How to estimate the returns of Clean Room Technologies

In recent years, clean room technologies have emerged as a direct solution to the challenges that brands face. In events such as CES 2023, clean rooms dominated the marketing space and made it clear that there is a hunger for this new tech. With challenges like data privacy, consumer protection, and uncertainty about the post-third-party cookie world, it is only clear that there is a major shift in what is now driving innovation in martech: consumer needs and regulation; both the consumers and government have caught up with the previous technology and now, rightfully so, have a seat at the table. With Google’s deprecation of third-party cookies looming, brands are scrambling to find ways to maintain their marketing efforts while still protecting the privacy of their consumers. Clean room technology provides the solution by enabling brands to utilize their own data or share data with partners and vendors without compromising consumer privacy. In this article, we will explore the importance of clean room technology, how to estimate its return on investment, and how to select the one for you to be able to enter the future of ethical data-driven marketing.

Clean room technology has been a hot topic in the marketing world for some time now. Unsurprisingly, clean rooms started as offspring from walled garden platforms, such as Google, to provide previously inaccessible data while still disallowing misuse. Naturally, this grew into a more ambitious space that gives more control to the brand and at the same time, eases some of the biggest stresses. It is now March 2023 and we are just at the brink of the early adopters stage of the product adoption curve. What waits for us on the other side is a clear advantage given to those brands that have put consumer needs at the heart of their data strategy. It is an advantage, not only because consumers can start associating the brand name with trust before other brands, but because this data, like in most systems, has a build-up time. The earlier you start, the better your position will be once the current connection tissue that is third-party cookies will be removed.

 

 

In addition to the functions in data infrastructure, clean rooms act like a sandbox for brands to play and experiment in, with crucial subjects to both the brand and its consumers. Topics such as sustainability, diversity, and inclusion (DEI) and other consumer-centric focuses require brands to be actively involved in solving the challenges they face, all the while maintaining consumer privacy. The power of clean rooms is only limited by the data that a brand has purview to and the time it takes to onboard it.

Selecting the right Clean Room technology

When selecting or reviewing clean room technology, there are several key considerations to keep in mind. One important factor is whether the clean room technology is “furnished” or not. “Furnished” refers to whether it comes with all of the necessary components, such as data anonymization, compliance, and governance tools to make them move-in ready from day one. This can be a convenient option for brands that want to get up and running quickly.

Another key consideration when selecting a digital data clean room technology is the level of contribution and support provided. Some clean rooms are sold as standalone products, while others are part of a larger suite of services and offerings that may include data that you would normally not have access to. Additionally, businesses should consider the scalability of the clean room technology, as well as its compatibility with existing systems, integrations and technologies. By carefully considering these factors, businesses can choose the clean room technology that is best suited to their unique needs and goals.

For businesses that opt for an “empty” clean room, additional considerations come into play. These clean rooms require more steps and resources to set up and may require specialized expertise to ensure that all components are properly installed and configured. However, empty digital data clean rooms offer greater flexibility and customization options, allowing businesses to tailor the space to meet their specific requirements. Businesses should also consider factors such as the data sources they will need to integrate into the clean room, as well as the specific tools and technologies they will need to process, analyze, and visualize the data. By taking a thoughtful, strategic approach to selecting and configuring their digital data clean room technology, businesses can create a highly effective, tailored space that supports their data-driven goals over the long term.

It is important to note that no matter the clean room technology, if you are looking to invest, make sure to account for the staffing requirements behind the goals that you set out for your data. According to a survey conducted by IAB for the “State of Data 2023” report it takes a team of 6 or more to manage such tech. This effort can always be offloaded onto the tech provider as long as it is part of the offering.

Here is a quick checklist of questions that might help you:

1. Do I need a “furnished” or empty clean room? In other words, do I need it to work from day one or will I operate multiple systems in parallel until the clean room is completely set?
2. Is my priority to replace existing operations I perform with my data or do I want to find new opportunities with my data?
3. What is the starting capital and volume of data that I want to start with? Is my own data stack enough for what I need it to do or should I immediately look for additional sources and/or partnerships?

Calculating the Net Returns of Clean Room Tech

The time-to-value of a clean room can be as little as a month and as long as two years, depending on the complexity of the data and the challenges that the brand is trying to solve. The math behind the calculation that would bring about the understanding of the “return” of a clean room is equally bound to the complexity of the challenge being solved. Unlike time-to-value, however, the value itself can be somewhat ambiguous as it goes beyond the monetary aspect of returns. To address this, it is important to look for a model that incorporates both monetary value and non-monetary values.

While the ROI (Total Net Return/ Total Cost) model is straightforward, unfortunately, it does not take into account the intangible benefits that are harder to quantify. These benefits can be referred to as the return on value (ROV); add a layer of time (forecast) and risk (as a result of regulation as an example) and that makes it an entirely different formula.

