New Data: New Investment Pours Into Gaming As Measurement Solutions Evolve

While global M&A activity slowed in 2022, VC still poured money into the gaming acquisitions as industry organizations addressed lingering concerns about in-game advertising and measurability.

2022 M&A Gaming Activity Surges 

For many VCs, gaming represents a safe haven amidst economic uncertainty, according to Kurt Ma, a corporate partner at Bryan Cave Leighton Paisner LLP. Because gaming success is primarily driven by user experience, Ma stated powerful gaming franchises tend to produce reliable profits as long as users get their money’s worth.

“Gaming is quite different from a traditional business because gaming studios, on the whole, don’t get distressed in the same way,” said Ma. “You stand or fall on the strength of what you put out, and that’s true whether you’re a big player like Microsoft or an individual writing brilliant code in your bedroom.”

In 2022 M&A investment rose to $38.1 billion in 2022, up from $33.4 billion in 2021.

The flurry in M&A activity reflects an emphasis on strategic investment growth among VCs seeking to consolidate competitive advantage as gaming audiences and marketplace values rise. 

Per a recent report by DDM, M&A activity made 2022 a historic year for games funding.

“The investment landscape in 2022 has been hindered by a crypto winter, macroeconomic headwinds, high-interest rates, inflation, and recession concerns,” the report reads. “Despite these challenges, our data shows that 2022 was still the second-best year in the video game industry for games funding, mainly driven by acquisitions as large gaming corporations acquire mature and established businesses.”

That drive towards consolidation will likely continue, some analysts suggest.

“Despite the short-term turbulence, the deal activity will remain strong,” according to a recent report by InvestGame. “There is potential for a few significant deals to occur in 2023, as the industry continues to consolidate, supported by strong investors’ interest and enough cash to pursue transformative deals.”

According to Pitchbook’s Launch Report: Gaming report, many of 2022’s deals focus on emergent tech and monetization.

“Although VC funding is evenly distributed between early- and late-stage VC, the content segment has proven to be the impetus for most late-stage funding,” the report states. “Early-stage funding is skewed toward emergent technologies, such as Web3 infrastructure and generative artificial intelligence (AI), in addition to gaming content.” In addition, the report reads, “deal value is also flowing to startups helping content, and intellectual property (IP) owners monetize gamers.”

As new money flows towards proven gaming properties and audience monetization, measurement and addressability is becoming a priority in the industry.

Measurement Stays Top Of Mind For Gaming and In-Game Advertisers

In July 2022, The IAB and IAB Tech Lab, in collaboration with the Media Rating Council (MRC), in releasing its Intrinsic In-Game (IIG) Measurement Guidelines to provide updated measurement guidelines for in-game ads. The goal was to support agencies, brands and gaming platforms as the marketplace evolves and how audiences interact with advertising changes. A lack of understanding about in-game ad metrics is hindering in-game advertising investment, according to Jack Koch, SVP, Research & Insights, IAB.

“Buyers want to make good quality buys that align with their brands and drive all the way through to purchase,” said Koch in a press statement. “And while that is absolutely possible in gaming today, perception lags reality.”

Despite a global audience of more than three billion gamers, advertisers have yet to view game advertising as a platform for reaching a wide audience like they might look at social media, according to the IAB. A recent IAB-Mediascience survey of 40 brands, agencies, ad tech companies, game developers, and publishers revealed that gaming ads represented less than five percent of their marketing spend.

Report: Top Five Most Considered Brands Leverage In-Game Marketing

YouGov’s most recent report covers CPG brands that are top of mind when consumers go shopping. We found that the top five food brands have accelerated in-game and gaming platform marketing in response to consumers’ brand loyalty coming up against inflation concerns.

Brands Matter—But So Do Consumers’ Budgets

There’s some good news for brands. Consumer loyalty is up slightly from 2021. According to Emarsys’ Annual Customer Loyalty Index, consumers stating that they are loyal to brands rose from 74 percent in 2021 to 79 percent in 2022. There’s some bad news as well: 60 percent of consumers report that inflation concerns have made them abandon brands that they were previously loyal to for cheaper alternatives. According to the survey, 58 percent of consumers state that discounts, incentives and rewards drive their loyalty, with just 42 percent stating that poor quality products and only 30 percent stating that poor shopping experiences would cause them to leave a favorite brand.

In fact, this may be an inflection moment for well-known name brands. A recent survey by IRI shows that inflation concerns may provide lesser-known “private” brands an opportunity to gain loyalty from consumers looking for bargains. It may also provide iconic brands with a pathway to solidify brand affinity by improving consumers’ perception of their value. The shares of consumers spending only with their favorite brands, on less-expensive “store brands,” or both are evenly distributed.

That means most consumers will still spend on the brand that offers them the kind of value they prioritize, regardless of the name on the label. Enter marketing and the new challenge brands, especially CPG food brands, face. 

The CPG Brand Challenge Amid Economic Concerns—And Who Is Winning

The 2023 FMCG report by YouGov ranks FMCG brands across 18 key international markets in terms of their level of consumer consideration: how readily consumers would choose a brand among others when deciding what to buy. The most competitive brands not only have the most to lose amid inflation as consumers hunt for bargains, but they also must avoid launching discounts that can negatively impact their bottom line when costs rise. Added to that is the pressure from stores that may resist rising prices for fear of alienating consumers.

“Supply chain slowdowns, in tandem with inflation-fueled cost increases, have further driven consumers to adapt their shopping behaviors,” the report reads. “Amidst these rising prices and product shortages, some people have started buying less, and some have switched from brands they typically buy.”

