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Data clean rooms (DCRs) are a priority area for many marketers in 2023, but raise tough questions for the industry as adoption spreads, a report from the Interactive Advertising Bureau (IAB) found. The research was fielded for the trade group by Ipsos.   

The IAB also views DCRs as needing data interoperability to reach their full potential, an area where marketers have historically struggled. Among surveyed DCR users, 39% pointed to challenges with data interoperability and customization, while 38% called out a lack of internal resources and 32% did so for privacy hurdles.  

Steep investments are required to maintain DCRs, both in terms of building the underlying tech and the talent needed to manage it. That puts smaller brands, agencies and publishers at a “tremendous market disadvantage,” per the IAB — one that may curtail in-housing trends.

DCRs have become a fixation point for marketers as they try to address the pending deprecation of third-party cookies. The technology allows advertisers and platforms to dump their aggregated first-party data into one place in a privacy-safe fashion. Different data pools can then be matched up to refine targeting and address problems like audience duplication, among other functions.

Platforms and publishers have quickly wised up to the business potential. Amazon previously expanded clean room capabilities powered by its AWS cloud-based computing juggernaut. Disney Advertising around the same time enhanced its existing DCR through a VideoAmp integration. 

Broadly speaking, companies are expected to invest 29% more in DCRs in 2023 compared to 2022, according to the IAB. The research conducted by Ipsos draws on 200 surveys and 20 in-depth interviews with stakeholders from across different industry categories. 

“There is growing demand due to loss of signals, and wanting to share data with partners without sharing sensitive data,” said Jeffrey Bustos, vice president of measurement, addressability and data at the IAB, in a statement. “This may show that companies are understanding what’s required and ramping up their investments accordingly.”

But the trade group’s report also emphasizes that the resource intensiveness of DCRs could leave smaller and mid-size marketing players behind at a critical juncture. 

DCRs are often leveraged in tandem with other ad tech like customer data platforms, data management platforms and consent management platforms. The compounded annual costs of these stacks can climb above $2 million, per the IAB.

Nearly one-quarter (23%) of marketers spent over $500,000 on their DCRs alone in 2022, while 62% put a minimum of $200,000 toward the technology. The heavy price tag could be more of a drag in a downturn, when marketing departments are often among the first to feel cutbacks. 

Time is another consideration, with respondents stating that standing up a DCR offering can take up to two years. Meanwhile, Google has slotted cookie deprecation to take effect in 2024. On the talent front, roughly half of DCR users have teams of six or more people dedicated to the tech and 30% have a minimum of 11 specialists.

Looking beyond the barriers to entry, the IAB believes DCRs could be held back without full data interoperability. That’s a level of standardization and unification that’s been called for in digital marketing and ad tech for years, while the landscape in reality has often remained fragmented and controlled by walled gardens.

“It’s in everyone’s interests for closed ecosystems to provide access so that advertisers can effectively analyze their campaign activity,” said Bustos. “Advertisers need a window into the data.”

Artificial intelligence (AI) and algorithms are increasingly key pieces of technology for Procter & Gamble (P&G) as it aims to improve advertising efficiency and effectiveness, brand chief Marc Pritchard said during a livestreamed keynote at the 2023 Association of National Advertisers (ANA) Media Conference. 

The packaged goods executive, who is board chair of the trade group and delivered the confab’s opening address for the eighth time in its 11-year history, started his talk by acknowledging that P&G has lost its status as the world’s top marketer by media spend. It’s a change he attributed in part to a focus on precision versus volume, suggesting that others in the industry could benefit from adopting similar thinking.

“Celebrating a company as the largest spender implies that it's better to spend more and more each year,” said Pritchard. “We see it a little differently, and that it's time for a reset.”

P&G has made efforts to in-house marketing functions over the years, notably in media buying. This strategy has extended to more tech-forward areas like data and analytics and AI development, Pritchard added at the conference.

Multiple units within the company, which owns Tide, Downy and Pampers, now rely on proprietary algorithms that draw on “a vast repository of consumer research data” from across decades, Pritchard said. With P&G’s in-housing bets reaching fresh levels of maturity and sophistication, its relationship with marketing services providers — which has been contentious in the past — continues to shift.

