Thursday, February 13, 2020

Understanding Adobe Real Time CDP

Adobe fully released its Real Time Customer Data Platform last November. Although they had briefed me on it before then, it was only this week that I finally caught up with them to discuss the final product. Since this is a topic of great interest – and confusion – it’s worth sharing what I learned.

Part of the confusion has to do with Adobe’s habit of reusing product names. It’s easy to confuse the Adobe Experience Platform, the core system for collecting customer data, assembling profiles, applying machine learning, and sharing the results with services and applications, with Adobe Experience Manager, the Web content management system that is one of those applications. Similarly, Experience Platform contains a Real Time Customer Profile, which is different from the Real Time CDP, one of the services that consumes data from Experience Platform. Got that?

It also doesn’t help that Adobe describes Experience Platform and Real-Time CDP as managing unknown and known profiles for activation across all channels, without clarifying that it’s only referring to first-party data. It turns out that Audience Manager, their Data Management Platform (an “application” in their terminology), holds third party profiles that aren’t shared with Experience Platform.   Adobe nevertheless uses the term “audience activation” to describe movement of first party profiles from Experience Platform into other applications, including into Audience Manager itself.

Somebody get these people a thesaurus.

But that’s just words. What really takes explaining is that Adobe has split what it considers the functions of a CDP between the Experience Platform and the Real Time CDP itself. Specifically, they describe a CDP as doing three things:
  • ingesting customer data from all enterprise sources
  • creating persistent customer profiles used for modeling and segmentation
  • “activating” the profiles by moving them into applications
The first two functions, ingestion and profile management, are provided by Experience Platform. The third is provided by Real Time CDP.  

In other words, although Adobe’s combined stack does everything you expect from a CDP, its Real Time CDP only provides one of the three core functions. I’ll pause for a moment while you wrap your head around that.

Ready to continue? Great.  There’s nothing inherently wrong with Adobe’s approach, which is ultimately another matter of labels. In fact, I’ve recently seen several situations where the CDP is primarily an access tool that connects a master data store to marketing systems. As with Real Time CDP, the role is simply to take already-assembled data and put it in a format that’s suitable for marketers (or potentially other business users). So Adobe may be on to something.

Of course, any system that just provided data access would not be a CDP. Adobe’s combined solution does meet the CDP Institute definition of a CDP: packaged software that builds a unified, persistent customer database accessible to other systems. They might be a bit weak at the edges – I haven’t explored whether they can truly include all sources and all details within the Experience Platform database.  News that that Experience Platform excludes the third party profiles in Audience Manager does raise some questions about that. But, truth be told, quite a few CDPs have some practical limits in those areas.

You’re likely aware that some analysts and CDP vendors disagree with the CDP Institute definition, arguing a CDP should include analytics and experience orchestration. The general logic is that data is worthless unless it’s exploited, so the CDP should include features to use it. This is usually described as “activation”, a word I’m avoiding since Adobe is using it one way (to describe moving data from the CDP into application systems, with some segmentation capability but no message selection), while others often use it to include message selection, personalization, and orchestration. I personally don’t much care how anyone defines “activation” so long as they’re clear about what they mean when they use it. I happen to agree with Adobe that message selection, personalization, and orchestration aren’t essential CDP functions.  But that’s a debate for another day.

That said, it’s important to know that Real Time CDP isn’t the only Adobe service that can access the customer profiles in Experience Platform. Services including analysis, journey orchestration, and offer management provide alternative connections between Experience Platform and the applications. This is wrinkle that wouldn’t be present in a CDP that provided ingestion, profile creation, and access as part of one system. It adds complexity if one application might connect with several services. You might even worry that it recreates the crazy wall of point-to-point connections that causes people to want CDPs in the first place.  But that’s an overstatement if only four services are involved.

A more pressing concern would be how much data is actually loaded into Experience Platform. Some operational data will stay within the individual Adobe applications because no other system can use it.  Beyond that, my understanding is that Experience Platform has an extensible data model which would theoretically handle any information that users wanted it to ingest. But that could be wrong. Anyone thinking about buying the system should check that it can load the sources that matter in their situation. Remember that Experience Platform grew out of Adobe’s previous approach, which largely relied on storing identifiers within the central data store and looking up everything else in its source systems as needed. Adobe has clearly moved beyond that but some traces may linger.