That adds pressure to the most popular consumer food brands to engage consumers with a new concept of value, not just offering discounts but reminding them of why they shop for their favorite brands in the first place. That’s marketing’s job, and we’ve found that each of America’s top five most considered brands in 2022 also amplified their efforts to engage consumers in new arenas, like gaming platforms.

Leading Brands Are Venturing Into Gaming To Connect With Loyal Consumers

Kraft, Hershey, Frito-Lay, M&M’s, as well as Campbell’s all launched marketing initiatives that appeared on gaming platforms or used mobile games as a platform to reach audiences within the past twelve months. 


“Launching a Chunky metaverse experience is another step forward for the brand to intersect sports and culture,” stated Marci Raible, Vice President, Integrated Marketing Campbell’s Meals & Beverages, in a press release. “As we leverage our 25-year NFL partnership, this activation allows Chunky to connect with the gaming audience and offer an innovative brand interaction.”

Kraft, in addition to other gaming-related promotions, created teams in Call of Duty and Overwatch in an effort to raise brand profiles in-game.

According to Statista, 65 percent of adults game, with over 3 billion gamers active globally for nearly six hours per week. Gen Z and millennials spend about 11 hours per week gaming, according to a Deloitte study. 

The Takeaway:

Reminding consumers of their connections to brands and why they’ve been loyal over the years may be hard in a 30-second ad, but perhaps easier when consumers are in lean-back mode, gaming or interacting with a branded gaming experience. While gaming holds only a 6 percent share of digital advertising spending, according to recent IAB data, brands are now turning to creative game marketing to recapture the imaginations of their audiences. 

Data Clean Rooms: A Primer For Marketers

From CES 2023 to Twitter, data clean rooms are big news and brand marketers may have a promising cookie alternative.

Cookies will be history by 2024, per Google. That may make new campaign ideation and audience segmentation challenging in the near future. Fortunately for marketers, data clean rooms may offer a safety net as they develop campaigns requiring deep insights drawn from first-party data.

“Unless there is a major change to how data is handled, less and less data will be available in the industry, particularly due the decline of the 3rd party cookie and device identifiers like IDFA,” the IAB Tech Lab wrote in a 2022 blog post. “ As a result, marketers will struggle to create personalized advertising, optimize campaigns, and attribute outcomes.”

The IAB believes that the demise of the cookie may have wide-reaching effects on consumers and publishers as well. “Consumers will receive less personalized and relevant ads, the post states. “Publishers may suffer decreased advertising income potentially forcing more subscription models and creating a move to a less open internet.”

According to Angela Eng, IAB VP of measurement, addressability & data center, this change has been a long time coming. 

“Over the last five years, we’ve moved in a direction where privacy regulations and consumer privacy require us to rethink the way the advertising ecosystem collects and uses data to target, measure, and optimize,” Eng stated. “Advertisers are looking for alternative solutions beyond the current third-party cookie and moving towards privacy-preserving solutions such as CDP, Clean Room, and CMPS.” 

How Data Clean Rooms Work

From social platform information to customer purchasing histories, a data clean room offers a secure environment where data can be analyzed and shared only with authorized individuals. Because all actions taken within the clean room are tracked and auditable, compliance issues can become less of a concern when campaigns and corresponding customer data inflows scale.

According to the IAB, a data clean room can be described as intermediary software that enables two parties to pool their data securely.

“Anonymisation is configured into the design: any personally identifiable information, such as email addresses, is encrypted, and access is only granted to those involved in a partnership,” reads a recent post from IAB Europe

“Data clean rooms are a secure, privacy-friendly way to help brands get a clearer and more detailed picture of their media performance, with insights that can help determine reach, frequency, and attribution metrics.“ 

The IAB described three types of clean rooms relevant for marketers in a recent post: 

  • Single-party centralized clean room: data from one party goes in and is analyzed in relation to other data sets.
  • Multi-party centralized clean room: data from multiple partners both inside and outside of an organization are aggregated 
  • Decentralized/agnostic clean room: data is connected in an independent, trusted environment. No one party has more privileges than another, and the data is not linked, thereby reducing the risk of data leakage

The IAB Tech Lab has stated that the use of a data clean room will likely be a central part of a future-focused data and privacy strategy for brands, marketers and publishers, but there is a caveat.

“Data clean rooms are not a silver bullet,” the post reads. “Ultimately, the data clean room is a piece of technology that cannot solve all privacy needs but rather works as part of a system of technologies and business needs.”

How Data Clean Rooms Can Support Marketers

For brand marketers, a data clean room offers several potential benefits when implemented with other appropriate Privacy Enhancing Technologies (PETs). One of the main advantages of a data clean room is the ability to gain a deeper understanding of first-party audience data by looking at contextual insights from multiple data sources in a General Data Protection Regulation (GDPR) or California Consumer Privacy Act (CCPA) compliant environment. 

Another advantage of a data clean room for brand marketers is the ability to collaborate with partners and third-party vendors, such as research firms or data analytics companies, without exposing sensitive data to potential breaches or misuse. 

Here are several ways brands, marketers, and publishers can leverage data clean rooms to support marketing or branding goals:

  • Audience segmentation: By analyzing customer data in a clean room, marketers can gain a deeper understanding of their target audiences, including demographics, behavior patterns and preferences. This can help marketers segment their audiences more effectively and tailor their messaging and campaigns to specific groups.
  • Performance analysis: A clean room can also be used to analyze past campaigns’ performance and identify improvement areas. For example, marketers can analyze data on website traffic, social media engagement and sales to understand which campaigns were most successful and which were not.
  • Predictive modeling: Clean room data can also be used to create predictive models that can help marketers identify future trends and opportunities. For example, by analyzing historical data on consumer behavior, marketers can build models that can predict which products or services will be in demand in the future and which segments of their audience are most likely to respond to certain types of messaging.
  • Fraud detection: A clean room’s multi-source data can be used to verify the accuracy of data collected from third-party sources, such as cookies or mobile device IDs. Marketers can also identify anomalies that may indicate fraudulent activity, such as bot traffic or click fraud. 

