What you need to know:

• Woolworths Group’s digital arm, WooliesX, experienced an costly financial setback due to a misconfiguration of its Tealium Customer Data Platform (CDP), resulting in what insiders described as an “event stream API blowout” that cost hundreds of thousands of dollars. Happily after an investigation of the cause the vendors forgave the cost.
• It is an example of CDP ‘bill shock’, a phenomenon all too familiar to many CDP users of a variety of off-the-shelf CDPs who customers say often lack tools to mitigate such risks, or which have only released them in recent time.
• Some of the other common pitfalls in CDP implementations include licensing costs driven by function bloat, limited AI-driven personalisation capabilities, and ongoing data privacy compliance concerns.
• Meanwhile the market has become more competitive with the number of active CDP vendors rising to 28 from 20 – at just the time when project volumes have cooled. Consolidation of suppliers is happening overseas but for now at least, has not resulted in a local cull.
• However, the trend towards composable CDPs is gaining traction as companies seek more tailored solutions that fit specific needs without the high costs of traditional CDPs.
• Another trend is that IT departments are increasingly back in charge of data architecture due to board and leadership team concerns about data security and incoming AI impacts.
• For early movers, including the University of Tasmania, Carsales, SCA, and News Corp Australia along with insurance marketplace Compare Club, use cases are developing and ROI emerging, though with some qualifications.

Staff at WooliesX, the digital, e-commerce, and data arm of Woolworths Group misconfigured its Tealium Customer Data Platform (CDP) setup, triggering what one project insider described as an “event stream API blowout”  that cost the retailer hundreds of thousands of dollars.

In the high-volume, low-margin world of Woolworths where executives know every dollar of cost on a first-name basis, it was the kind of variance guaranteed to create a storm. 

Woolworths declined to comment on the now recovered incident, and it is understood Tealium swallowed the accidental expense incurred by one of its marque Australian customers.

Other Australian customers across a range of CDP implementations have not been so lucky with the overwhelming majority of  CDP customers experiencing “bill shock”, per a series of Mi3 briefings with similar snafus at those implementing across Adobe, Salesforce and others.

The problem seems to be the immaturity and in some cases the absence of tools to help mitigate the risks. A lack of understanding by marketing of the drivers of variable cost – ultimately storage and compute cycles – was also cited.

While a relative poster child for successful CDP deployment, Stephen Kyefulumya, GM media – product and technology at Carsales, said some of those issues were familiar.

Carsales uses Adobe CDP user and has notched wins, including resurrecting its Apple audience, despite Apple deprecating cookies years ago.

He says there was initially a scarcity of tools in the platform to manage costs, but that’s been improving of late.

“It’s an issue,” he confirms. “When you start off you want everything – but then get hit by this whole profile of richness and the compute and storage which drives cost.” Then the bill lands and users tend to “dial back” to core areas of focus that deliver best bang for buck. “That becomes an interesting discussion with a vendor … and it goes through a few iterations.”

SCA is another media business that has leaned heavily into a CDP via Salesforce Data Cloud and has racked up successes with wins across multiple use-cases, including slashing customer acquisition costs by 60 per cent. But it’s also encountered cost negotiations or what Salesforce nomenclature refers to as “True Ups” along the way.

Cam Strachan, SCA’s head of data and analytics, said that can making forecasting – i.e. balancing the tech books – a challenge. “We would like to see more granular controls in the platform so that we balance the newer functionality that we really want to take advantage of with the potential costs.”

Vendors acknowledge the issues and claim they are addressing them – both through methodologies and technologies but while also pushing the onus back onto customers by stressing the importance of strong governance.

“We have started to notice a trend of mature customers asking for structured commercial governance to optimise event loads or rightsize consumption efficiently,” according to Tealium CMO Heidi Bullock. 

She said that as enterprises scale, having a solid governance framework around data collection and architecture is critical to customer data management.

“Managing data consumption and storage costs is a shared responsibility, and requires the ability to control data that enters the CDP as well as downstream.” Bullock said Tealium provides the ability to control this at both ends through its data orchestration capabilities. 

Gabbi Stubbs, APAC Product Marketing, Adobe, took a similar line. She told Mi3 that the firm’s Real Time CDP includes capabilities such as ‘Time to Live’ dates and deletions so only actionable data is used or retained and that Adobe’s ‘federated audience composition’ draws on data that exists in other systems when required – but is not retained or duplicated in the CDP. Which in short means customers only working off “preferenced, relevant, and actionable data,” per Stubbs, while baking in “greater compliance to the customer’s privacy principles and preferences for data access and usage”.

The upshot, she suggests, is “a clear line of sight on utilisation with regards to managing volumes and budgets.”

News Corp Australia, which uses Adobe, has managed to largely avoid bill shocks.

According to General Manager, Commercial Data, Dean La Rosa, “For us, it’s all around internal processes, we need to understand the volume of data that’s coming in, if we’re expecting spikes, or if there’s a new integration or a new data source that we’re plugging in. That way we don’t have any nasty surprises coming at the end of the month due to any increases in volume or usage.”