Monday, February 03, 2020

Salesforce Buys Evergage But Not For CDP

The CDP Institute published its semi-annual Industry Update report today, which you download here for free. Although every word and image in the report is a jewel, there’s no question that the main story in this edition is CDP industry consolidation. Events in the past six months (stretching a bit to include early January 2020) include seven new funding rounds, three acquisitions of CDP vendors, four acquisitions by CDP vendors, and four asset sales by CDP companies.  Asset sales aside, these are all ways for companies to strengthen their business more quickly than organic growth permits.

What’s particularly intriguing is the industry position of the firms in these deals.  Using our best guess at CDP employment for each vendor, only one of the twelve vendors involved funding or either side of an acquisition is among the industry’s five largest (SessionM, bought by Mastercard). The rest all ranked within the fairly narrow band from number eight to number thirty (of 101 total). That is, they were bigger than most but not the industry's largest.  I interpret this to mean that these vendors were either adding resources for a push to reach the industry top tier or have already decided they need to be part of something else.  

Notably, the firms that engaged in asset sales were much smaller: only IgnitionOne would have fallen within the top thirty and their deal might be considered more of an acquisition, since Zeta Global is apparently still selling the product.

Careful readers will have already noticed that this chart includes one other deal: acquisition of Evergage by Salesforce, announced on Monday.  Evergage fits into the size range of the other deals and the sale can certainly be seen as an escape from the crowded campaign CDP space. But the purchase is otherwise atypical because Salesforce has stressed that they are primarily interested in Everage for real time interaction management and personalization.  Of course, Salesforce is already far along in work on its own CDP, the Customer 360 Audiences component of Customer 360 Truth, which is due for general release around June. So this deal has little to do with Evergage as a CDP.  It's about closing a gap elsewhere in the Salesforce product line, not a sudden acceleration of Salesforce’s entry into the CDP space.

Monday, December 30, 2019

Explaining Martech to a Five Year Old

One piece of paper stands between me and ending the year with a clean desk: a list scribbled on hotel stationery that compares different customer data systems to different types of motor vehicles. Richard Scarry  meets CDP Institute, you might say.

So, just in case your New Year’s plan includes explaining marketing technology to a five year old, here we go:

  • Data Warehouse = School Bus. The seats in a business are lined up in nice neat rows, designed to carry one type of cargo very efficiently. Similarly, a data warehouse is highly structured environment that is very efficient at dealing with specified data types. (See how this works?)

  • Data Lake = Moving Van. A moving van is a big box that can hold pretty much anything, although it might be jumbled together in no particular order. A data lake can store any type of data but doesn’t do much to organize it.
  • Integration Platform = Delivery Motorcycle. A motorcycle carries small items quickly from one place to another, but doesn’t have any place to store them. An integration platform moves bits of data between systems but doesn’t have its own storage, either.
  • Data Management Platform = Fire Truck. A fire truck is a highly specialized vehicle designed to moves very quickly and pour out huge volumes of water. A DMP is a highly specialized system that quickly moves huge volumes of data.
  • CRM System = Taxi. A taxi carries one person and their baggage directly to a specific destination. A CRM system delivers one customer and their history to a single sales person or call center agent.
  • Cloud Platform = Car Carrier. A car carrier is a frame that can hold many unconnected vehicles. A Cloud Platform supports many unrelated systems in the same rack.
Believe it or not, my original list didn’t include an entry for Customer Data Platforms. So let’s give that a moment’s thought and go with…Ice Cream Truck!  They make a lot of noise and everybody loves them.  No, wait, better still...Food Truck!  A food truck collects ingredients from various sources, converts them into delicious meals, and distributes the results to many happy customers.  A CDP combines customer data into profiles that it shares with different systems.  

You’re welcome.

Happy New Year!