For Eng, navigating a cookie-less future, even using tools like data clean rooms, is highly dependent on marketers having access to the right data in the first place.

”Investing in deterministic first-party datasets (data from logged-in, “known” audiences) remains vital,” Eng stated.“ Yet, in most instances, this only represents about 20 percent of potential consumers. Marketers need proven, probabilistic solutions to target and measure the 80 percent of consumers who are not part of their first-party data.”

Could AI Be A Powerful Creative Tool For Brand Marketers?

Can brand marketers leverage AI as a tool that amplifies rather than limits human creativity?

In a recent commercial for Mint Mobile, actor Ryan Reynolds uses a script written by the AI-powered platform’s ability to mimic his style of speech and delivery and notes that its accuracy is “mildly terrifying.” However, for some brand marketers, the debate over whether and how AI can support creative marketing is genuinely frightening. Since copywriters, content strategists and other creatives do what ChatGPT does—creating marketing copy and long-form content—there’s been significant debate about the prospect of AI diminishing the role and value of brand marketers and the creatives with whom they collaborate. But some analysts are looking at AI as an opportunity for brand marketers and creatives rather than a threat.

Is There A Role For Human-Led AI Creativity?

So why is ChatGPT so good? According to the Content Marketing Institute, the most recent release of the open-source AI technology that powers tools like ChatGPT—GPT-3—represents a sea-change in how well these platforms work.

“Each version has gotten progressively better at producing text that reads as if a real human wrote it,” the post states. “The release of GPT-3 resulted in an exponential jump in skill and accuracy as compared to GPT-2.”

ChatGPT, which generates content based on prompts, is one of many options that brands have for creating content ranging from original artwork to blog posts to scripts. According to an article by Harvard Business Review, the possibilities for marketers and brands are vast.

“[Generative AI models] can take in such content as images, longer text formats, emails, social media content, voice recordings, program code, and structured data,” the post reads. Once input is processed, AI platforms “can output new content, translations, answers to questions, sentiment analysis, summaries, and even videos.” 

While generative AI platforms have been used to create copy and even full-length movie scripts, there’s a significant caveat, according to a recent article by Harvard Business Review. “To use generative AI effectively, you still need human involvement at both the beginning and the end of the process. Once a model generates content, it will need to be evaluated and edited carefully by a human.”  The wooden, awkward sentences or the word-salad produced by early versions of auto-generated content tools can still happen with modern AI platforms. But there are also examples of powerful, human-like responses to prompts that can inspire consumers and challenge creatives to build powerful messaging around a specific theme.

When a columnist for The Atlantic entered a tricky challenge designed to test Chat GPT’s ability to respond to contradictory or irrational suggestions, they received the following reply:

The most sophisticated tools have limits—even with GPT-3. There’s no ”plug and play” with generative AI, and that means it should be seen more as a tool than a potential replacement for human creativity.

How Brands Marketers Are Using AI To Optimize Creative Talent

Nestle is one of the brands that has embraced AI as a tool to amplify human creativity. The company first used AI to improve its R&D and product development processes and is now using it as a tool for social listening.

“We established an artificial intelligence concept engine, which is transforming (social media) insights into concept proposals, which our employees then evaluate,” stated Stefan Palzer, chief technology officer.

The company has also used AI as a central actor in a recent AI campaign for La Laitière yogurt, in which Vermeer’s famous painting “ The Milkmaid” was expanded.

According to Ogilvy ECD David Raichman, brands and creatives warming to AI as a tool can allow agencies to streamline content creation.

“A.I. generated imagery is a revolution, and all the creative industry should embrace it,” Raichman says. “It will probably have us rethinking lots of jobs, but in a good way. Illustrators will be able to sketch roughs more quickly. Photographers or art directors will create mood boards more easily. We see A.I. as an amplifier of creativity. It democratizes the process. We just need to keep in mind that it should be used in a meaningful way and ensure that there are still creative people directing the A.I., and not the other way around.”

The technology behind AI-powered image generation is fairly straightforward. AI tools that feature text-to-image capabilities may use leverage a network called CLIP (short for “Contrastive Language-Image Pre-Training”) which classifies and then ranks input or generated visual information according to how likely it is to be classified under a given text prompt. That makes it easier for machine learning engines to present a more relevant representation of a concept, based on a text prompt. That ability to rank is limited by the datasets that a particular AI tool has access to and also by the limits of the technology itself. 

A recent campaign by Hardee’s designed to add humor to the conversation around AI resulted in several humorous results from a text-to-image generation exercise.

Source: Hardee’s

“With the spectre of AI hanging over us all, it was the perfect time to show not what it can do, but what it can’t. Each image Ai generated therefore became an eye-catching reminder (and proof) that Ai isn’t quite there yet,” stated Jamie Kennaway, Executive Creative Director for the campaign.

The takeaway? AI works best with human brilliance as a mitigating force.

The Takeaway For Marketers: What Can AI-Powered Creative Campaigns Really Do?