“More than ever, we need agency partners to see around corners,” said Pritchard, again calling out AI as an example. “We're finding that we can do more work in-house productively and we can strengthen agency partnerships at the same time to create more value.”

Algorithms in action

Pritchard joins a chorus of executives who have put renewed emphasis on AI and adjacent technology in 2023. The rapid rise of solutions like OpenAI’s ChatGPT has captured the interest of both consumers and investors and set off a firestorm of debate around the ethical implications of ceding more work to automation. Top agencies also appear eager to jump into the space.

For P&G, AI intersects with a concentrated push around first-party data. Pampers, for instance, needs to engage the relatively small subset of parents who have children in the diapering stage. In turn, the marketer has switched its model to focus less on broad-based channels like TV and more on owned channels, such as a due date calculator, baby name generator and its Pampers Club rewards program. Data acquired from these assets is then leveraged by an in-house media unit for targeting purposes. 

“With first-party data and other sources, the Pampers media team has created precise smart audiences using a proprietary algorithm that defines consumer groups across the various stages of baby and child development,” said Pritchard.

Advertising creative is also being tested more frequently against AI. Pampers and other P&G brands like Tide rely on an AI studio offering that uses a “neural data network” built on decades of P&G consumer testing, according to Pritchard. Consumer feedback to new efforts is uploaded to this system and measured against existing ads to predict in-market performance.  

“This allows us to make changes to images, music, copy or text to iterate and improve the ad for the very, very best performance, very quickly,” said Pritchard. 

The executive claims this approach is cheaper and more efficient than traditional ad-testing methods. Pampers is now able to optimize more than 140 different ads per year for various channels, including TikTok, YouTube and e-commerce. The brand grew its U.S. sales by 10% in 2022 while increasing return on investment by 17% and media savings by 15%. 

Tide applies AI differently because it’s aimed at a wider swath of consumers, giving TV and streaming greater prominence. The detergent brand now has planning and scheduling algorithms that help it place ads across dozens of networks and thousands of program combinations while cutting down on redundancy, a sore spot in connected TV. P&G claims it saved $65 million in 2022 through its fabric care in-housing.

“Now, they're using an algorithm to test a new way to buy ads that's spread evenly across all TV programs, channels and day parts, which should increase reach another three points and save another $40 million,” said Pritchard of the fabric care team.

New frontiers

With automation bolstering aspects of P&G’s legacy media business, an algorithmic bend is bleeding into more nascent channels as well. Retail media networks represent one of the CPG marketer’s largest and fastest-growing buckets of spend, according to Pritchard. 

Together with retailers, P&G is creating what he called an “auto-bidder.” The digital solution opens direct access to retailer search programs and lets P&G adjust its ad buying and content “every 15 minutes automatically,” the executive said. The end result is four times higher return on brand sales and bigger basket sizes for merchants. 

During a Q&A portion of the event, Pritchard was asked about how he thinks about AI practically for P&G amid a period where marketers are trying to discern what’s hype versus substantive.

“The best way, we found, to do it: Don't talk about the algorithms, don't talk about the technology, don't talk about AI,” said Pritchard. “Talk about the outcome you want. What are we trying to achieve?”

Unilever, in collaboration with Mindshare, is the first brand to test the integration of Disney's Audience Graph and The Trade Desk's Unified ID 2.0. The deal is one of several developments announced as part of the Disney Tech & Data Showcase that took place on Jan. 25, 2023.

The announcements made at the Disney Tech & Data Showcase demonstrate how the media conglomerate is working to meet new mandates on identity and measurement, especially in streaming environments, in advance of its upfront on May 16, 2023.

The company also announced that the ad-targeting and segmentation capabilities of its ad server currently used for Hulu will be extended to every Disney platform, including Disney+. In addition, EDO will now be one of Disney’s preferred partners for outcome measurement of addressable ads across its streaming portfolio.

Disney made several announcements about deals and developments that have enhanced its ad offerings, which span linear TV, connected TV (CTV) and digital platforms. The announcements revolve around identity, measurement, clean rooms and other areas of increased marketer attention.

CPG giant Unilever will become the first brand to strategically test the integration of Disney's Audience Graph with The Trade Desk's Unified ID 2.0 identity framework, which was announced in July 2022. Advertisers leveraging first-party audience segments see three-times the performance of standard segments, per Disney. Such privacy-safe applications of first-party data continue to increase in importance amid changes to the data privacy landscape.