Wednesday, December 11, 2019

Acquia Buys AgilOne CDP

Acquia, which is moving past its roots in Web content management to become a multi-channel “digital experience platform” (DXP), took a big step in that direction today with a deal
to buy the AgilOne Customer Data Platform. The deal follows Acquia’s May 2019 purchase of open source marketing automation platform Mautic  and September 2019 purchase of site building tool Cohesion.  Acquia itself was purchased in September by Vista Equity Partners  for $1 billion, which obviously supports their DXP strategy.

The logic behind this deal is so clear that there’s little need for comment. While the exact meaning of DXP is a bit fuzzy, it surely involves coordinating and personalizing customer experiences across channels. This certainly requires the unified customer data that a CDP provides.  Acquia’s heritage in Web content management doesn’t provide deep customer data unification experience, and neither does Mautic.  AgilOne is a particularly good fit because it’s better than many CDPs at identity matching, including offline as well as online data. It also provides lots of connectors to source and delivery systems, as well as advanced machine learning for segmentation and predictions. Acquia and Mautic lacked those, too.

AgilOne rebuilt its core technology fairly recently, giving it a highly flexible and scalable platform that should easily extend beyond the company’s current base in mid-tier retail.  In particular, it will be able to serve Acquia’s clients, who tend to be very large companies with multiple Web multi-sites around the world. At the same time, AgilOne gives Acquia a stronger story in retail and other B2C markets where it has been less active.  AgilOne will also gain by integrating with some of Mautic’s features, notably email and SMS delivery and complex customer journey management. And the deal gives AgilOne much deeper resources to fund growth than it had as an independent company.

What, if anything, does the deal tell us about the larger CDP industry? I’d argue it mostly reinforces the trends I described in October, of independent CDPs being purchased by companies that are not primarily marketing software vendors but need to add customer data capabilities. Nearly all major CDP purchases to date meet this description: Mastercard buying SessionM, Dun & Bradstreet buying Lattice Engines, Arm buying Treasure Data, and Informatica buying Allsight. The only partial exception is Salesforce buying Datorama, but CDP wasn’t the focus of that deal. None of the other companies trying to follow Acquia’s approach of expanding from Web content management to DXP has yet purchased a CDP. But they’ll all need CDP functions so don’t be surprised to see more deals along those lines.

Put in a broader context, adding a CDP as a module inside a DXP is an example of CDP as a component within large marketing or even operational systems, something I refer to as “CDP Inside”. I expect that to be increasingly common and, thus, a potential home for independent CDP systems as the market matures, competition heats up, and the big marketing cloud vendors release their own products.  Selling or merging to become part of a larger system is one escape path for the independent CDPs. Another path is to focus on specific industries or cost-sensitive segments where the big marketing clouds are at a disadvantage.  I expect to see current CDP vendors take both approaches, even as new entrants continue to appear.  The CDP market won't get any simpler but buyers should have increasingly clear choices, so buying a CDP may become a bit less complicated.

Sunday, October 27, 2019

What Happens When Everyone Has a CDP?

October 22 was a landmark day for the CDP industry.  We reported three significant announcements:

Each announcement follows a string of similar previous developments.

SessionM/Mastercard: most CDP acquisitions have been made by companies that are not primarily marketing software vendors. Arm (microprocessor technology) bought Treasure Data; Dun & Bradstreet (B2B data sales) bought Lattice Engines; Kabbage (small business finance) bought Radius; Anaplan (business planning) bought Mintigo; Informatica (data management) bought Allsight; Equifax (credit bureau) bought Datalicious. The exception that proves the rule is Salesforce’s purchase of Datorama, which it uses for marketing performance measurement, not as a CDP.

I believe the reason for these deals is that the buyers want to offer services that depend on unified customer data, but find it’s easier and cheaper to buy the necessary technology than to develop it internally. Note that it's truly a build/buy choice: many of the buyers already have extensive customer data management operations, so they probably could have built the systems for themselves.  They simply realized that buying was the better option.

The implications of this are substantial.  Competitors of the acquiring firms will feel pressure to offer similar services that help their clients deploy customer data.  Such services can be important tools for retaining clients, since switching customer database providers is painful at best. For CDP vendors, these deals are a promising exit path from a crowded industry which will only become more competeitive (see below).  For marketers, these deals mean their companies gain new options for access to a CDP.  This is especially true for small and mid-size businesses that might lack the resources to buy and integrate a CDP on their own.

