To Avoid Fines, Buy Carefully

We recently had breakfast with the head of a regional advertising agency in the Southwest. After he finished telling us about how much native advertising and influencer marketing he was doing, he told us about how he also buys advertising beyond the social platforms to reach specific niches. Of course he does that programmatically.  These are the sort of cross-channel campaigns we read about in marketing blogs.

And yet he had never heard of the European law taking effect about 8 months from now, the General Data Protection Regulation (GDPR), that will probably change the advertising business globally. “As of next May, if advertisers have not obtained specific consent from individuals, they cannot market to them in any shape or form,” writes Ad Exchanger, one expert source on programmatic advertising. Ad exchanges, its core constituency, stand to lose most when these regulations take effect.

Although the world sometimes seems pretty small, especially to mobile Millennials, most day-to-day American advertising decisions are not made with European consumer data in mind, even though many marketers do have customer data on European citizens who have bought their products.

The EU’s new privacy rules are likely to disrupt the global digital marketing scene by preventing companies from using an EU citizen’s data unless they have obtained their direct consent. This will apply to the data of every EU citizen, regardless of where in the world their data is being used or stored. This means that US companies, such as Facebook and Google, which no doubt possess a large amount of EU citizen data, will have to pay attention to the regulation across the pond and take the same steps as everyone else to become compliant.

Come next May, if these companies have not obtained specific permission to market to individual Europeans, they will be fined heavily. The precursor to this was the $4 billion fine just levied against Google. The European Commission is not fooling around.

The easiest way to become compliant is to offer some kind of bonus to consumers who give their data willingly, and many marketers are already doing that. Business to business marketing has done it for years: “give us your email address to download this free white paper on privacy.”  But consumer brands have simply adopted automated relationship building, buying for reach across dozens of exchanges, and marketing to people they only know because the media buyer has targeted a specific demographic and the algorithm claims to deliver it.

Although every advertiser and marketer who is in possession of customer data (we are not) will be affected by these regulations, they’ll fall hardest on those ad tech companies that offer data for targeting.  This may affect how programmatic advertising is used in the future. At the very least, it will be used more carefully in specific situations, mostly as a workflow improvement  rather than as a way to guarantee reach.

The emphasis on reach, in our opinion, has nearly destroyed the advertising industry, and we can’t wait for niche advertising, based on real customer relationships and customer choice, to return.