on such investments in 2020 to meet the demands of homebound consumers. These transformations are not going anywhere, even as the pandemic potentially recedes in the months ahead.

"The pandemic has accelerated the digital adoption behaviors we've been seeing for years, and even as people return to in-store shopping, we can't ignore the e-commerce and digital experiences they have come to expect," Mathieu Champigny, CEO at content agency Industrial Color, said in emailed comments.

To meet this demand, social media platforms have continued to meld content with commerce, connecting consumers with brands and shrinking the sales funnel. Facebook added a Shops tab, Instagram beefed up shoppable posts and e-commerce on IGTV and Reels while TikTok rolled out shoppable livestreams — including a Walmart holiday collaboration.

"The world of social commerce is booming, and we can only expect to continue to see further investment, particularly in social and livestream shopping apps," Lucas Tieleman, executive vice president of product at Bazaarvoice, said in emailed comments.

The first few weeks of January made clear that the volatility marketers weathered in 2020 wasn't going anywhere with a change to the calendar year. Procter & Gamble, one of the world's largest advertisers by media spend, adjusted to ongoing bumpiness by holding fast to what Chief Brand Officer Marc Pritchard dubbed "constructive disruption" — a willingness to quickly switch strategies to meet the demands of a society under pressure, the executive said at the Consumer Electronics Show soon after the new year began.

Pritchard coined the "constructive disruption" term several years ago — and even trotted it out at last year's CES — but developments that have rocked the industry since last March, including the pandemic, mass protests for racial justice and an economic downturn, reinforce the mantra's value to the organization.

"The events of the last year have accelerated disruption to unimaginable levels. It will undoubtedly continue," Pritchard said during a virtual presentation. "We're reinventing how we innovate, moving faster by combining 183 years of expertise with the entrepreneurial spirit of a startup."

P&G, which owns household brands like Tide, Febreze and Oral-B, has grown its presence at CES in recent years through a tech-heavy LifeLab showcase that Pritchard said is reflective of how the organization is gravitating to a younger company's mentality. The products displayed via an interactive virtual experience included EC30, a cleaning swatch made with no water or plastic packaging, and Microban 24, a disinfectant spray that rolled out in February 2020.

Outside of conference showrooms, P&G has generally grown more aggressive in wresting control over of its marketing, including media buying, data acquisition and content. Pritchard indicated that shoring up internal strengths increasingly enables P&G's constructive disruption, allowing the company to keep pace with changing consumer and technology trends at a time when they're moving at a faster clip.

"We're reinventing media to constructively disrupt the definition of what it means to be the world's largest advertiser," Pritchard said. "It's not who spends the most; it's who reaches the most efficiently, effectively and with experiences consumers prefer."

Shoring up strengths

P&G for years has pushed to in-house more marketing functions, but the pandemic's effect on consumer behavior as well as broader changes to the digital landscape, including the introduction of data privacy laws and the death of third-party cookies, add urgency to the shift. The Cincinnati-based marketer now handles roughly 80% of its U.S. media planning in-house, and all of its media planning internally in China, its second-largest market, Pritchard said in January. P&G had in-housed only about 30% of U.S. media planning as of October 2019.

As the pandemic decimated the traditional media landscape amid an accelerated jump to streaming last year, P&G got a chance to flex some of its muscles. The company eschewed the traditional TV upfronts to instead negotiate deals directly with major broadcasters, a significant move Pritchard said creates a more level playing field for the business and serves as an example of constructive disruption.

"We're doing more media-buying deals in-house, disrupting the legacy systems that have historically favored sellers," Pritchard said.

An in-house focus is apparent in P&G's approach to digital media as well, with a spotlight on building out an automated programmatic media-buying infrastructure that allows for more precise audience targeting compared to traditional demographic-based methods, per Pritchard. Similarly, first-party data acquisition is a top priority for P&G given the deprecation of cookies, with Pritchard expressing confidence that consumers will be willing to share information with the marketer's myriad brands.

"It's clear that walled gardens are going to stay walled, and that cookies will soon be eliminated, so we're gathering permission-based consumer data on our platform, where consumers opt-in to share data in exchange for brand engagement," Pritchard said. "Consumers trust our brands, and we aim to ensure that the data that they choose to share with us will be used in ways that they prefer."