Teradata: major marketing software vendors have chosen to build their own CDPs rather than buying one. This list includes Salesforce, Adobe, Oracle, Microsoft, IBM, SAP (sort of) and SAS (although they don’t use the term).  Their decisions to build their own CDPs are a bit perplexing, given that most have made many other acquisitions to fill gaps in their product lines.  My best guess is they like to buy companies that give them a substantial position in a new market, and even the largest of the pure-play CDP vendors are too small to catch their fancy. It might also be that building a CDP looked simple to them, so they all decided there’s not much reason to purchase a CDP for technology alone. The time it has taken them to deliver proper CDPs suggests it may have been harder than they thought.

The marketing software vendors’ delay in delivering CDPs has given other vendors opportunities that might not have existed had the marketing software companies moved more quickly. But with the marketing software vendors products now finally reaching the market, that era is ending. This will make life more difficult for the independent CDP vendors.  I still expect many of the independents will survive by developing systems tailored to particular industries, regions, or client sizes.

Wunderman Thompson: many ad agencies have decided to partner with a CDP vendor rather than purchasing one outright. The analysis gets a little confusing here because the big ad holding companies have been purchasing data-based marketing agencies: Dentsu bought Merkle, IPG bought Acxiom, Publicis bought Epsilon. But those agencies have themselves generally resold marketing technology rather than building or buying their own. This is probably a good choice: although they have considerable skill working with customer data, they have limited software development capacity. So it makes more sense for them to rent technology from others.

Assuming they continue to work with other vendors' technologies, the agencies represent a market for CDP vendors that won’t go away. If anything, it’s likely to grow as more agencies offer customer data-based services. But agencies have special needs and are often very cost-sensitive. So only a handful of CDP vendors are likely to get much benefit.

These three lines of development all point in the same direction. The path leads to a world where unified, sharable customer data is available to nearly every organization: that is, a world where every company has a CDP.  Nirvana, you say?  Yes, possibly, for CDP users.  But remember that CDP might be a stand-alone system, part of a marketing software suite, embedded in operational systems, or provided as part of an agency’s service. So it's not necessarily great news for CDP sellers.  

The broad availability of CDP functions affects users in other ways. When CDP functionality was available only from specialist vendors, the choice of a CDP was based on finding the best system (or, more precisely, the system that best fit each buyer’s particular requirements). But when CDPs are baked into larger software and service offerings, the quality of the embedded CDP is one of many considerations in selecting a vendor. In fact, the CDP itself may be invisible, as buyers base their choice on which vendor can best meet their business needs. If the potential vendor can meet those needs, its CDP must be adequate. If the potential vendor isn’t a good fit, it really doesn’t matter whether the fault lies with their CDP or some other component.

Note that there will be exceptions to this new rule. Large enterprises are likely to assemble their own collection of best-of-breed components, including a stand-alone CDP to integrate data from disparate sources. Mid-size firms who don't want to commit to one comprehensive marketing suite may prefer broad-scope CDPs that combine centralized data, analytic and personalization functions while integrating with external delivery systems.

What doesn’t change are the needs for users to define their requirements, to accurately assess which vendors will meet them, and to deploy their choice effectively. These tasks are closely related: you can’t define requirements, assess alternatives, or deploy effectively without understanding what the CDP needs to do. So education and training of CDP users will remain important regardless of how CDPs are purchased or delivered.

Another way to look at it is this: CDP has been cruising through the Gartner Hype Cycle for the past four years. Each hype cycle stage implies a common customer question*.  Here's what we’ve seen for CDP:

  • at the start, when the technology is unfamiliar, the question was: What’s a CDP?
  • during the peak of inflated expectations, people had some understanding of the concept, so their question became: Do I need a CDP?
  • as CDP enters the final stages of disillusionment, enlightenment, and productivity, people accept that they probably need a CDP and ask the next logical question: How do I best use my CDP?
Of course, different markets and individual users are at different stages in their own CDP journey, so we still get all three questions. But it’s clear that the third question – often phrased in requests for use cases, best practices, and maturity models – is becoming the most important. I’ve no doubt that the industry will provide more answers.