The experiences at WooliesX, Carsales, and SCA are neither unique nor uncommon – and offer a salutary warning to other businesses implementing CDPs. If organisations of this scale with their technical capabilities and negotiating clout are susceptible to these kinds of problems, it’s little wonder less tech-capable businesses with lower leverage are falling into the same trap.

Six CDP pitfalls

Nor is bill shock the only challenge users of CDPs have discovered in recent years.

Joel Leslie, enterprise systems manager for Tourism Tasmania, outlines six common pitfalls of CDP implementations:

• Some CDP vendors charge per user profile, making it expensive at scale.
• CDPs mostly rely on predefined rules-based segmentation, lacking robust AI-driven personalisation.
• Marketers often struggle to access raw data for deeper analysis.
• CDPs manage sensitive first-party data, raising concerns about data residency and privacy compliance.
• Many businesses buy a CDP expecting it to solve their customer journey challenges, but their teams are not structured to leverage the technology entirely.
• A CDP is only as good as the marketing strategy it supports. If teams continue to execute campaigns the same way as before, they fail to maximise their capabilities.

Tourism Tasmania currently uses an off-the-shelf CDP. Leslie’s column, however, was focused on exploring the benefits of more composable Data Lakehouse style CDPs. He told Mi3 it was an approach he sees as offering value to organisations like his and that they have access to a data Lake House built on technology like Microsoft’s Fabric, along with Snowflake, a cloud-based data warehouse that allows users to house and crunch large volumes of data from multiple sources.

Consistent demand

Despite risks and limitations, demand for CDPs remains consistent if cooler than the CDP “bender” witnessed a couple of years back. Vendors say the number of requests for proposals is holding up, but the market is harder because more vendors are competing locally. That is consistent with Mi3’s research which identified 28 active CDP vendors in Australia, up from 20 when we last tracked the market in August 2023.

Google’s decision not to formally deprecate third-party cookies also took some wind from the sails.

Market consolidation has shifted up a gear in the US but is yet to play out locally in any meaningful way. Rokt’s purchase of mParticle is unlikely to have an impact, and Segment’s decision to remain in the CDP market after a strategic review by Twilio in February last year likewise mitigates against any upheaval. Segment had the largest installed base in Australia during Mi3’s 2023 review – although most of its customers were startups or scale-ups benefiting from a low-cost-of-entry program run by the vendor to grow volume.

While there have been some project cancellations due to the extra scrutiny of martech costs generally, the decision to step away from CDPs is just as likely to be driven by changes in strategy as pressure on the budget.

Tourism Australia is a case in point. It abandoned its CDP – and plans to build national CDP capability in league with the state organisations as part of a broader post-Covid overhaul – over 18 months ago after a change in strategy, although there is some talk the states may revisit the idea themselves in the coming year.

Cost pressures (or bill shocks) feed into the ROI story, which is one of three key trends unpacked when reassessing the CDP markets. The other two standouts are the rise of composable CDPs, and the re-emergence of the IT department as the key decision-maker around data architecture.

Mi3 will cover those aspects in two following reports but in short IT’s primacy is largely down to increasing concerns around cyber security and the strategic importance of data assets in building out the next generation of AI-powered service capabilities.

Meanwhile composable CDPs – often more agile systems where customer profiles are built in a company’s enterprise data warehouse, rather than a separate CDP database – are carving out market share as the companies that help brands build them expand locally and AI’s impact on software models impacts market dynamics. 

Greg Krehbiel is a US-based martech consultant who has particular expertise around CDPs and media markets. He told Mi3, “CDPs face competition on the one hand at the back end from these big data warehouses and on the front end from this plethora of other services that do half or three-quarters of what a CDP does anyway.”

That’s a view reflected in the approach of insurance comparison site Compare Club, which took the composable route, building CDP functionality on technology from Snowflake and Hightouch.

Composable Comparison

According to Compare Club’s chief customer officer Rich McPharlin, “You’ve got 5.5 million health insurance policies in the country, and about 3.3 million life insurance policies in the country. We were finding that we were dealing with the same people time and time again.”

He told Mi3, “We sell about 110,000 health insurance policies a year and about 20,000 life insurance policies. We talk to a million customers across those two lines of business, but every year it’s the same million customers. Every year, we were paying Facebook and Google $40, $50, $60 a pop to talk to the same customers year in, and year out.”

They were in the firm’s database, he said, and were clearly interested in the product  “but we just weren’t getting in front of them in cost-effective ways at the right time, either through media or through other means, to get to present the right offer and the right message.”

That led to the creation of a CDP use case that was heavily marketing ROI-driven. “It was about our ability to activate our data uniformly across a range of ecosystems simultaneously, to present the right message based on what we knew about people – even largely if those people didn’t know we knew them.”

The composable approach made sense to McPharlin for a number of reasons, not least of which was speed to market. The time taken to identify and submit the business plan through to acquisition was 12 weeks, with a few more weeks after that for implementation.