Elsewhere, Disney's proprietary ad server, which currently powers Hulu, will be extended to every Disney platform, including Disney+, which rolled out an ad-supported tier in December 2022. The extension of segmentation and ad-targeting capabilities should make the nascent ad-supported tier more attractive to marketers. The company is also expanding the technology it uses to create content like “The Mandalorian” to its ad environments.

“Our studio environments are now adopting that technology, which allows us to take any environment in the world and virtually render it with robotics and advanced machine-learning and AI to create a seamless world that is not only great for content but allows us to create so many innovative ad opportunities that are almost part of the content, it’s almost seamless,” said CTO Aaron LaBerge.

The media conglomerate also announced a deal with outcomes-based company EDO, which will apply its engagement metrics to Disney's streaming portfolio, beginning with Hulu. Beyond measuring who is seeing ads on its platforms, the partnership seeks to give advertisers better information about how Disney content drives consumer engagement and performance.

In the measurement space, Disney has continued to push back against the idea of an alternative currency, opting for a "currency expansion" approach that sees it work with hundreds of vendors in the space. Along with being a test partner for Nielsen One, Disney is building on its multi-year relationship with Samba TV to determine true reach and frequency across platforms and boosting its clean room offering in partnership with VideoAmp.

Just 10% of surveyed marketers believe the metaverse is irrelevant to their industry, a figure that represents continued optimism about the future-facing technology, according to Deloitte’s 2023 Global Marketing Trends report.  

Still, nearly half (45%) of respondents viewed development and implementation as a challenge. Marketers are also taking varied approaches to the metaverse, with some jumping onto existing platforms and others investing in proprietary ones. Blockchain was another area of focus, with 41% of marketers planning to use the technology to support their advertising strategies in 2023. Among CMOs who are prioritizing addressing the regulatory environment, 35% already have blockchain tools in place compared to 21% of broader respondents.

Deloitte’s marketing trends report indicates CMOs will continue to gravitate toward nascent technology in the future. These experiments come as the industry grapples with changing consumer expectations coming out of the pandemic and mandates from lawmakers that make wielding troves of personal data a thornier prospect than it once was. The consultancy’s surveys were conducted in June 2022, while interviews were done between July and September of the same year.

Blockchain presents “new possibilities for strengthening consumer privacy and allowing consumers to control their own data,” according to Deloitte. That’s been the promise effectively since blockchain first emerged in marketing discussions several years ago, but a stricter regulatory landscape and greater familiarity with the ins and outs of immutable ledger offerings may lend some newfound credibility in 2023. 

Use cases can also be specific to certain categories. H. Moser and Cie., a high-end watchmaker interviewed by Deloitte, is applying blockchain to track and authenticate its products over time, including after they are sold secondhand — an increasingly important market for luxury goods. Consumer brands, like Unilever, are investing to put more transparency and traceability into their supply chain.

Deloitte noted that marketers may want to keep an “eye on digital currency leaders” as they think through their approaches to blockchain. Who those leaders are could be less clear following the spectacular implosion of FTX in late 2022, which has set off a broader chill the crypto space is struggling to recover from. 

Similarly, metaverse skepticism is on the rise. Meta Platforms, a leading champion of the concept, has been pressed by investors about the steep upfront costs and weak consumer demand. Watchdog groups have also raised concerns about the channel’s use as a stealth vehicle to market to children. Many brands value the metaverse as a tool to reach groups like Gen Z and Gen Alpha who are averse to traditional advertisements but familiar with online gaming.

Deloitte’s findings indicate most marketers believe the metaverse will still be relevant to their business, with weakest interest shown in verticals like life sciences and healthcare. Brands have certainly stayed busy on platforms like Roblox and Fortnite so far in 2023. For example, Oreo in January 2022 launched an “Oreoverse” on Meta’s Horizon Worlds with help from celebrity spokesperson Martha Stewart. 

By 2024, 70% of marketers are expected to shift 10% of their budgets to product placement as brands move away from online ads, according to a report by Gartner.