One area where Pritchard suggested P&G wants to be more hands-off is content policing. The executive has frequently issued calls to clean up the digital media space, but problems like hate speech continue to bog down social media platforms — and produce real-world consequences, as evidenced by January's insurrection at the U.S. Capitol. While Pritchard did not reference the riots by name, his directive to platform gatekeepers soon after those events was clear.

"[We're] still operating with very few boundaries other than those that are self-imposed or that marketers try to enforce. Frankly, we're tired of wasting time monitoring bad content," Pritchard said. "It's time for the platforms to get on with it, for as history has shown, where industries can't sufficiently self-regulate, governments will step in."

Two-pronged approach

Overhauling P&G's media operations arrives in tandem with a changing outlook on advertising. At CES in 2019 — P&G's first year presenting at the show — Pritchard said traditional advertising's days were numbered, a claim he reiterated this year, pointing to the enshrinement of ad-free streaming services toward the end of 2020.

"Reinventing media goes hand-in-hand with reinventing advertising to create ad experiences that are more superior, more useful and more interesting so that consumers actually look forward to them," Pritchard said.

The executive stated that P&G is centering more consumer-facing outreach on "high-quality content," particularly around purpose-driven marketing. He pointed to P&G's partnership with The Queen Collective, a collaboration between Queen Latifah and Tribeca Studios focused on forwarding gender and racial diversity. P&G recently made larger internal commitments to ensure its advertising and partnerships are more representative of consumers from diverse backgrounds.

"Now is the time to lead by using our voice to address the systemic inequalities that exist," Pritchard said, highlighting work P&G released around the movement for racial justice in summer 2020.

But the issues-oriented ads that have won P&G industry accolades are just one aspect of its evolving messaging strategy, and maybe not the one driving the most sales. According to Pritchard, the pandemic has reinforced the value of purely utilitarian marketing, like how-tos on properly sanitizing surfaces or washing one's face after a long day wearing a mask. Microban 24, which claims to be able to kill 99% of cold and flu viruses, was projected to net $200 million in sales last year, its first on store shelves, The Wall Street Journal reported.

"We're doubling down on educational infomercials to communicate the superior performance of our brands, especially home cleaning products where interest remains really high," Pritchard said. "These won't win any awards, but they're especially effective at driving growth."

The absence of major advertisers like Budweiser, Coca-Cola and Pepsi at the Super Bowl this year suggests the big game might not be as strong a measure of marketing macro trends as usual. However, the event is shaping up to be an important platform for newcomers — especially digitally focused companies that have benefited from the pandemic — to shore up gains made in 2020 and plot a path forward for another uncertain year.

"There are some legacies being built coming out of [2020] that have huge relevancy for particular brands. Fiverr is one of them," said Christa Carone, president of CSM Sport and Entertainment in North America, referencing the freelance services provider that is running a Super Bowl commercial for the first time.

"If ever there was a year where they could start to weave into a bit of the societal narrative and in a relevant way, it is, for them, this year," Carone said.

Regular faces like Budweiser choosing to sit out the game in 2021 still reinforces how the Super Bowl — an enduring piece of appointment viewing in an otherwise decimated TV landscape — has taken on a muted tone amid the pandemic and broader social unrest. The shakeup to decades-long advertising traditions signals that marketers watching the game for broader indicators on what will resonate in 2021 might not get the answers they seek.

"We're still faced with so much uncertainty that none of us should be looking at Super Bowl spots as a bellwether for what's to come across marketing," Carone said.

Walking on eggshells

Despite the big game's dimished status as a marketing bellwether, it holds some lessons for marketers. There are still advertisers willing to shell out a reported $5.5 million per spot, with humor and lighthearted messaging retaining its importance, albeit with a slight shift as brands try to reflect a desire for escapism from the day-to-day anxieties of life under a pandemic.

"You're going to find brands staying in their lane and trying to meet their marketing objectives by having a more straight-out product call-to-action, and hopefully using some humor to convey their product," Carone said.

But even tried-and-true tactics can create the effect of walking on eggshells as consumers remain hyper-sensitive to external troubles, which might diminish the impact of ads during the Super Bowl and beyond while heightening reputational risks for brands that miss the mark.

"Some brands will take a path around humor. That's certainly long associated with the Super Bowl; however, I do think it takes on a bit of new risk at this particular moment," said Janet Balis, marketing practice leader at EY Americas. "On the one hand, it could provide levity and some form of comfort ... and on the other hand, it could be perceived as obviously not being appropriate to the moment."

