As big tech continues to be put under the spotlight for its data collection practices, there is a growing list of early-stage companies that intend to disrupt the status quo. As I have dug deeper into this emerging ecosystem, it has been encouraging to explore the efforts of Founders championing marketplace strategies to create change.

While the approaches differ, the unifying mission for these startups is to allow users to monetize their own data. Fundamentally, at the heart of these offerings are value propositions that see behavioral data as both an asset and security, driven by two C’s – Control and Compensation. Users can control what data and attributes they share and are compensated in the form of cash payouts or other brand-driven reward incentives.

Adtech in 2021

Advertisers benefit from gaining access to anonymized aggregated data, which fuels business insights and personalization. The US digital advertising and marketing industry is estimated at $87.1 billion for 2020, accounting for 27 percent of the global market share. Within the region of 70 percent of digital ad spending going to Google, Amazon and Facebook, it is clear that personal data collection is a ‘need’ and not a ‘want’ for businesses across the spectrum.

Historically, businesses have relied on tracking mechanisms to provide services and data to advertisers. However, as a response to California’s CCPA and Europe’s GDPR, Apple’s Intelligent Tracking Prevention (ITP) and Firefox’s Enhanced Tracking Protection have prevented third-party cookies from passing along users’ data within their browsers. The biggest disruption is still to come, where Google has announced that it will end Chrome browser support for third-party cookies by 2022. While the browser battle heats up, it is clear that advertisers will now need to shift their reliance towards alternative first-party data channels, and this is where it gets interesting.

Generation Z

Taking the above into consideration, it makes sense for early-stage ecosystem players to build their market position on this two-sided problem. In fact, it particularly resonates with Generation Z (ages 13–25), which represents approximately 40 percent of the world’s consumers and holds up to $143 billion of spending power.

While data privacy is front of mind for older generations, Gen-Z, the first generation of true digital natives, was initially said to be less privacy conflicted because they expect and demand customization and personalization – and this would not be possible without sharing their data with big tech. However, new research suggests that this is not entirely the case as high-profile data breaches have led to skepticism and feelings of mistrust. While the jury is out on this, one thing is for certain – Gen-Z’s online behavior is constantly changing and this is reinventing social media marketing.

Combine this with their appreciation of ad blockers, and shorter attention spans, and it becomes obvious why brands are expected to spend up to $15 billion on influencer strategies by 2022 to try and reach them. However, influencer strategies present a whole new set of challenges surrounding creative control, engagement and conversion, emulating the red ocean that came before it. Hence, the rise of these B2B2C and B2C data marketplace models.

The Way Forward

The public narrative towards data monetization, privacy and protection has gained significant momentum, serving as an effective springboard for these early-stage ventures. However, the key to success within the market is ‘value perception’ and whether compensation can be priced and sustained at an appropriate level. Currently, it feels as though the real value is skewed towards advertisers who are looking for alternative and enhanced means to capture new audiences. However, this too needs to be proven first before they would be willing to allocate larger budgets to these platforms and inevitably kickstart the flywheel to build a sticky and scalable ecosystem.

We have seen this unravel at a national level with former US presidential candidate, Andrew Yang’s, Data Dividend Project, which has gone particularly quiet since attracting media attention last June – a sobering case study of the challenges faced by disruptors amidst the $200 billion+ data broker industry. This being said, the market is ripe for change, and there is no clear winner yet.

As the early-stage landscape grows increasingly competitive, I am most interested in companies focussing on Gen-Z’s spending power and redefining their relationship with data. If you or your network are passionate about this space and would like to connect, please feel free to reach out to ecosystemteam@anthemis.com.