Here are just a few benefits for brand marketers:

  • Simplified creative personalization
    • As with Nestle, AI can deliver impactful creative prompts that leverage vast datasets to boost campaign originality. When creatives work with a powerful concept, their expertise can make the end result shine while using fewer human resources at the beginning of ideation.
  • Streamlined concept-to-product processes
    • The Hardee’s campaign highlighted AI as a humorous tool for new product development. But Nestle, as stated above, has integrated AI tools into their R&D and product development process, optimizing social media prompts to fast-track new product ideation.
  • Supporting content production at scale
    • While creative collaborations between humans and AI may always be controversial—some content creators are finding value in looking at AI as a tool rather than a competitor. Tools like Jasper.AI and ChatGPT are no substitute for content creators, but their prompts can speed up repetitive content creation tasks for teams with high output responsibilities, such as news organizations.

Case in point:

Learn more about ChatGPT.

The Burberry And Minecraft Partnership: High Fashion Is Taking The Metaverse Seriously

When a 166-year-old iconic apparel and accessories brand enters the metaverse with a splash worthy of New York Fashion Week, it’s a signal that fashion may be shifting towards virtual commerce.

Burberry’s new in-game experience for Minecraft: Burberry: Freedom to Go Beyond, allows players to wander a mythical London populated with Burberry-themed characters and motifs. In-game players will have access to 15 free skins to download.

“As the player, you venture into an alternate reality version of London taken over by a malevolent entity called the Nexus,” according to Cristina Anderca writing for “Once a place blooming with foliage and gentle animals, this land has been drained of color and life. Its inhabitants have been scattered to the four realms of air, water, fire and earth, and your quest is to restore the spirit of the wild by traveling to each realm, reviving its Nature Guardian, and freeing the animals trapped there.”

This is the third collaboration between the fashion brand and a metaverse or gaming entity: the brand also offered virtual handbags on Roblox earlier this year. In 2021 and again this year, Burberry partnered with Mythical Games launch an NFT collection for its Blankos Block Party, the company’s flagship release. 

Burberry: Freedom to Go Beyond is also available in New York, Shenzhen, London, Tokyo, Seoul, Taiwan, and Bangkok in addition to online. There is also ESG goodwill involved in the launch. According to the press release, “Burberry and Minecraft will make a donation to help protect 500,000 trees and plant 25,000 trees through environmental organization Conservation International and their forest conservation efforts around the world.”

Burberry’s New Partnership With Minecraft Shows The Company Is Serious About Metaverse Commerce

The metaverse’s value to fashion companies like Burberry isn’t just about brand recognition. Consumers who interact with brands in virtual spaces are also providing valuable data to marketers and platforms about their content and entertainment preferences: the more time they spend connected, the easier it is for marketers to find out which types of content sparks their engagement.

According to Burberry’s director of channel innovation and marketing, Phillip Henneche—who spoke with Vogue Business—Burberry now sees gaming spaces as an important customer engagement channel.

“Gaming is a super important channel for us in terms of how we engage our customer,” Hennche says. “We know that it’s a very important passion point for our target markets and consumers. We know that they are there, they are present, and they’re very active in that community.”

But Burberry may also see gaming platforms as a way to open new revenue streams, not just engagement. According to estimates by Morgan Stanley, the market for virtual luxury goods may reach $50 billion by 2030. In-game sales also offer brands like Burberry a way to sell to high-intent consumers at scale without the expense of a physical storefront or having to dip into traditional ad spend. According to Bloomberg, with high margins and no need to discount or manage overstock, fashion brands can glean significant profits from virtual swag that consumers will snap up almost immediately. According to Forbes, Burberry quickly sold out its NFT collection for a cool $400k.

Watch the DLC trailer here.

Why Games Are The New Social Platform

Gaming platforms are forcing an evolution across the social media landscape—and that’s good for brands.

How Gaming Platforms Are Raising The Bar For Social Media

Gaming is no longer just a pastime for kids, it’s a new form of social interactivity and a platform for content that is always evolving. But just how popular is gaming? According to a recent report, global consumers spend over 1 trillion hours playing games and an additional 25 billion hours watching gaming streams each year, meaning gaming hours outpace all of the time consumers spend on social media and/or watching television.

Gaming platforms are notorious for their side chatter—some of it controversial, some plain silly—but the noise masks a tidal shift in how consumers communicate about experiences with digital content. Consumers immersed in a world of engaging content are passionate and vocal about their experiences and are often eager to share what works and what doesn’t.

Consumers who discuss the games they’re playing in depth are a blessing for game producers. When games are great, every passionate player becomes a brand ambassador, inviting friends to play along and discuss live on platforms like Twitch while encouraging others to become superfans. In that sense, games are amplified social media—focusing a players’ attention and providing them, on platforms like Twitch, with a preloaded community that is ready to engage around experiences.

How Social Platforms And Brands Are Engaging Consumers With Gaming Content

“We have 2.5 million engaged viewers tuning into live content every single day. And so, at its core, it’s about interaction,” said Victor Lu, brand partnership studio lead, Americas at Twitch, while speaking at the recent IAB Audience Connect conference. “If you’re ever on Twitch, you’re not just watching the stream, you’re part of the experience—you’re chatting with people, you’re talking to the streamer, they’re talking back to you.”

That global shift toward deeper connections with others and with the content we love has also changed marketing. Demographic groups used to the immersive, engaging nature of games—like Gen Z—have high expectations for social media, marketing and retail experiences. For example, a recent survey by Snapchat revealed that 92 percent of Gen Z users want access to augmented reality tools while shopping, and over half pay more attention to ads with AR components. That means in-game advertising and platforms like Twitch offer significant opportunities for brand marketers to reach new, highly engaged audiences.

