2019 CDP Market: Thoughts and Predictions

2018 was my first full-year involved in the CDP space but having spent a veritable lifetime in first-party data, analytics, APIs and machine learning I came to the market with both an appreciation for the technology being built and the problems CDP was looking to solve.

I am impressed by the maturity of CDP solutions in an immature market.

It reminds me of the very early days of site analytics. Brands are still trying to figure out what it is and if they need it. Everyone who goes through that process decides they need it and then they decide on tech. Then things get messy until a decision is made. If it’s the wrong decision then repeat the above. Don’t make a wrong decision! You don’t have the time. Data is a motor-sport.

If it’s the right decision then it’s all about how well you execute and implement (data quality) and how much you improve business results with the data (people & org).

I learned quite a bit last year about the challenges that brand are facing as they look to improve collection and use of first party data to grow customer value. I blogged extensively about CDPs during the course of 2018 due to processing a lot of diligence on vendors and conversations with CMOs CIOs, CTOs and CEOs about the challenges related to CDP. I also worked closely last year with three very large consumer facing brands for whom the process of standing up their CDP has begun. Based on all that, here are some thoughts and predictions for how the CDP market might continue to develop in 2019.

Confusion>Verticalization>Maturation

Call it verticalization, call it specialization, call it marketing, whatever you want to call it CDP vendors will start to distinguish themselves by concentrating their product<>market fit a level deeper than they do now. This will be helpful to the market and start sorting out some of the confusion that exists between vendors. It will also help those technologies become better by being more focused on specific customer use cases.

For example, publishers have much different needs around customer data than a D2C brand. A B2B company has a much different customer cycle than a B2C. Omnichannel retailers collect different datasets than App based businesses.

Flexibility, while always important with technology, will lose out to specific solutions tailored by vertical, type of business or most importantly, the different ways customers interact with the brand depending on what they are consuming and how. The door is also open for CDP vendors to take parts of their technology and offer it as a stand-alone service (more on that idea below).

We saw the beginnings of this in 2018. Treasure Data was purchased in-part because of its focus on IoT data. With so many vendors in the market and building a bespoke CDP a legitimate option for many large brands, specialization will both increase the value of these start-ups, make better products and move the market forward.

Identity>Segmentation>LTV>Prediction

Identity is the primary use case for CDPs however it is also the weakest part of the technology because of data quality challenges. Identity will continue to play a central role and it wouldn’t surprise me per the above if a number of CDPs actually move from full featured platforms to concentrate on IDaaS (Identity as a Service) since there is real value to be created there and not as much competition.

The real purposeful part of ID is what you do with it assuming you are able to stitch it together well. The most valuable thing you can do with it is predict customer lifetime value. This is where I think there will be some nice advances in the coming year though we still may be a couple more years for some real breakthroughs with predictive systems.

There are way too many companies out there with needs around customer segmentation. Knowing who these customers are is critical. Once different cohorts are created and then treated differently you can start to focus on strategies to increase LTV and ultimately validate predictive models used to fuel growth and create what every CEO wants, customer data as the hub of the flywheel.

There’s no easy way to do identity. Accuracy takes time, match rates vary, enrichment is as much art as science. However, since it sits at the core of CDP I expect a number of advancements here in 2019 to help not only differentiate the vendors but make the technology perform better.

Enterprise>Startups>Exits

Two of the most interesting things that took place in 2018 were the Enterprise players Oracle, Salesforce trying to move into the CDP market and the Open Data Initiative from Microsoft (365/Azure), Adobe (XC) and SAP (C/4HANA). Clearly with customer data being the most valuable data to business it was only a matter of time before CDP caught the attention of the big fish. It will be very interesting this year to watch this evolution and making a prediction that the big players will evolve their offerings is really not a prediction at all.

Two things that are interesting that I will be following closely in 2019 are Amazon’s move into services related to CDP, namely Machine Learning and IoT and the adoption of Google Cloud Platform. These services are state-of-the-art. Additionally, either or both of these would truly unleash some major damage on the market if they were able to leverage their own first-party data and offer an ID service.

Last year’s acquisition of Treasure Data by ARM may give us a peek into what to expect in 2019. Treasure Data was one of the few CDPs to include IoT in their talk track and were acquired by a chip-maker. As mentioned above this kind of specialization will not only help the market make sense of vendors but will help potential acquirers zero in on technology that makes sense for their future business. It also increases the pool of potential acquirers beyond software to include companies in POS, Supply-Chain, manufacturing and even brands themselves.

Technology>Modeling>ML>Aftermarket

As the CDP market grows the next step in its evolution (as car enthusiasts might be familiar with) is the development of aftermarket add-ons that increase performance. CDP to date has struggles with the balance of being a very good plumbing system vs being a very good reservoir and filtration system. This is a very difficult balance from a product development standpoint. Frankly the market is not yet ready for the more advanced applications that really extract the largest value from CDP. As more and more use cases are developed once CDP capabilities are better understood we will see the emergence of more advanced tooling that will plug into and out of the CDP.

Much of this will involve Machine Learning and prediction including data modeling as a service and point solutions for things like scoring, forecasting, and lots of clustering and segmentation capability will add some high-performance fuel injection, disc brakes and exhaust systems to CDP and create some valuable sand-alone companies in the process (all puns intended).

Organization>Culture>Change Management

I saved the most important one for last which is similar to what many companies are doing but certainly not recommended. None of this technology reaches its potential without people. The right people doing the right jobs in a culture and organization that understands and values data-driven decision making.

This requires change. Change is never easy. Especially when you are replacing decades old ways of doing things and moving the foundation of the data collection and analysis from a product and market centric view to a customer and value centric view. Simply put the vast majority of people you have now are not going to be the ones to get you where you need to go in the future. Even worse they will consciously or sub-consciously undermine the change needed because they selfishly fear it. The higher up and more well paid they are the more fear they will have.

Everybody likes talking about technology being the great change agent. However, I’m here to make a prediction about the large incumbent brands I know will come true. Despite their better sources and larger volumes of first-party data and existing relationships with consumers, navigating change management to become a truly customer data led company will be the make the make-or-break for every incumbent brand. Most will fail. Many will spend millions on consulting and technology while still failing.

The crazy thing about the market is those with the best data will likely be the poorest at doing something with it. This will fuel a huge wave of acquisition as incumbents buy more and more companies to literally take over their data before they lose all their customers to smarter competitors.

*****

2019 is shaping up to be a really interesting and formative year for customer data and the platforms and services that leverage it. I have not even mentioned anything about privacy or security which are two very large issues in the market with GDPR and CCPA.

I look forward to sharing more thoughts the coming year on my blog and I’m always excited to talk about this stuff in-person so please feel free to reach out if a conversation could be helpful.

Cheers!

JM

 

 

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