TMW #062 | The politics of digital identity, eCommerce spending hits $200B, and the largest fundraise in CDP history.

Welcome to The Martech Weekly, where every week I review some of the most interesting ideas, research, and latest news. I try to look to where the industry is going and make sense of it all.

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Before we get started, I thought I’d let you know that another podcast episode is up. I talk with David Finkelstein. He's the CEO of BDEX, the largest consumer data exchange platform in the U.S. It’s about online advertising: Cookies, privacy, and fraud. Listen.

Here’s the week in Martech:

• The politics of digital identity.
• Adobe: eCommerce spending will hit the $200B mark for the first time.
• The largest fundraise in CDP history.
• Everything else: Shopping on YouTube, the trajectory of online tracking, artificially intelligent paywalls, Apple’s edge strategy, measurement theatre, and how an 8-year-old explains the metaverse.

✍ Commentary

The government’s role in digital identity. Three weeks ago, a suburban mum and family friend from years ago reached out to me via Facebook messenger. She sent me a link to a petition and asked me to sign it. Like many unsolicited Facebook messages from almost strangers, I disregarded it. This week I took a second look.

The petition was challenging the new Australian digital identity framework legislation. It introduces a number of broad and sweeping changes to how the government intersects with personally identifiable information, the companies that collect and use it, and public services. At first, the legislation appeared to be fairly benign (and quite boring), but reading through the proposed legislation and other world government trends, I'm convinced that what I was reading is the beginning of a new era in data governance.

The legislation is long and complex, so I want to break down some of the more interesting aspects of it for you and what it may mean for the companies we work for.  

The first thing to know is that the government is offering a voluntary accreditation service to companies that collect and manage user identities. By centralizing identity management in the form of a government database, companies can go through an accreditation process to access data sharing services with the government and other private companies, but also will be able to tell consumers that they’re a compliant and trusted entity.

This is kind of like getting your forklift license, your working with children’s check, or your food safety certification. The Australian government has now come to realize that the data companies collect and use online can lead to significant potential harm, at a personal and societal level. And so it is reasonable to suggest accreditation may be needed to prove a company is responsibly using consumer data, just as it's reasonable to expect that your child is safe with their kindergarten teacher.

The framework also opens up new opportunities to streamline identify verification and reduce friction for customers across the board. This takes on a similar form to single sign-on using your Google or Facebook account, a feature that many companies use today. A government ID could play a major role in streamlining identity verification with more sensitive data points like a driver’s license or a passport. Accessing medical histories, or the number of parking fines you have yet to pay could open up new opportunities for companies to tap into previously non-digitized realms of data in a way that's safe and accountable.

Other features of the legislation include things like user experience testing on data collection practices, something I personally welcome in theory, but I am skeptical of in practice. There are way too many dark patterns and regulating the experience of how people interact with sign-up or sign-in interactions could minimize harm later down the track. It also covers things like the ease of data deletion or changing settings, and improving the knowledge transfer between what kinds of data are collected and used.

Interoperability is something else added to the legislation. One of the hardest problems of the web is being able to port your digital self from one platform to another. As an example, you can’t take all of your Instagram followers to TikTok nor can you take your order histories from Alibaba to Amazon. Right now the details are scant on how the government will enforce data interoperability between platforms, and also how privacy will be ensured. But the concept is in there, and that’s enough to know that there are people thinking about the problem.

As you can see there could be many positives with something like a national digital identification framework. But there are also some significant trade-offs and huge risks with legislation that has such broad and sweeping powers over public and private services.

The first question you really have to ask is whether or not most governments can execute on massive centralized systems like this. As we’ve seen recently in the US, government systems are often more vulnerable to hacking and data leaks than tech companies. The SolarWinds attack is the most recent example and one of the most significant invasions on government data to date.

Alongside this, there's the fact that most governments are extremely good at burning a lot of taxpayer money on tech that hardly works. Unlike other forms of regulation, like ensuring someone is safe to work with children, you actually need to build the technology to enforce and manage compliance. Governments are legacy institutions, that are barely keeping up with the tech companies that can easily out-innovate and out-ship products at mind-boggling speeds.

Governments have been slow to respond, build and iterate to a digital world. We’re still in the early stages of digitization where almost 20% of governments don’t have a digital ID in place, and the ones that do, don't connect it to services. This just proves the point - we’ve been online for more than 30 years now, and most governments are still fumbling around in the dark.

The second question we need to ask is if a centralized repository of our information with semi- marketplace dynamics makes any sense at all. If China is anything to go by, people are ruthlessly surveilled in a cultural context where social standing, criminal records, and how much salary you take home are all connected and aggregated. This path leads to a privacy-less future, something I'm sure we all don't want.

Perhaps it is a good idea to have some systems siloed. In most cases not having medical histories linked with purchase history can create an air gap that helps to protect privacy. Of course, most consumers won’t care that much, if the value proposition is strong enough and the service is attractive I doubt that many people will think twice when sharing deeply personal data sources with apps. The Australian legislation’s answer to abuse of this kind of data is fines, but in the context of tech, they are paltry compared to what is gained.