Commercials that land in the sweet spot could resonate even more when so many advertisers playing it safe. The pullback from established players evident during this year's Super Bowl has carved an opening for newcomers to make an impression, as evidenced by an influx of first-time advertisers including Fiverr, DoorDash and e-commerce site Mercari — all companies bolstered by the pandemic. The Super Bowl could then be a brand-building venue for businesses looking to sustain their COVID-19 sales tailwind.

"Either one or more brands that gets it right, they're going to get it really right," Balis said.

Tight-lipped

One way to estimate how impactful ads will be is to examine pregame chatter, but this, too, is different in 2021.

Last year's championship match was one of the last major marketing stages before COVID-19 locked down society in March, and produced a number of commercials that drew praise and skepticism in equal measure, such as a saga around the death of Planters' mascot Mr. Peanut that included a teaser commercial depicting the icon's demise. The Planters campaign persisted after Super Bowl LIV, with a reincarnated iteration of the character reaching middle age around the holidays as part of the Kraft Heinz label's efforts to promote its e-commerce offerings. It's an example of how the Super Bowl increasingly serves as a launchpad for larger marketing programs.

There was no equivalent to the Mr. Peanut hullabaloo in early 2021, and only in the weeks leading up to the game did brands share substantial details of their plans for Super Bowl LV at all — a change of pace from the usual months of lead-up to generate hype ahead of the game. Relative lack of discussion around the game's ads this year is understandable in the wake of the presidential inauguration and the Capitol riots in January, and with the expectation that the pall of uncertainty won't dissipate anytime soone.

Some of the newsiest ad developments in advance of the game have been around the brands deciding to not attend, with Budweiser a standout. The beer marketer, known for commercials featuring its signature Clydesdales, opted not to run a Super Bowl ad for the first time in 37 years, instead directing its media investments to a COVID-19 vaccine awareness program.

On YouTube, a video is still billed as the "Budweiser Super Bowl Commercial."

"Even though they won't be advertising during the game, the buzz created by their decision not to run a commercial is just as effective," Ronn Torossian, chief executive of 5W Public Relations, said in emailed comments. "Furthermore, they are able to tie this decision to a cause that directly relates to their brand identity — a win/win for any brand looking to connect through cause marketing."

That's not to say marketers won't have breakout moments; some of the most memorable ads during Super Bowl games and throughout the year have been the ones with the least preamble. But if the current climate in many ways calls for unity and a big social message, this year's Super Bowl shows that key marketers known for championing such appeals have already tapped out.

"What would be the brand that we would expect to come forward and [call for] unity?" Carone said. "In the past maybe it's been a Coca-Cola — 'let's teach the world to sing' — and they're not doing an ad."

Picking the winners

A more subdued Super Bowl could at the same time reward a low-key approach from low-key companies consumers might not be familiar with. Fresh faces like Fiverr demonstrate how digital services providers that have seen a windfall due to COVID-19 are using the game to reinforce value to customers while reaching a broader audience.

Fiverr's spot comes as part of a larger "It Starts Here" platform that debuted in September and centers on helping small- and medium-sized businesses navigate digital transformation demands driven by the pandemic.

"It doesn't get any bigger than the Super Bowl from a branding and marketing perspective," Gali Arnon, chief marketing officer at Fiverr, said in a press statement. "We believe this is a major opportunity for us to introduce the world to Fiverr in a unique and creative way."

Chipotle is a more established name, but has similarly experienced a massive digital sales lift since March after spending years investing in its online ordering and delivery capabilities. The quick-service marketer is looking to continue its momentum by running its first Super Bowl ad, a spot showcasing its work around sustainability.

"The Super Bowl will continue to be powerful because it's some of the only appointment viewing that we have left," Carone said.

"It's a very economically resilient advertising form factor," she added. "It's the most resilient advertising that's out there."

Marketers face steep challenges in 2021 as the death of third-party cookies and changes to key identifiers, namely Apple's Identifier for Advertisers, upturn widely used digital marketing tactics. While first-party data remains the industry's top priority, its cousin — the more nebulously defined second-party data — is of growing importance, signaling that greater collaboration will be essential to businesses trying to build muscles weakened by the loss of cookies.