“So, 77 percent of Twitch viewers agree that the community that they build from gaming is just as important as the game itself,” Lu said. “And 65 percent actually would buy the game for the community that it surrounds versus just playing the game itself. And so it’s really about being together. And so what does this mean? Like, this is an audience, like, it’s all about community, it’s all about togetherness.”

But games are also doing something to the way consumers think about social media. Gaming content makes digital experiences center on interactions, so viewers’ attention is focused on the screen without interruption. That means gaming-focused social platforms have an audience that is already used to prolonged, intense connections with on-screen content, and their social media networks are already motivated to connect around gaming and the experiences they encounter on those platforms.

Brands Are Turning To Collaboration To Create Unique Ad Experiences

Brands are taking advantage of social gaming platforms in innovative ways. Rather than using traditional tools to reach these audiences, brands like Kellogg’s, which created an animated Tony the Tiger avatar in collaboration with Twitch, are reimagining native advertising as a social gaming experience.

“It’s the first time a brand [has] come to work with Twitch to transform a brand mascot into a VTuber.” Lu said. “It is really just quite amazing to see [Kellogg’s Tony the Tiger] live, talking to people, talking to streamers. It’s kind of incredible.”

Twitch is also collaborating with Adobe to develop not just a new type of advertising, but a new way to bring audiences deeper, immersive experiences with their content.

“So, to break that down, it’s a triple-A game that allows the fans to create an asset that would go into the game that they could then play for free as a result of the stream,” Lu said. “So it’s something that could really only happen on Twitch. And what was really fascinating was that we got 21,000 chat interactions out of it for the initial stream, and it showcases, really, how engaged the audience was.”

The Takeaway

Social gaming platforms like Twitch show how impactful games have been in the evolution of social media. Consumers want more visual, immersive and interactive elements in their ads, retail experiences, and social media. Brand marketers seeking to connect with this audience in the arena where they are the most engaged and attentive should look at gaming platforms as their first choice when developing creative campaigns.

Breaking Down The State Of Data With IAB’s Angelina Eng

On the first day of this year’s IAB Audience Connect, we spoke with Angelina Eng, vice president, programmatic and data center, about the current state of data in marketing and the Interactive Advertising Bureau’s new report.

Carla Rover: How has the current “state of data” changed the way advertisers think about the audience, measurement and compliance?

Angelina Eng: Given the current “state of data,” our industry has to rethink our approaches to how we target consumers, deliver relevant ads and measure effectiveness with privacy-first solutions. The companies we interviewed all agreed that rebuilding consumer trust and communicating the consumer value exchange are top priorities.

CR: Please tell us some of the biggest compliance and data privacy issues facing advertisers.

AE: They are:

One: how to comply with five new privacy laws in the span of a year.

Two: When a consumer opts out of “sales,” that likely includes measurement and frequency capping. So even if you deliver an ad that does not involve the sale of personal information, there is still a challenge to measure it and frequency cap delivery.

Three: When a publisher or advertiser independently engages a measurement company or DSP as a service provider, it cannot measure, or frequency cap insofar as those activities require a combination of personal information, which is prohibited by the CPRA. The CPRA adds contract requirements for third-party, contractor and service provider agreements and will result in a major effort to amend contracts by Jan. 1.

Four: Certain parts of the digital adverting supply chain that involve the disclosure of personal information do not typically have governing contracts (e.g., pixels in the ad creative or disclosures from the advertiser’s ad server to the publisher’s ad server). Putting in place new contractual relationships will be a critical challenge.

Five: New state privacy laws include additional user controls over the use of personal information and sensitive personal information, which must be built into compliance plans.

CR: How has the advertising landscape evolved over the last five years with respect to the challenges facing advertisers?

AE: Over the last five years, we’ve moved in a direction where privacy regulations and consumer privacy require us to rethink the way the advertising ecosystem collects and uses data to target, measure and optimize. Advertisers are looking for alternative solutions beyond the current third-party cookie and moving towards privacy-preserving solutions such as CDP, Clean Room and CMPS. In addition, advertising needs to shift away from 1-to-1 personalization and measurement and embrace cohort-based solutions and probabilistic attribution.

CR: How are marketers and advertisers adjusting to the ever-changing digital landscape and new challenges around data?

AE: Advertisers are prioritizing rebuilding consumer trust and testing privacy-preserving technologies. They are currently evaluating various cookie-less targeting solutions, such as Identity, Cohort, and Contextual targeting. However, they realize that the way they measure performance will be difficult with ongoing legislative and platform changes. The fragmentation of state legislation is also making it difficult for advertisers to keep track of the regulations.

CR: What does the new State of Data report cover this year, and what are some topics that it delves into?

AE: First, investing in deterministic first-party datasets (data from logged-in, “known” audiences) remains vital. Yet, in most instances, this only represents about 20 percent of potential consumers. Marketers need proven, probabilistic solutions to target and measure the 80 percent of consumers who are not part of their first-party data.

In addition, creating consistent measures and protocols that work inside their companies and with external partners has become a major issue. In the face of rising complexity, the majority of respondents agree a “one size fits all” approach spanning multiple jurisdictions is probably necessary. But there is a significant trade-off: failing to leverage data that is fully permitted in certain states means lost opportunities.

Report: Data Privacy Practices Impact The Bottom Line

A new report shows consumers are very much aware of data privacy issues and judge brands based on them. Ketch and Magna conducted a survey among 2,750 consumers across the US, 76 percent of which described themselves as the primary decision-makers for household purchases. 

According to the findings, 74 percent highly value data privacy and 83 percent say they understand the value in sharing data with brands under the right conditions, such as when they want to learn about new products.