*This is my interpretation, not Gartner’s.

Monday, October 14, 2019

Privacy Regulations Will Lead to Advertising Innovation

Naysayers doubted that the European Union’s General Data Protection Regulation (GDPR) and ePrivacy rules, California Consumer Privacy Act (CCPA) and related privacy regulations would have any real impact on the flow of consumer data. But it’s now clear that they will, as European regulators show they will interpret the rules to require meaningful consent to data sharing, will treat cookies as personal identifiers, and will assess significant fines for data breaches. The imminent effective date of CCPA, which rather surprisingly survived without being watered down or preempted by weaker federal regulation, confirms that privacy can not longer be ignored by data collectors. Meanwhile, actions by Google, Microsoft, Apple and other major browser are putting still more barriers in the way of data business as usual.

None of this marks the end of the advertising industry or even of targeted online advertising. Advertising was a big and important business before the Internet existed and would remain one if the Internet went dark tomorrow. Pre-Internet advertising wasn’t as targeted or measurable as today’s display and social ads, but it did work. A total end to distribution of third party personal data would still leave Internet marketers able to target based on context, content, and in-session behaviors. This probably wouldn’t be quite as effective as individual-level targeting, although I don’t recall any studies that prove this.  It’s even possible that closer attention to ad targeting methods would reduce fraud enough to more than compensate for the loss of third party data.

In any case, the hunt is on for mass advertising audiences to replace audiences based on third party personal data. The recent merger of content-based advertising leaders Taboola and Outbrain was driven in part by the desire for greater scale in content ads (those click-bait teasers that lead you off-site at the bottom of many Web pages). The rebirth of out-of-home advertising (billboards, wall posters, in-store displays, and clever niche products such as elevator and gas pump ads) as a digital channel opens another mass medium. Above all, the various forms of individually targeted TV advertising promise new levels of personalization and tracking in a medium that already has near-universal reach. Other types of video, available through YouTube, Instagram, TikTok, Snapchat, Twitch, and much else, are delivering new mass.

Taken together, these emerging options promise a new Golden Age of Advertising Creativity, as marketers explore their potential and evolve the most effective approaches to each. It’s true that a vastly more fragmented media landscape will be harder for marketers to manage. But it also means that fears of a Google/Facebook duopoly controlling all access to new customers are clearly overblown. Regulatory pressures, changing consumer attitudes, and new competition should further deflate them every day.

What does all this mean for martech in general and Customer Data Platforms in particular? The most directly affected martech systems are Data Management Platforms (DMPs), whose core function is to manage the third party data-based customer profiles that are quickly becoming extinct. Marketers who had hoped the DMP would manage all their customer data had already lost much of their interest when they discovered how limited DMP capabilities really were.  Many DMPs have repositioned themselves as CDPs, although not all have the technical capabilities required to meet the RealCDP requirements.*

The implications for CDPs are more positive, although not quite as rosy as sometimes suggested. There’s a common argument, which I frequently make myself, that the loss of third party data makes first party data more important, and that’s good for CDPs because they primarily manage first party data. This is true on some level but shouldn’t be overstated. The third party data that populates DMPs is mostly used for acquisition marketing, while the first party data in CDPs is mostly for marketing to current or former customers. So switching focus from DMP to CDP would leave a significant gap in many acquisition marketing programs.

As we’ve just seen, marketers will plenty of other ways to reach new audiences even after today’s third party data-driven advertising is gone. But there is one way that CDPs can directly support acquisition programs: by making it easier for companies to share first party data with each other, creating what is usually called second party data.

Second party data can refer to any first party data that is directly shared with another company (the second party). The CDP supports this by creating an extract file of first party data that can be sent to the second party. If that’s all that happens, it’s no different from any other extract.

But often second party data is created by comparing the customer lists of both parties and finding shared customers. The trick is often that the two parties don’t want to expose information about customers they don’t share.