In early 2021, Merkle released a report that detailed successful examples of second-party tactics, including a tie-up between Buick and Amazon that looked to net younger buyers for the automotive brand. The effort involved steering users to ask Amazon's Alexa voice assistant about information on Buick SUVs, which drove 150,000 people to a virtual showroom for the brand's vehicles, per Merkle. Other marketers could replicate this approach, especially since many are only just starting to grow their own stores of first-party data and may need to rely on other brands, publishers and platforms to achieve the reach they need in a more privacy-stringent world.

"If I don't have enough of my own scale or my own insights, how do I take this [data] and put this together with others?" Bruce Biegel, senior managing partner of Winterberry Group, said during a virtual presentation of the consultancy's 2021 forecasts.

Defining second-party

Identity is a complicated space with few shared definitions among marketers. That assessment holds true for second-party data: 41% of marketers surveyed by Winterberry Group defined the asset as another brand's first-party data "acquired through an intermediary service or platform," while 29% simply view it as third-party data masked under another name. Lack of clarity on what constitutes second-party data speaks to why marketers must navigate its application carefully, keeping privacy considerations in mind.

"We believe that second-party [data] and how you define it is about the permission you have and the use cases," Biegel said.

Those use cases include gleaning insights and measurement, but second-party data can functionally start to look a lot like third-party data once it's sold, licensed or commercialized by other means, according to Biegel. Winterberry Group devised its own definition of second-party data, describing it as "data shared in a dedicated environment with a clearly defined set of permissions and rights set between each of the parties, frequently with a third-party provider managing the environment."

"Understanding collaboration is about understanding those permissions and those rules," Biegel said.

Collaborative mindset

While the bedrocks of online identity are changing in significant and disruptive ways, marketing investments in the space are unlikely to cool. In fact, U.S. spending could double to about $8 billion by 2024, according to the Winterberry Group, as businesses focus more on data management, hiring talent and changing processes.

Some of the technologies receiving attention will enable more second-party data sharing, including data cooperatives. Biegel noted that data co-ops are actually ancient by internet standards, going as far back as the founding of the Abacus Cooperative in the early 1990s. But as the deprecation of cookies demonstrates, many of the digital marketing tactics built up in the decades since will no longer be relevant, forcing marketers to rethink their approaches. Privacy laws such as the EU'S General Data Protection Regulation and the California Consumer Privacy Act have compounded demand for different solutions, many of which first gained traction in Europe but are now seeing more interest in the U.S.

"One of the things we're starting to see is an expansion in the cooperatives — more players coming in because it's that source of first-party data that you can leverage as a member," Biegel said. "We're seeing a growth of data exchanges and marketplaces, another place for collaboration."

Other predictions have keyed into second-party data's rise in prominence as marketers look to fill the gaps in their cookie-less strategies. Merkle revealed that 25% of businesses view second-party partnerships as their top priority, while nearly half (49%) said it was a high priority.

"The partnerships are typically made with non-competitive organizations who share to benefit from collaboration," per Merkle's report. "Companies may find non-endemic partnerships that align two brands that won't cannibalize each other's audience."

Given the higher level of trust required in second-party deals, data clean rooms, bunkers and safe havens are also hot items for marketers in 2021. Clean rooms and the like allow multiple data sources to be amalgamated and analyzed in a way that safeguards user privacy and data ownership, per Merkle, essentially acting as a clearing house before that consumer information is applied for marketing purposes.

Clean rooms are offered by vendors, data-marketing agencies — including Merkle — as well as some of the major digital ad platforms. Utilizing such spaces can be pricey, but will only grow more common in the years ahead, as Gartner estimates that 80% of marketers with media budgets of $1 billion or more will adopt clean rooms by 2023.

"These are environments that allow you to share data, whether it's for insights, whether it's for looking at overlap, or whether it's for activation, all based around different permissions," Winterberry Group's Biegel said.

One year after announcing plans to kill third-party cookies, Google revealed the latest development from its Privacy Sandbox project to build a more private web. The tech giant said that with its Federated Learning of Cohorts (FLoC) technology, advertisers can expect to see at least 95% of the conversions per dollar spent that they currently get with cookie-based advertising. But while the high marks are a hopeful sign for advertisers looking toward a cookieless future, concerns remain about how FLoC and other solutions will change the targeting and measurement of digital advertising.