Still, brands haven’t quite fully earned consumers’ trust. An overwhelming majority (82 percent) of consumers are highly concerned about how their data is collected and used, the report found, which is fueled by a lack of transparency and control. In addition, 57 percent worry that brands use their data beyond their intended purposes.

Brands have a lot to gain by remaining transparent with their data privacy practices. The survey shows that 49 percent of consumers would not only trust the company more but would also prefer it over others (43 perfect) if the brand was transparent and gave them control over their data usage.

Part of earning trust requires that brands allow consumers to decide how much and what kind of personal information to share with the brand. The report echoes this sentiment; most said that instead of cookie notices, they want personalized preference centers with clear and easy-to-understand privacy options they can manually set.

Data storage practices and data minimization have the greatest impact for consumers and trust translates to 23 percent higher purchase intent. To build trust, the data retention period matters the most for retail, travel and finance while data minimization matters the most for telephone companies. 

Key takeaways for marketers:

  • Control data across its lifecycle
  • Clearly communicate with people about how their data will be used
  • Allow people to change their privacy at any time
  • When people make a choice, ensure it’s reflected in all the data systems that store it and use their data as well as with downstream partners that receive it
  • Ensure legal, technology, marketing and data teams all have a say

Marketing Spending Growth Breaks 10% For First Time In A Decade

Annual growth in marketing spending exceeded 10 percent for the second time in the last 10 years and is anticipated to increase to over 13 percent through 2022, according to the 28th edition of the CMO Survey.

The report, which shares insights on brand trust, climate change, privacy and more, also found that marketing budgets as a percent of overall budgets rose to 11.7 percent, resetting to pre-pandemic levels while marketing budgets as a percent of revenues increased to 10.3 percent. Among the survey’s key findings include:

  • Digital marketing spending accounts for just over 57 percent of marketing budgets and is expected to grow by over 16 percent over the course of the next year.
  • Investments in digital marketing have increased across the board while investments in data analytics increased by roughly 40 percent over the last year and are now the most common marketing investment.
  • Survey respondents report the integration of customer data across all touchpoints and combining digital and offline data as the most prominent digital marketing challenges they face.
  • Just one-third of marketers surveyed reported that their company has in place specific goals related to climate change. Less than half of those marketers believe their companies are willing to make short-term financial sacrifices for climate change.
  • Companies are less likely than they were in prior years to take specific actions to reduce the negative impact of marketing-related activities on the environment.
  • Forty percent of companies are not taking any climate-related actions, either because they don’t feel customers or partners will reward such action or because some customers aren’t willing to pay more for climate-friendly offerings.
  • Over the last decade, there has been no increase in the concern over marketing’s impact on the climate.
  • Marketers expect a 75 percent increase in first-party usage over the next two years, as compared to second-party data (46 percent) and third-party data (39 percent).
  • There has been no meaningful increase in privacy concerns since 2019 as marketers label them as “moderately” concerning. This may be explained by the fact that roughly 66 percent of marketers feel that customers will stick with current brands instead of switching for the purpose of increasing privacy
  • More than 90 percent don’t believe consumers read or understand privacy disclosures. Nevertheless, marketers continue to take actions to ramp up brand trust in the face of ongoing privacy issues.

Macroeconomic Forecasts

Just under 40 percent of marketers are less optimistic about the US economy in Q2 2022 compared to the previous quarter—up from 37 percent in February 2021, the survey found. This decline is consistent with the rise of the COVID-19 Omicron variant, inflation and ongoing supply chain issues.

The report found that optimism reached almost 67 percent, which is lower than that reported in August 2021, but considerably higher than the 51 percent figure reported in June 2020.

Marketing Spending

As a portion of overall budgets, marketing budgets have returned to pre-pandemic levels at 11.8 percent. Annual growth in marketing spending surpassed 10 percent for the second time in a decade and, according to the report, is predicted to reach 13.6 percent over the next year. Digital marketing spending is also expected to increase, growing by 16.2 percent during the same time frame.

Over the course of 2022, marketing spend is predicted to increase across all categories, including brand building (11.8 percent), customer relationship management (9.5 percent), new product introductions (8.8 percent), customer experience spending (8.6 percent) and new service introductions (5.3 percent).

Marketers report customer acquisition budgets being 14.7 percent larger than customer retention budgets as companies spend roughly 7 percent more on research and development than they do on marketing.

Marketing Performance

Marketing performance surged for all tracked metrics compared to the previous 12 months. In February 2021, approximately one year into the pandemic, marketers reported a 0.3 percent revenue gain over the previous year. In February 2022, revenue gains recovered and reached about 14 percent on average.

Similarly, marketers reported a 10.7 percent increase in profits in February 2022—almost 8 percentage points higher than that reported one year prior. These growth rates point to the contention that despite its pace, business is recovering from the negative financial effects of the pandemic.

From a societal perspective, companies’ metrics haven’t changed much over the last 10 years. In February 2011, for example, marketers reported a 3.2 rating for their companies’ marketing having had a positive benefit to society. This most recent CMO Survey reported a 3.3 rating.

Customers And Channels 

Ranked as the top priority by 31.3 percent of marketers, superior product quality will be their customers’ top priority in the next year. Beyond that, excellent service (22 percent) and trusting relationships (14.3 percent) will also be prioritized. These findings are similar to those found in August 2021; though compared to February 2020, there’s now a greater emphasis on product quality—especially within the business-to-consumer sector where product quality increased as the top priority from 7.4 percent to over 39 percent.