One way to achieve this is to send a copy of both customer lists to another company that both firms trust. That company compares the two lists, finds matches, and returns whatever information the parties have agreed to share. Alternatively, a common identifier such as email address might be run through a standard “hashing” algorithm that will yield a unique result for each input but not reveal the actual identity information. Both parties use the same algorithm so that all records with the same identifier yield the same hash code and are identified as a match. Records that don’t match will generate different hash codes which are meaningless to the other party. With this sort of processing, there’s no need for another trusted company to do the matching because customer identifiers are not actually shared. Each party keeps a record of the original identifier and the resulting hash code, so it can tie the codes back to its actual customer records.

Here’s a practical example. Suppose a hotel chain and airline agree to identify loyalty program members on each others' lists.  That is, the airline would learn which of its customers were members of the hotel loyalty program and the hotel would learn which of its customers were members of the airline program. They can do this with the type of matching just described, adding a "partner loyalty member" flag to appropriate customer profiles.  The airline could then make a special offer to hotel loyalty members and the hotel could make a special offer to  airline program members. Each party could also send acquisition promotions on behalf of its partner to its own customers who are not  members of the partner's loyalty program. So long as each party sends the promotions to its own members, the other party never learns anything about them.

The minimum role of the CDP in this sort of second party sharing is to generate a customer list with the required data. Some CDPs can also find direct matches (acting as the trusted third company) or generate and match the hashed identifiers. CDPs with these added functions are in a position to benefit as the loss of third party data makes second party data sharing more important to acquisition marketing programs.

In sum, privacy regulations won't kill targeted marketing.  They'll actually lead marketers to expand the methods they use, promoting a healthy diversity and weakening the much-disliked Google/Facebook duopoly.  Customer Data Platforms will benefit as first and second party data play larger roles in the marketing mix. 

*load all types of data, retain all original details, store the data indefinitely, build unified profiles, and expose the profiles to any external system.

Monday, June 17, 2019

It's CDP Time for Marketing Cloud Vendors

Adobe, Salesforce and Oracle all made announcements regarding Customer Data Platform products this week. None are world-changing: Salesforce described a planned extension of Customer 360; Abobe announced triggered journey campaigns that draw on its “real time CDP”, and Oracle described CDP services from systems integrators.  But the fact that all three vendors are addressing the topic raises some interesting questions.

Why does this matter to technology and marketing professionals? Customer Data Platforms have been a hot topic for the past three years. The reason is simple: they promise to solve a pressing problem that has not been solved by anything else. That problem is the need of marketers (and others) to combine data from all sources into easily accessible customer profiles. Those profiles are needed for accurate targeting and consistent, satisfying customer experiences.

The problem is unsolved because alternate solutions fall short in different areas.  Data warehouses are largely limited to structured data.  Data lakes are not unified or easily accessible to non-technical users.  Data Management Platforms are limited to summary data about mostly anonymous individuals.  CRM and marketing automation systems don’t easily combine data from external sources.

By contrast, CDPs promise to ingest all data sources, retain all details, and share the resulting profiles with any system that needs them.  But CDPs have been developed by relatively small specialist vendors, which many enterprise buyers are reluctant to consider. So having Salesforce, Adobe, and Oracle promote CDPs will prompt more enterprise buyers to give the category serious consideration.

It also doesn’t hurt that Forrester issued its first CDP wave this week, that Dun & Bradstreet just bought CDP Lattice Engines, and that Martech Advisor’s Talking Stack podcast devoted an entire session to the topic  (humble-brag disclosure: I’m a panelist on Talking Stack).

So, yeah, CDP is getting a lot of attention right now.

What’s new in these announcements and what’s not? Adobe, Salesforce and Oracle have all previously announced something that they positioned as addressing the needs met by a CDP.

• Adobe’s original approach was to map a single customer ID across all its systems and create transient customer profiles by pulling together data on demand. It changed direction in March 2018 with news that its Experience Platform would create persistent profiles.  It released this a year later and described it as including a "Real-Time CDP".  Nothing about that changed with yesterday’s announcement, which described an Adobe Campaign application using the CDP data.  All this is separate from the Open Database Initiative, a still-undelivered project announced last September to build shared database model with Microsoft and SAP.

• Oracle announced CX Unity last October. It included a persistent data store from the start but is just now starting beta deployments. The latest Oracle announcement describes collaboration with Accenture and Capgemini to provide services around CX Unity projects.  It doesn’t include anything new about the product.

