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Data Clean Rooms 101: An Introductory Guide
Data clean rooms are not just a buzzword; they are a game-changer for businesses in today's data-driven world.
In recent years, sharing consumer data has become extremely complicated due to the rise of sweeping consumer privacy laws like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
When businesses mismanage consumer data, they face severe financial penalties and long-term damage to their brand image. But modern businesses rely on consumer data to fuel marketing efforts and guide decision-making processes. Gathering all this data through first-party collection strategies is impractical, costly, and tedious.
How can brands access the data they need without running afoul of the GDPR, CCPA, and similar regulations?
Data clean rooms are the answer.
Here’s everything your business needs to know to take advantage of this powerful tool to safely, securely, and lawfully share data.
What Are Data Clean Rooms?
Data clean rooms are secure environments that enable several companies (or separate departments of a single entity) to aggregate data for joint analysis.
When analyzing the data, all parties must adhere to a clearly defined set of restrictions and guidelines for setting up the data clean room. When data is uploaded to data clean rooms, personally identifiable information (PII) is anonymized, handled, and stored in a manner consistent with relevant regulatory requirements.
While there are many use cases for data clean rooms, one of the most popular applications is to bring together advertising and marketing data from multiple entities. By aggregating the anonymized data, marketing entities can attribute conversions and gain other actionable insights about their target audiences.
In addition, since data clean rooms prevent PII from leaving the environment, organizations can comply with privacy laws while simultaneously gathering the information they need to optimize marketing efforts.
Setting Up a Data Clean Room
Setting up and using data clean rooms typically involves a few key steps, which include the following:
Establishing Parameters and Creating an Environment
As part of this phase, the entity managing the data clean room must establish clear data-handling parameters. They should relay this information to all participants to ensure that all data-handling activities comply with relevant regulations.
Once project leaders have laid out their parameters, they must create a secure environment in which to store, manage, and analyze their data. While they can develop such an environment independently, working with a third-party data management and optimization solutions provider is the more practical option.
During the ingestion phase, first-party data from the company’s website, applications, customer relationship management (CRM) platform, and other digital assets are uploaded to the clean room. If an organization collaborates with other entities, its data is funneled into the clean room as well.
After all the relevant data has been ingested, participants can begin matching data sets at the user level. They can also connect complementary data using tools like third-party enrichment software.
In this stage, data is analyzed for:
- Campaign performance measurement
- Propensity scoring
- Intersections or overlaps among audiences
Project leaders must have a clear objective before starting the analysis stage. More specifically, they must decide what questions to answer by analyzing their data. As such, identifying the “why” behind data clean rooms helps businesses determine which types of analysis to run.
The final stage in the data clean room journey involves reviewing and applying the analytics results to business objectives. In most cases, the insights gleaned from data clean rooms are used for marketing purposes like:
- Segmenting audiences
- Executing cross-platform attribution
- Conducting A/B testing
- Analyzing campaign efficacy
It’s estimated that by the end of 2023, 80% of marketers with “substantial media budgets” will use data clean rooms to support their brand-building efforts.
Benefits of Data Clean Rooms
Data clean rooms are becoming increasingly prevalent due to their many benefits. For example, by setting up a data clean room, organizations can:
- Gain access to a broader array of data
- Ensure compliance with data privacy regulations
- Build custom audiences
- Gain actionable insights about customers, campaigns, and audiences
In addition to supporting marketing efforts, data clean rooms can be a valuable asset when planning mergers and acquisitions.
How Is Data Accessed and Used in a Data Clean Room?
Data clean rooms exercise strict control over what information comes in, how it’s stored, and how inbound data can be combined with other data on the platform. A data clean room’s parameters will also regulate the types of analysis each entity can conduct. Most importantly, data clean rooms regulate what information can leave.
Once PII data is uploaded into the clean room, it’s encrypted and stored in a secure environment. The data owner retains complete control over their clean room, including who can access it. They’re ultimately responsible for ensuring that only approved partners can access the anonymized data.
Use Cases for Data Clean Rooms During an M&A
Mergers and acquisitions (M&A) data clean rooms provide enterprise decision-makers with a secure environment for aggregating and analyzing relevant organizational data, such as financial information, PII, and other protected data.
They can use data clean rooms to assess the viability of a merger or acquisition, compare sensitive data, and identify potential roadblocks that threaten to hinder the deal.
By leveraging data clean rooms, organizational leaders can ensure confidentiality for all parties while accessing the insights they need to make an informed decision. M&A clean rooms expedite the planning process associated with mergers and acquisitions, setting the stage for a more seamless, mutually beneficial transaction.