A similar trend emerges when studying companies in the consumer packaged goods sector. Here, product quality wasn’t prioritized by any of the survey respondents in February 2020. That month, over 45 percent of those companies identified superior innovation as their customers’ top priority. Now, that figure is 10.7 percent. This trend aligns with consumer behavior of flocking to tried-and-true brand name products during their stress-induced pandemic shopping sprees—a phenomenon that caused companies to divert funding away from innovation and toward their core product lines.

Considering this new emphasis on product quality, most marketers believe their customers trust their brand above the industry average. Business-to-consumer and business-to-business service companies believe this more strongly and rated themselves as 8.2 and 8.1 out of 10, respectively.

Marketers have reported a notable reduction in the use of channel partners over the last decade—they’ve moved toward disintermediation to market alone. The companies that continue to use channel partners are consumer packaged goods companies (80 percent) and companies with over $10 billion in sales (76 percent).

Marketers Report Strong Brand Trust From Customers

Over 90 percent of companies believe that customers trust their brand more than the industry average. Of those that believe they are significantly less trusted are pharma/biotech companies – unsurprising considering the COVID-19 pandemic and issues around vaccines.

Managing Digital Marketing Returns

Investment in digital marketing activities has increased since February 2021 as it continues to be a priority for marketers.

Data analytics investments are now the highest priority, increasing from 56.5 percent in February 2021 to 77.5 percent one year later. Pointing to a stronger push toward customer-level data management and advanced customer analytics, some of the other top movers include marketing technology systems or platforms (14 percent), managing privacy issues (20.5 percent) and improving company apps (32.6 percent).

Despite these successful figures, the survey notes there’s room for improvement. Despite the fact that 60 percent of marketers continuously test and iterate their digital marketing, less than 40 percent feel they have an adequate system to track customer data and have consolidated/integrated customer data across all touchpoints. For this reason, they’re investing heavily in data analytics and martech systems.

Today, roughly one-third of all digital marketing activities are performed by external agencies. Business-to-consumer companies are most likely to use external agencies, which happens to be over 45 percent of the time.

Data Analytics Investments Skyrocket To Top Priority

Although digital marketing investments have increased across the board, data-related activities experienced the highest growth. For example, in February 2021, 56.5 percent of companies invested in data analytics. Today, that figure is 77.5 percent and includes larger companies, primarily. As data collection and purchasing becomes more complex, companies are increasing investments in efforts to analyze, store, manage and automate their data.

Current State Of Digital Marketing Practices

  • 67.2 percent of companies continuously test and iterate their digital marketing
  • 64.8 percent of marketing leaders have a good understanding of the technology roadmap and capabilities they can use to do great marketing
  • 62.1 of companies share customer information from sales, marketing, customer service and product teams across the company
  • 59 percent of companies are able to connect their digital marketing data with other intelligence they have about customers
  • 58.7 of companies have been able to link digital marketing returns to business outcomes such as incremental revenues or profits
  • 56.6 percent of marketing leaders are more collaborative with the CIO/CTO (or the equivalent technology leaders)
  • 54.1 of marketing teams have the skills and training to best use their company’s marketing systems powered by technology systems/tools

Contributions From Digital Marketing 

As expectations increase and attribution analyses evolve, perceived contributions from digital marketing have declined, according to the data. Pure-play internet companies experience the highest returns on digital marketing (5.7 out of 7) as consumer-facing companies report above-average returns (B2C product, 5.4; B2C services, 5.2). Real estate (2.8), energy (3.6) and pharma/biotech (3.9) report the weakest industry-level returns, potentially due to the planned purchase nature of their products and services.

Managing Privacy

Marketers are still concerned about third-party data. As much as 17.7 percent of marketing leaders report that they expect their companies’ use of third-party data to decrease over the next two years. The survey asked these marketers to rate their worries concerning the intersection between privacy and third-party data and found an average of a moderate 3.8 out of 7. Third-party data concerns rise dramatically as they relate to Apple offering users the option to choose which apps can access their data and Google phasing out tracking cookies on the Chrome web browser by 2023. For these reasons, marketers are being forced to learn how to extract more value from first-party data.

Just over half of marketing leaders report that protecting customer privacy falls under their job description. And over 58 percent of marketers report that their companies are taking steps to create stronger privacy strategies. Sixty-two percent of marketers believe customers will remain loyal and stay with brands as opposed to switching to others that offer more privacy protection.

Forty-five percent of marketers believe that sharing privacy notices with customers improves customers’ perception of their brand despite the fact that 95 percent of those marketers believe that customers don’t read them carefully and that over 90 percent don’t think customers comprehend the message. 

Marketers continue taking actions to ease consumers’ concerns such as promising not to sell customer information (63.1 percent), informed consent of customer data usage (58.1 percent) and investing in technology that reduces the risk of data breaches (52.2 percent).

First-Party Data

Marketers anticipate a larger increase in first-party data usage over the next two years compared to their usage of second-party data and third-party data. In August 2018, just 11.4 percent of marketers predicted a decrease in their use of third-party data. 

Today, that figure is 17.7 percent. In the wake of the changes spearheaded by Apple and Google, marketers will have to find different avenues to gather relevant user data on their own or to partner for it. As technologies evolve and allow companies to gather and interpret first-party data, CMO Survey expects this trend to continue.

Metaverse Technology And Its Implications For Business Leaders

The metaverse has the potential to disrupt several realms from gaming to advertising to retail and so much more. But to tap into this virtual world’s full power, leaders must address its possibilities and pitfalls over the coming years and determine where it fits in with their business models. To help you do that, Deloitte has shared an overview of metaverse technology and its implications for business leaders.

What Is The Metaverse?