• Salesforce’s Customer 360, also announced last September, was another master customer ID used to access source system data on demand. Salesforce now says they’ll release that product this November. The bigger news is they’re developing a next-generation Customer 360 that will store its own data, bringing them in line with Adobe and Oracle. There’s no release date although they hope to start pilot projects this fall.

It's taken a while but all three vendors now acknowledge that a CDP must store its own data. That will remove some confusion from the CDP market.  Cynics might say it also confirms that software vendors define user requirements based on what their systems currently do, not what users actually need. It’s hard to interpret the CDP story in any other way, since the need for a persistent data store has always been clear to anyone who tried to support core CDP use cases such as attribution, prediction, and journey analysis.

What benchmarks should these CDP products be measured against? The CDP Institute (which I head) believes that buyers expect a CDP to ingest all types of data, capture the full detail of the ingested data, retain that data as long as the user wants, assemble unified customer profiles, and make the profiles available to any external system. We codify those as requirements in our RealCDPTM certification program. The original Adobe and Salesforce approaches certainly didn’t store the data and had other limits about the types and detail they captured. On the other hand, they did include real-time access to current source data, which is not part of RealCDP but is important for many CDP use cases. Many other CDPs also provide real-time access as well as segmentation, predictive modeling, personalized message creation, and sometimes even message distribution. Oracle, Salesforce, and Adobe have separate products for most of those functions so they are not part of their CDPs.

What should we look for next from these vendors? The main thing to watch is how quickly the announcements turn into released products. Only then will buyers be able to judge the details of how well these vendors deliver on their promises and how their offerings compare with other, more mature CDPs. In particular, pay close attention to how easily each system connects with other products. Because the marketing clouds are built from acquisitions that remain technically separate, integrations for each component are developed and delivered in whatever sequence the vendor thinks best.  Connections to other vendors’ systems are an even lower priority. Buyers will often be left to develop their own connectors using a CDP API – which should itself be examined closely to see what it does and how hard it is to use.

Once the vendors flesh out the core CDP capabilities of their offerings, the focus will shift to improvements in user experience. This includes end-user functions such as segmentation and more technical capabilities for connecting to data sources and destinations. Reducing the technical work required to set up and maintain a CDP can have a significant impact on time to value and operating cost.  More important, it can help the CDP achieve its mission of including all data and sharing it with all other systems. Also expect the vendors to create industry-specific packages with prebuilt data models, connectors, predictive models, workflows, and reporting. These will further ease deployment and help the vendors to compete with industry-specialist CDPs.

In most of the CDP market, vendors are extending their systems by adding more activation functions such as marketing campaigns, personalized message selection, and message delivery. Many users are eager to buy one system that combines as many functions as possible. But because the marketing clouds offer these functions as separate modules, they are unlikely to expand their CDPs in that direction.  This will probably reduce their competitiveness in the mid-market.

Who else might toss their hat into the CDP ring? There have been four significant CDP acquisitions to date: Datalicious/Veda by Equifax (2016); Datorama by Salesforce (2018); Treasure Data by Arm (2018), and Lattice Engines by Dun & Bradstreet (2019). Salesforce is the only marketing cloud vendor on this list and they've positioned Datorama as a campaign analytics product, not a CDP.  Since Oracle and Adobe are far along in their CDP development, neither is likely to purchase an independent CDP vendor – although that might happen if they feel pressure to deliver a mature CDP more quickly. That Equifax and Dun & Bradstreet have bought CDPs suggests other data compilers might do the same, with the goal of adding more value than just their data.

Other potential acquirers include ad agency holding groups and consultancies who want to bulk up their data management capabilities. Moving from the other direction, companies that offer message delivery and interactions, such as email delivery, Web site personalization, mobile app development, call center, and customer support systems, might add a CDP to expand their footprint, make their products harder to replace, and ultimately let them add delivery in other channels. Case in point: unified marketing, sales and support vendor Freshworks recently purchased Natero, a customer success system with CDP capabilities.