Model 1

The most direct way to take into account both the monetary and non-monetary factors would be to put your best guess estimations in dollar value for each non-monetary benefit. This would result in the following formula:

ROI = (Total Net Return + Total Non-Monetary Value)/Cost of Investment

In this case, the first variable is calculated from the monetary elements just as in the original ROI formula: Total Monetary Gains – Investment Cost. The second element would be the summation of every dollar’s estimated value of the non-monetary benefits. For example, Brand A would put a $500,000 estimated gain from introducing customer privacy into its data infrastructure over its lifetime. This formula is very useful but has its flaws, as it is difficult to put a $ against benefits that may or may not come to fruition at the scale that you anticipate.

Model 2

The second model focuses on calculating the ROI relative to your current setup and ROI estimate. In many ways, this is more relevant seeing as clean rooms enter existing frameworks rather than creating new ones. The result of this model will help you understand if and by how much a clean room would be a better return on investment than your current setup.

Overall ROI Score = (Cost Savings x Weighting Factor) + (Productivity Gains x Weighting Factor) + (Risk Reduction x Weighting Factor) + (Customer Value x Weighting Factor)

What you are looking at is a formula that helps you calculate the overall ROI score of your potential clean room investment. This score takes into account several factors that are important for your business, such as cost savings, productivity gains, risk reduction, and customer value. Each of these factors is weighted according to its relative importance to your business so that you can see which ones contribute the most to the overall score. By using this formula, you can better understand the value that a clean room can bring to your business, both in terms of financial returns and non-monetary benefits.

To fill this out this is how you can get to each value:

•       Cost Savings= (Current Cost – New Cost) / Current Cost
• Deducing current costs is in reality a whole exercise in and of itself which is something every brand should go through once every so often. In this case, the best places to look are the costs that you currently have on anything analytics, insights, or data related. Placing this on a Venn diagram and seeing what overlaps with the new cost will help you with this calculation.
•       Productivity Gains= (Expected Productivity – Current Productivity) / Current Productivity
•       Risk Reduction= (Current Risk – New Risk) / Current Risk
•       Customer Value= (Expected Customer Value – Current Customer Value) / Current Customer Value
•       Weighting Factor= the assigned weight or importance value for each category, expressed as a decimal between 0 and 1.

The resulting overall ROI score would be a weighted average of the four categories, with higher scores indicating a greater expected return on investment.

Please note that no matter what method, the math of projecting ROI is not an exact science. There are always unpredictable factors that are either invisible today or just hard to predict. The purpose of such calculations is to get a better understanding of how clean room values might be calculated.

Adara Private Data Consortiums

The Adara Private Consortium is a ‘move-in’ ready clean room technology that takes the model that Adara has built for its consortium and provides that technology to the customer to build their own. It is a comprehensive first-party data onboarding, identity enrichment, audience segmentation, and marketing measurement product that embeds data ethics and protection against data leakage, redistribution, and misuse at every step of the way.

Powered by Adara’s proprietary identity service that can adapt to any first-party data needs, it treats different identifiers agnostically and links relationships through commonalities and metadata to build a truly privacy-safe, de-duplicated first-party identity map for downstream applications:

• Build your own private consortium for data sharing
• Future-proof your data and data strategy beyond the third-party cookie world
• Diversify your data assets to avoid dependencies on any single identifiers
• Activate and measure your data in a multi- and omni-platform approach
• Enrich identifiers with Adara’s Travel Consortium data points
• Connect to external visualization platforms for streamlined analytics

Adara believes that the future of tech in the data and media industries is in ethical data practices and transparency. For over a decade, some of the largest brands have trusted Adara with their data and now that framework is available for replication within existing and new environments:

•       Adara Privacy SDK– Simply onboard your first-party data in real-time and batch form via JavaScript, API, S3, GCS Bucket, or SFTP. More info available here.
•       Adara Privacy Token– Your customers’ PII will automatically get tokenized and decentralized. You may add a salting value to ensure added encryption. More info available here.
•       Adara Data Rights Management (DRM)– Attach governance to your data at the onboarding stage to ensure oversight on the state, approved use, and lifetime of your data.
•       Adara Identity Services– Link, Enrich, Analyze, and Activate your data with an ethical data-handling approach via the Privacy Token and your private ID Graph.
•       Adara Clean Room– Define and manage your own data clean room architecture for independent analyses and applications.
•       Adara Cortex – Manage a single workflow from onboarding to segmentation to activation of your media platforms, and facilitation of multi-platform strategies. More information available here.
•       Adara Impact– Measure and attribute your media activations in near real-time and a cookieless environment to optimize your future marketing. More information will soon be available here.

Conclusion

Unlike what some might say, clean rooms are not a fad; they are here to stay and they are solving some, if not all, the major challenges that today’s world of data is facing. While clean rooms may seem to introduce more silos than before, more robust networks and coops will eventually exist, which will be privacy-by-design, something that consumers pressingly need. Every brand should be adopting clean room technologies to form that trust with their consumers and while third-party cookies are still around, there are still opportunities to scale data at rates that won’t be possible once the third-party cookie is deprecated.