Data clean rooms: making sense of the hype

There’s much talk in martech circles about data clean rooms and the new capabilities they’re opening up for brands looking to share data safely

Acxiom’s Tate Olinghouse, chief client officer, explores what’s actually new about clean rooms (and what isn’t), and why the hype is justified after all.

As one business year ends and another begins, martech experts round up the trends and technologies that are winning marketers’ attention – and their budgets. This year, some of the loudest buzz has been around data clean rooms, and for good reason. There are truly exciting things happening in this space.

Data clean rooms (which can evoke images of lab technicians in white coats) are privacy-conscious, data collaboration spaces. In a data clean room, brands and their trusted partners can share and combine data to create new insights that benefit all parties - more relevant advertising for people, better growth for brands and their partners. They open up opportunities in co-marketing, audience building, monetization, and marketing measurement without asking brands to actually share their customers’ personally identifiable information.

For example, manufacturing brands and consumer packaged goods (CPG) brands have traditionally struggled to build out high-quality first-party customer data and direct relationships. But with the help of a data clean room, a retailer could partner with a CPG brand to co-create subscription-based offers that give their shared customers something really meaningful. It’s a win for the brands and the customers, too.

Brands might take a similar approach when assessing a partnership with a credit card issuer. Or when they’re looking at potential mergers and acquisitions, and they want to compare their customer base with that of a target acquisition.

My point is this — the list of data sharing use cases is both long and long-standing. So, while I’m excited about clean rooms and I don’t want to spoil the hype party, I feel it’s important to point out that a lot of the new and exciting capabilities clean rooms are said to enable are actually pretty old-school, tried-and-tested direct marketing capabilities. And that’s a good thing for marketers and marketing because direct marketing strategies work and are part of a holistic marketing plan. Gone are the days when direct marketing simply meant direct mail – it’s about direct connections with your customers.

We were doing clean rooms before they were cool

Whether it was called co-branded marketing, collaborative marketing, or even just a smart way of using a relational database, forward-thinking marketers have been doing this stuff long before clean rooms were a thing.

In fact, about 30 years ago some of my colleagues were developing the first ever relational database for what is now a leading national bank. This enabled them to combine data about their credit card customers with data from an airline partner, creating new, valuable offers with the insights they generated. In effect, they were also creating the first clean room.

The latest developments in cloud computing and clean room technology are supercharging many of the capabilities you need to make this kind of data sharing and collaboration effective and safe. Our partners, companies like Snowflake, Google, and AWS are leaders in this transformation.

But at the same time, a lot hasn’t changed. We’re still talking about combining datasets to create new customer intelligence and using that intelligence to create customer value through better marketing experiences. It’s deceptively simple, and it reminds me of learning to use Venn diagrams in second grade math class. Which data creates the most interesting and valuable overlap? That’s the sweet spot.

One thing remains the same: you need to get the data right

Clean rooms may be the latest and one of the greatest solutions available in digital marketing, but technology alone is never enough. If you want to genuinely understand people, you have to start by understanding the data. And you need to be a good steward of the data.

In order to drive real business outcomes with the tech, you need to unlock the full potential of clean rooms. There are three data components you need to consider:

1. Data expertise – To know how to put a clean room environment to work for you, you need an expert, trusted team or partner who can work with you to analyze and decipher what data will make a difference for your business.

2. Data security – Good data governance and security measures are always worth mentioning, even when they’ve become table stakes. Clean rooms are about combining information safely, so they demand an ethical, privacy-conscious approach to data.

3. Data augmentation – A simple clean room instance lets two brands share their first-party data with each other. So far so good. But to maximize your reach and your potential for valuable insight, you also need to be able to bring high-quality third-party data into the mix. Third-party data can often bring first-party data to life with behavioral and interest attributes or even transactional data.

Why clean rooms are on the rise

So, if clean rooms are, in essence, a reincarnation of this protected data-sharing capability, why are they creating such a buzz today?

On the one hand it’s because, while data volumes are always increasing, meaningful people insights will continue to fragment as smart devices, the Internet of Things and new technologies like the metaverse, generate siloed datasets.

On the other hand, there’s the need for privacy-conscious and protected data sharing. With third-party cookie deprecation coming, brands need new ways to build their data assets, and quite frankly to measure what marketing is working. And with increased regulations around data privacy and security, brands need the most ethical and protected forms of sharing.

That’s what clean rooms represent today. And when they’re used intelligently – by brands that have an understanding of the data that will ultimately drive positive outcomes for the business, because it drives positive outcomes for its customers – that’s when I think the hype around clean rooms is totally justified.