But the big clouds looming over the entire customer data ecosystem are, literally, the big clouds: Amazon Web Services, Google Cloud, and Microsoft Azure. So far, none has shown much interest in selling customer data management tools, although they already host plenty of CDP data.  There’s a reasonable chance these vendors will eventually enter the CDP market.  But that would be a few steps up the value chain from their current offerings, which still focus primarily on data storage. The cloud services vendors are starting that climb, adding cloud connectors, data transformations, in-database analytics, machine learning, and reporting tools. Google Cloud’s purchase of Looker is a recent step in this direction. Data quality services such as address standardization and master data management could be next.  There's a way to go before these vendors are ready to add the specialized features needed for a CDP. They may also find themselves constrained by anti-trust and privacy issues. But don’t rule it out.

What do these announcements mean for current CDP vendors? At a fundamental level, these announcements confirm that there’s a real need for CDPs and that the CDP model of building a separate, persistent database is correct. That’s no small thing, given the fear, uncertainty and doubt that the marketing cloud vendors have previously spread about both. The result is to expand the market, since more potential buyers will now accept CDP as a valid option.

This does not mean the cloud vendors have given up their efforts to shape the conversation. They are now trying to redefine CDP as part of a larger integrated package – that is, of systems like their own. This isn’t likely to be successful, given how few enterprises actually limit themselves to one vendor’s products. So the ability of the current CDP vendors to work equally well with systems from any provider is likely to be even more appealing.

Still, it would be unrealistic to ignore the fact that many buyers would rather buy from the marketing cloud vendors. The long lead times between preannouncement of the marketing cloud CDPs and their actual delivery will lead some buyers to delay their purchases, which is exactly the cloud vendors’ intent. But the interval will also give potential buyers more time to think carefully about what they need in a CDP, making them smarter consumers when they do start an acquisition project. A rigorous, requirements-based acquisition process will often favor the existing CDP vendors, whose products are proven and mature.

How do these announcements relate to other developments in the CDP market? The CDP market is evolving rapidly. From its initial base in retail and media, it has spread to new industries including travel, financial services, B2B, telecommunications, healthcare, and education. Industry-specialist vendors are appearing with prebuilt data models, integrations with industry systems (such as point of sale in retail or reservations for hospitality), and staff expertise. Other specialists now focus on mid-size or small businesses and in particular geographic regions.

There’s also an increasingly clear split between CDP vendors who focus on data collection, unification, and access functions and those with marketing functions for analytics and personalization. One result is that some clients deploy one CDP for data unification and another for marketing applications. Some CDPs have extended their marketing features to include delivery systems such as email engines, Web site messaging, and even DMPs.  These were previously beyond the scope of CDP products. Vendors with delivery capabilities still allow clients to use other delivery systems – otherwise they would not meet the definition of a CDP. You can see where this leads: CDPs with a full set of marketing applications become direct competitors of the marketing clouds. It also means that CDP becomes one feature among many in these products -- a change that may lead some to deemphasize their CDP capabilities and instead partner with data unification specialists.  (See this post for a deeper exploration of that scenario.)

On the buyer side, CDPs are increasingly used beyond marketing to support sales, service, and business operations. This often means the CDP becomes a shared resource managed by corporate IT rather than marketing.  Enterprise-wide digital transformation projects and increasing concern over compliance with privacy regulations have further increased involvement of central IT and compliance teams.  In general, greater familiarity with CDPs has meant that buyers have a better understanding of what they do and what to look for, making them more sophisticated consumers and helping them to navigate the growing number of products in the market.

Entry of the big cloud vendors may accelerate the trend to industry-specific CDPs by pushing smaller vendors into niches where they can better compete with general purpose systems. The big cloud vendors may push also independent CDPs to deliver comprehensive marketing functions to the mid-market where they can be more integrated and more economical than the marketing clouds. CDPs that focus primarily on data management will probably face the greatest competition from the marketing cloud CDPs, since they compete for enterprise clients where the big cloud vendors are the strongest. But those CDP vendors also have the greatest technical lead and will find it easiest to support enterprise-wide use cases.

In short, entry of the marketing cloud CDPs will accelerate industry growth and reinforce current industry trends, not change the over-all direction. For CDP vendors and buyers alike, that is good news.