"Google shared little information about how they achieved that 95% number," said Chris Paquette, founder and CEO at healthcare demand-side platform DeepIntent. "We're talking about such a serious change to the way marketers will be able to target. It just needs to be independently validated by third parties."

As opposed to third-party cookies, FLoC creates a lookalike audience that protects privacy by using machine learning algorithms to process web browsing behavior on individuals' devices. The way FLoC works is analogous to how many data providers use third-party cookies in aggregating various data sources to build audiences, but with typical third-party data, marketers have direct insight into the sources that are being used to build the audiences. Google's 95% effectiveness statistic makes it clear that inefficiencies and waste are inherent in cohort-based advertising like FLoC, drawbacks that may be necessary in the trade-off for privacy.

"There's no way it's going to be as precise as third-party-based retargeting or deterministic targeting," Paquette said.

However, early results from FLoC and related moves Google has made to incorporate industry feedback into Privacy Sandbox are promising for ad world players seeking efficient targeting capabilities after the death of third-party cookies, according to Michael Schoen, senior vice president and general manager of marketing solutions at Neustar.

"For most of our marketers, they're going to continue targeting in a variety of different ways, some of which will continue to use other identifiers. But as a kind of catch-all for consumers who are using the Chrome browser, [FLoC] certainly provides an effective way of reaching those consumers at scale," Schoen said.

Challenges remain, with time still on the clock

The transition from third-party cookies to solutions like FLoC will also affect measurement and analytics. As part of the Privacy Sandbox, Google has said it will provide a click-through attribution solution to support measurement while preserving privacy. However, this only encompasses a small part of the marketing picture as ad click-throughs are not effective at measuring the impact of video, banner and social ads, or the impact of multichannel campaigns that expose consumers to a campaign in several ways.

"Misattribution is the downfall of some of the most simplistic measurement techniques," Schoen said.

Still, Google has signaled that it recognizes that measurement beyond click-through attribution is required by marketers, and Schoen expects Google to work with the World Wide Web consortium (W3C) working groups to coalesce around a proposal. (Neustar, where Schoen works, in 2020 introduced a proposal to the Privacy Sandbox for PeLICAn, short for Private Learning and Interference for Causal Attribution, calling for privacy-preserving, view-based attribution.)

When Google announced its plans to eliminate third-party cookies at the start of 2020, it set a tentative two-year deadline that is fast approaching. Throughout the process, Google has made it clear it won't restrict cookies until there are alternative solutions in place that satisfy marketers and ad-tech providers. The deadline and timeline has been helpful in getting participants motivated, Paquette said.

"Independent ad tech companies are coming together in those second-party data consortiums. We are rising to meet the demands of the consumer — which is better privacy and better management of consent — and I think that those solutions are going to be a net gain for the industry across the board," he explained.

Schoen said some of these solutions should be available as APIs in the "early summer" timeframe of 2021, giving marketers time for piloting and testing. But that process will likely be affected not just by the continuing effects of the pandemic on the ad market but also the pressures around the holiday season.

"From a technical perspective, I expect many of the industry players to be ready. It's really about marketers getting crunched and their willingness and availability for piloting," Schoen said.

A changing landscape for privacy — and antitrust

Google's FLoC is just one part of the changing data privacy landscape. Along with the end of third-party cookies, changes to identifiers like Apple's Identifier for Advertisers (IDFA), and regulations including the EU's Global Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA) and California's Prop 24 have made collecting and storing first-party data a top priority for marketers in 2021.

"Within that Chrome Privacy Sandbox, there are solutions that allow [marketers] to still activate and target users off of the first-party data that they're collecting. There still are other proposals that will enable them to do that more granular addressable-type targeting without FLoC," DeepIntent's Paquette said.

"The best platforms that are going to emerge out of this least unscathed are going to be the ones that are approaching this with a best-of-breed approach, a multiple solutions approach," he added. "The combination of all of the different solutions will force technology partners, specifically DSPs, to get very ambidextrous."

The deprecation of third-party cookies is happening as Google faces a federal antitrust suit alleging outsized control of the online search market and calling the company's practices "anticompetitive and exclusionary." The antitrust spotlight will make it less likely that Google can move forward without the support of independent ad-tech platforms.

"If they were to single-handedly just wipe out a $150 billion market ... that really wouldn't look good for their case. They need to definitely tread lightly and work with the industry to to come up with a feasible and viable replacement," Paquette said.