If anything, this legislation proves that the future of the internet will be a regulated one. Like airlines, tobacco, and even hospitality, governments around the world are actively working towards regulating online identity in a way that’s interoperable, private, and safer. These are all good things to work towards, and things that should have been worked on 30 years ago. It might take another 30 for any of this to get off the ground in any real way. For now, understanding the risks and the tradeoffs may help with how companies plan their data governance into the future. Links: AU digital identity framework. The conversation analysis. IT news analysis. McKinsey case for the digital ID.

📈Chart Of The Week  

Adobe’s holiday shopping predictions. It’s very likely that 2021 will be the biggest year in eCommerce holiday shopping ever. Adobe is predicting that global spending will top $200b, with the last two months already up 11% in spending compared to last year. Curbside pickup will be a big factor in growth, people are becoming more comfortable with last-minute shopping online with instore collection. Link

📰 Latest Developments

The largest fundraise in CDP history. Treasure Data has raised $234 million. According to the CDP Institute, it is the largest fundraising round for a CDP ever. The round was led by SoftBank, which is indicative of the future promise of the CDP value proposition in market. Sure, COVID-19 has a lot to do with it, but so does the depreciation of 3rd party cookies and more legacy brands digitizing. Expect more raises of this size. Link

YouCommerce. Youtube has announced something called “a shoppable TV screen with Youtube.” Following the trending consolidation between social, fintech, and e-commerce platforms everywhere, Youtube is a little late to the party. However, shoppable Youtube videos have the strongest position in this trend. Think about all of the product review videos out there, decide that you want to buy the product under review? It’s one click. Link

Adobe’s next stop? The browser. Photoshop is an app that stayed as downloadable software, then Canva, Figma, and Sketch came along. And some 10 years later, Adobe has announced that they’re going to put photoshop into the browser too. Everything is becoming a browser tab, which means that everything becomes a bit more accessible. If Adobe wanted to they could probably put Premiere (the video editing software) on the browser too, and create an advantage in an adjacent market. Link

📚 Reading

The influence era. Brand marketing is increasingly tied to influencer marketing. In the 60s we had the Don Draper types. Now we have Mr. Beast. Social networks, streaming, and online communities have created new dynamics for how consumers discover and understand what companies stand for. This deep dive into these changes is the most considered I’ve seen yet. Link

Measurement theater. Augustine Fou on the longstanding trend of inaccurate marketing measurement. Digital marketing ushered in an era of unparalleled marketing effectiveness tracking, where the most granular of interactions can be, stored, analyzed, and used to determine strategy. There are companies that can do attribution properly, but most don’t and rely on bad data to tell a good story. Link

Apple’s edge strategy. A fascinating read on Apple’s approach to federated learning for ad targeting.  By tracking behaviors only on the device, and not allowing data to be stored on an Apple server, the company can interpret this as a privacy safeguard for consumers. However, pushing ad networks to edge computing only further enshrines device makers as the only mass consumer options in Adtech. Link

🔢 Data & Insights

The trajectory of online tracking. Gartner is predicting that by 2024, 40% of consumers will be actively tricking data collection tools, making the reliability of behavioral data exponentially more challenging. Link

Ad budgets are growing, again. The Advertising Association and WARCs quarterly advertising expenditure report are out. In the UK, holiday ad spending is the highest it's ever been, increasing to 24.8% this year to reach a total of £29.3bn. Link

Transforming manufacturing. We’re in a  global manufacturing and logistics crisis. But manufacturing companies are adopting more efficient (and customer-facing) technologies to compete. A major shift since the pandemic began is more manufacturers going direct to consumers and owning more of the customer ecosystem. This means an influx of new marketing tech and eCommerce implementations. Manufacturing is not a bad market to specialize in right now.  Link

💡 Ideas

Trusting AI to run your paywall. An interesting application of AI programs to determine how many free articles someone can have before they are paywalled, and when to swap out underperforming content. The Globe and Mail built their own AI software, hired 50 data scientists, and have seen significant returns. Link

Re-evaluating the place of competition. The number of people I talk to who don’t want to start a company because there’s already competition is incredible. There seems to be an expectation these days that to start something you need a truly original idea when for the 99% of us, executing on an idea that’s already in the market is a more viable path. Competition just tells you that there are enough people who want whatever you’re thinking about. Link

The “mainstorming” of crypto. Announcements from three different sectors all point in the same direction: A major BNPL, Zip is adopting cryptocurrencies on their platform, a major bank is opening a crypto wallet, and Starbucks is incorporating the blockchain into their loyalty program.  Three different applications, the same underlying technology. All of them indicate that soon enough your favorite coins will be as ubiquitous as cash. Links: Zip. ComBank. Starbucks

✨ Weird and Wonderful

When cookies go away. Link

When you definitely, totally understand NFTs. “It’s not ownership, but it represents ownership.” Link

An 8-year old’s interpretation of the Metaverse. Finally, some clarity.  Link

Stay Curious,

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Want to share something interesting or be featured in The Martech Weekly? Drop me a line at juan@themartechweekly.com.