The report, titled “Predicts 2023: AI, Social Toxicity and Disappearing Customers Forge the Future of Marketing,” also anticipates that one-third of businesses without a loyalty program today will establish one by 2027 in order to secure first party data. Additionally, combating misinformation and ethical artificial intelligence (AI) use will be top priorities for marketers in 2023. By 2027, 80% of marketers are expected to have a dedicated content authenticity function and by 2025, 70% of CMOs will prioritize accountability for ethical AI marketing.

Going forward, marketers cannot afford to ignore combating misinformation, ethical AI use, product placement and loyalty programs, per the report. Taking a long view, Gartner predicts that AI’s role in marketing will continue to expand and that those departments with widespread AI use will be able to streamline the creative process and reduce friction. By 2025, this will enable them to shift 75% of operations to more strategic activities, resulting in more dynamic marketing organizations.

The future, however, could prove tough for marketers who will face significant challenges to growing brand value and loyalty amid an economic rough patch and changing digital habits, Gartner forecasted in a separate report. By 2024, 60% of CMOs are expected to cut marketing analytics teams while forecasts for ad revenue in 2023 have also started to shrink.

Product placement is one trend with an impact that could grow more significant going forward, with a Gartner survey from October 2022 indicating two-thirds of surveyed consumers prefer product placement over separate ads. Product placement could garner more of brands’ budgets as they attempt to address ad-averse consumers. Brands such as Coke and Lacoste have seen success with product placement in shows such as Netflix’s “Stranger Things.”

“Brands pay top dollar to reach high income consumers via digital advertising, but such impressions become less meaningful as this audience figures out new ways to tune them out,” said Kate Muhl, vice president analyst at Gartner, in a statement. “Marketers who cling to traditional digital ad formats will increasingly reach an audience composed largely of digital have-nots.”

Movies and television are not the only areas getting interest from brands. Video game advertising, such as on in-game billboards, has gotten a lot of attention. Hershey found success with the method for its Oh Henry! candy bar, increasing recall by 15.9 points.

Despite recessionary warnings sounding and brands tightening their belts, one area of advertising can’t seem to stop growing. Retail media is now estimated to represent 11% of total advertising spend at the global level, a meteoric ascendance for a category that wasn’t widely recognized until a few years ago but is now under the higher level of scrutiny the spotlight provides. 

As the market matures and gets more saturated, cracks are forming that resurface old tensions in a brand-retailer ecosystem where the merchant side of the equation has frequently held the chips. Retail media’s stunning upward trajectory at the pure dollar level masks simmering frustrations from marketers that feel obligated to make buys or lose out, even if the strategy proves unprofitable or feels like a cost of doing business versus a nice-to-have perk.

With a lack of industry standardization, third-party solutions providers also see an opportunity to patch over the gaps that retailers are unlikely to mend of their own volition. And hovering in the background is the chance of consolidation that would lead to just a few heavyweights wielding influence. GroupM forecasts ad revenue for retail-based companies will grow nearly 15% in 2022 to $101 billion and reach $160 billion by 2027.  

“The relationship has always been fraught,” said Nikhil Lai, a senior analyst that specializes in performance marketing at Forrester Research, of brands and retailers. “That relationship is now being put through the crucible of retail media, and it's being changed in many ways.”

Growing pains

Given the amount of money pouring into retail media channels, pretty much any company that owns a brick-and-mortar store, e-commerce website or app is racing to stand up an ad network that can grab a piece of the pie. Trade shows have been abuzz with the topic, with a raft of presentations from companies like Walmart, Target, Albertsons and Kroger touting the latest in their tech and media innovations (the latter two also merged, which created an even more formidable player in the grocery vertical). 

“We've seen a tremendous growth in retail media network investments from our clients,” said Jeremy Woodlee, a managing director at Accenture Song, during an Advertising Week New York panel in October 2022. “Virtually every client we have, in retail and beyond, [is] looking at this.” 

Interest in retail media is driven by the promise that merchants can apply their troves of first-party shopper data to better target and measure ad campaigns, all while placing messages closer to the point of sale. The value of the “closed-loop” measurement proposition has only increased as third-party cookies face deprecation and performance marketing is decimated on social media platforms like Facebook and Instagram due to privacy changes implemented by Apple.

Meanwhile, marketers are under pressure to prove their efforts can be tied to results in the short term as the economy takes a nosedive. Ad spending steadily slipped in 2022 as brands tried to make smarter choices with their dollars. 