As Deloitte puts it, the metaverse is the term used to describe the convergence of an array of separate technologies that together will provide humanity with an immersive, three-dimensional virtual environment/platform to conduct business, interact, play and access new resources and experiences.

The metaverse, despite remaining years away from full realization and adoption, is a 30-year-old idea that has only just recently come into the spotlight and attracted considerable support and investment. Although it may have a comparable impact on the world as the internet did in the ‘90s or smartphones did at the turn of the century, it’s too early to accurately say. 

Other than a virtual space, the metaverse is characterized by two other important elements that could constitute make it the new platform with seemingly unlimited uses. First, it’ll likely include both physical and digital worlds in the user’s experience, fusing both into one. Second, it may have a native economy with digitally native assets and trade. 

Other elements of the metaverse that are already at play include immersive virtual worlds with avatars that interact, digital overlays on the physical world that provide data or commentary on what the user sees and digitally native trade and economic activity.

What’s Really At Stake Here?

  • Similar to what smartphones did to the world after the year 2000, the metaverse may prove to be a paradigm shift for consumer and enterprise behavior.
  • The metaverse could create a massive new market with an estimated commercial opportunity amounting to $13 trillion with 5 billion regular users by 2030.
  • It could rearrange the competitive landscape and displace legacy brands with new winners.

Why Now?

Several factors—including technical, social and financial—seem to be converging, which are in turn making the metaverse seem especially appealing. Deloitte says these are:

  • A cluster of maturing technologies
    • Extended reality user interface
    • Cloud and edge computing with artificial intelligence/machine learning
    • 5g and fiber optic networks
  • Incumbents’ search for growth
    • Digital market leaders and existing platforms are currently looking for new avenues to grow
  • Behavioral shifts amplified by COVID-19
    • Increasingly digitized social and work interactions
    • Rise of ecommerce and shifts in consumer preferences
  • Evolving digital economy
    • Growth of digitally native assets and supporting economic infrastructure
    • Increasing popularity of digital asset ownership, cryptocurrencies and digitally native contracts
  • Major capital investments 
    • Over $80 billion in corporate investment in the last 12 months
    • Over $10 billion in venture capital investment in 2021

How Will People Use It?

Several use cases for the metaverse exist across categories and industries, including work and learning, entertainment and experiences, retail, health and wellness, and manufacturing. 

Within work and learning today, the metaverse is being used for telecommuting, virtual collaboration and immersive professional training. Deloitte predicts emerging trends could include digital renditions of physical operations and locations and even classroom tools and fully native schools. In five or more years, we may begin to see metaverse-native and dependent companies.

Currently, we’re able to “attend” concerts, shows and sports games and even watch movies while socializing with others’ avatars. Emerging entertainment metaverse trends could include interactive sports and events and possibly even tourism. In the long-term, Deloitte predicts there will be immersive “theme park” experiences that adapt to customers’ data profiles.

And in retail, we’re seeing the metaverse’s capacity to host boutique shopping experiences and digital customer contact centers. Soon we may see data-enhanced everyday shopping for things like groceries, furniture and appliances, Deloitte notes. People may even one day be able to purchase homes and cars in the metaverse. In the long-term we can expect to see full sensory immersion in retail experiences, complete with sights, sounds, smells and more.

Where Is It Headed?

According to Deloitte, the metaverse’s evolution will likely depend on consumer response as well as the outcome of at least four key unknowns, each with its own set of questions that will have to be answered:

  • User interface
    • How user-friendly and mobile will the predominant interface be?
    • Does the interface enable seamless switching between physical and digital worlds?
  • Standardization
    • To what degree do standards and protocols converge? 
    • What is the level of interoperability among different platforms?
    • Is there a single unified economy across platforms?
    • Will digital goods purchased in one metaverse be available in another?
    • Are identities persistent across platforms?
    • Are there consistent design and programming standards?
  • Market fragmentation
    • How many market leaders will emerge and what consumer and commercial use cases do they serve?
    • How much competition is there in the market, and how does this affect innovation?
    • How much M&A/market consolidation will we see or will be allowed?
    • Do different platforms serve different use cases? For example, one dominant consumer platform and one dominant enterprise platform.
  • Governance
    • How effectively and consistently are content and conduct regulated? 
    • Are IP and digital assets reliably protected?
    • Is there strong government regulation or do platforms rely primarily on self-governance?
    • To what degree are interactions and transactions secure and trusted?
    • Is there an effective process governing tax jurisdictions and legal liability concerns?

What Leaders Can Do Today

Whether the metaverse has a future and what it might look like remains to be seen but there are four primary actions executives can take now to best prepare for the possibilities of what this potential paradigm shift could bring. Deloitte says these include:

  • Don’t underestimate the potential.
    • Design a flexible and adaptable strategy for taking your business into the metaverse, respond to new tech and shifting consumer preferences and engage a “test and learn” approach for both consumer-facing and enterprise functions.
  • Take the long view.
    • Considering the possibility that the mainstream metaverse and accompanying revenue generation may be several years away from being fully realized, take a long-term view on investments. Consider KPIs around consumer and employee engagement along with ROI. Also, consider investments in the context of broader digital transformation agendas.
  • Focus on demand and what motivates users.
    • Focus on how to create engaging experiences and captivating content—exclusive partnerships or user-generated content tools, for example. This will help you establish share and maintain a competitive edge.
  • Commit to a “responsible metaverse.”
    • Ensure your strategy can handle many complexities and risks within the metaverse. Privacy, security, accessibility and sustainability are all hot topics that consumers care about currently and will likely continue valuing in the near future. Ensure that your organization can be proactive in building a “responsible metaverse” – which will be indispensable in garnering consumer and employee trust.