There are other perks to retail media that stand out during an especially tumultuous digital period. Ads for pet food running on an e-commerce site people visit to browse and shop for similar products won’t appear next to conspiracy theories or hate speech, for instance. 

“What brands appreciate about retail media is that there is stronger attribution data (from media impression to [omnichannel] sales) and they consider it ‘more brand-safe’ compared to other forms of traditional media,” said Rachel Tipograph, founder and CEO of MikMak, an e-commerce services provider, over email. 

However, traditional retailers’ grasp of digital technology has historically been patchy, to say the least. The fast influx of brand dollars to retail media has led many to rush to scale up their offerings and partner with outside vendors, but most networks remain fairly rudimentary. Advertising supply can be limited, according to Tipograph, which can drive up rates. Additionally, there’s a shortage of the types of real-time reporting and self-service functions that marketers are accustomed to on digitally native platforms. 

“Most of the growing pains come from the fact that retail media is at its infancy compared to more traditional forms of media,” said Tipograph.

There’s also the issue of internal silos on the retailer’s end. Retail media teams are relatively new and making smart hires, but a lot of shots are still called by the stodgier merchant side of the house. That can create complexities where the retail media division is working closely with certain brand partners that want to boost their profile, while other pockets of the organization are focused on conflicting areas. 

“There is a disconnect between the retail media side and the merchant side,” said Michael Harrison, a managing partner at the management consultancy Winterberry Group. “Ultimately, the [key performance indicators] and objectives of the organization have to be aligned. And right now that alignment is not occurring.”

Walled gardens revisited

Endemic marketers — the packaged goods companies that rely on store and digital shelves to reach shoppers — for years have also warned that retail media networks run the risk of mirroring the walled gardens of Facebook and Google that came to dominate the digital sphere. Retailers put on a compelling pitch to advertisers around driving incrementality but are keeping their data as close to the vest as ever. The result is a lack of transparency, some experts say. 

“Kroger grades their own homework, Walmart grades their own homework and everybody feels that it's not truly moving the needle and they don't trust the numbers,” said Harrison. 

Marketers have taken assessing retail media into their own hands or tapped outside vendors and agencies to get a clearer picture. Software companies and ad agencies with historic shopper know-how have been able to piggyback off this demand to help brands solve for what’s termed “signal loss.”

With more tools at their disposal, brands for the first time are factoring retail media into media mix models (MMM) where it can be compared against the historic performance of other areas of spending.

“It's a matter of time, it's a matter of data volume. It's also just a natural human tendency to need verification,” said Forrester’s Lai. 

“[2022] is the first year that marketers have sufficient data to add Amazon or Walmart into their MMM,” he added. “They're able to compare the profitability of retail media as a channel versus search versus social versus TV versus out of home.” 

Fear of retaliation

Subsequent whispers that some retail media is unprofitable stem from the fact that buys rarely happen in isolation for endemic brands.

Slotting fees, traditional shopper marketer agreements and other fines to serve retailers tally up, and are entrenched through long-standing relationships that predate the retail media craze. Some view the cumulative cost increasingly as a “tax” versus a benefit, according to Winterberry Group’s Harrison. That factor can feel particularly sharp when buying media outside the retailer’s owned and operated platforms, or “off-site.”   

“All of the markups on top of it turns it into negative [return on ad spend],” said Harrison. “The retail media networks aren't getting that inventory for cheaper, they're just adding fees on top of it, and the performance doesn't justify the increased fee.” 

Avenues of recourse are limited because endemic brands act as retailers’ customers. They rely on them for prime shelf placement and positive rankings on e-commerce marketplaces to drive sales. Some are starting to fear some form of retaliation if they spend less than they can on retail media, experts said. 

“The threat is imagined, but is nonetheless credible,” added Lai. “The brands need the retailers so much more than the retailers need the brands.” 

Deals like the Kroger-Albertsons merger at the same time stoke the anxiety that power in retail media could be further consolidated into just a few hands, further tipping the scales and leaving brands with fewer alternatives over the long run. 

“You'll probably have, in reality, three big walled garden entities that compete against each other. I assume that there will be some form of a consortium of the other players that come together similar to an ad network back in the early days,” said Harrison. “It has to be that way. Otherwise, nobody will spend with them.”