“We think we’re a startup and we like to move fast. Sometimes it involves breaking stuff, but that’s that’s par of the course. What we really liked about the solution we selected is that we didn’t have to buy the whole big CDP solution that does everything under the sun and costs an arm and a leg. We could buy something that really fits the value cases we identified. We could execute on it well, and retain other parts of our best-of-breed technology stack without having to gut them and replace them as well.”

The resulting stack enabled Compare Club to stitch together everything they knew about customers into a single customer model.

“We already had Snowflake, and we were able to drop in Hightouch straight over the top to then collect customer data, activate it, and distribute it to everything from Facebook and Google to Braze, which is our email marketing platform. 

“We can run massively large computations, largely in the blink of an eye. And we can re-evaluate our entire customer model every 30 seconds.”

And he says, the solution they opted for was materially cheaper than the alternatives in terms of licensing costs. “Firstly we cut out would be very expensive, time-consuming bug prone data engineering. Secondly, we could put it in the hands of nontechnical users, and they could realise those activations in minutes. And thirdly the price point just made the ROI very, very obvious for us.”

How obvious is very obvious?

“The headline stat is that we were able to reduce the cost of acquisition in our key customer segments by 9.5 per cent. In an organisation where marketing is the largest line item, that’s really material. It flows through straight through the bottom line.”

It would be wrong to portray composable CDPs as threatening vendor CDPs outright. The vast majority of customers are still buying off-the-shelf solutions and those canvassed in 2023 say they are now banking impressive wins.

The University of Tasmania was one of the first sites in Australia running Oracle’s CDP. In 2023 CMO Michelle Weir told Mi3: “In a complicated university environment the data is in so many different systems and often those are not integrated. We just really wanted to be able to use our own first-party data to supercharge our targeting efforts.”

Eighteen months on, that mission is largely accomplished, according to marketing director Courtney Geritz, one of Weir’s team.

“Our students could have up to five different records in different systems across application portals, CRM, email marketing, student management, you name it. Just being able to synthesise all of those systems in one 360-degree profile of the student has been invaluable, and it’s enabled us to really customise our communications from end-to-end.”

The University is notching gains within key channels like email marketing, where open rates are up 20 per cent, click through rate is up 10 per cent and unsubscribes have dropped by 23 per cent, all of which feeds into a much improved cost per application reduction of 20 per cent.

While hard to ascribe specific ROI to a CDP, which is ultimately middleware, she credits the CDP with a contribution of half a million dollars in savings out of a much larger saving result of several millions.

Plus the University of Tasmania is now pushing beyond media optimisation and garnering insights about student experiences to feed its messaging.

According to Geritz, “We can see, are they engaging with things like our accommodation, for example, is there a rise there? What does that look like? “

That then helps the marketing teams determine what to amplify.

Media successes

According to Carsales’ Kyefulumya, the headline around its long-running CDP investment is all about personalisation – increasingly critical as commerce competition intensifies within the broader auto trade press.

“There are three aspects to how we personalise the commercial experience – the ads and what will help both our shoppers and our advertisers? Next, there’s the marketing experience, how we personalise messages that we’re sending out. And finally, the product experience, how we’re personalising what’s happening on the page.”

Kyefulumya believes the foundational work around data architecture has put the group in a strong position for what comes next, especially in AI.

“When we looked at three or four years ago, we were very deliberate about saying this is a data ecosystem play. If you’re going to bring this thing in, it’s going to be orchestrating multiple data signals so you need to look at it as an ecosystem,” he says.

“We are a marketplace and one of the important things we need to understand is where are you [the car buyer] in your mind? Where are you on your journey? But the problem is that customer journeys are not linear, and understanding the challenges of those non-linear journeys is a problem tailor-made for AI.

“Like a lot of things, AI is all about data, what data do you have, what data you need? Because of the work we have already done, our speed to value with AI is quite fast.”

Optimisation

For SCA’s Strachan the focus is shifting to optimisation.

“I’d say the vision of where the CDP in our business needed to get to has been mostly realised. We are now in what I would call an optimisation phase. The implementation was really tough, and getting the foundational elements took a lot longer. And I would say that without the help of a partner, Silver Bullet, almost impossible. They are now our managed serviced provider as well.”

The environment is complex, said Strachan, and the fact that there are multiple platforms adds to the complexity, he says.

“So it is really important to have people who understand the different platform components because it’s not one harmonious solution.”

But he says the gain is worth pushing through the pain.

“The big win is we have one central place to do segmentation for all campaign marketing … to have common segmentation across all that and to be used by multiple parts of the business is a huge win.”

In practical terms that means SCA can “optimise for acquisition, we can use suppressions but targeted suppressions, or push targeted audiences through for look-alike modelling for acquisition into Meta or Google. So everything from top of the funnel down to loyalty and cross-brand understanding and advertising is in one place,” says Strachan.

“The CDP also pushes into our reporting layer as well. So we can push that into our clean room, and we get some really valuable insights for advertisers,” he adds.

“The vision of really having that in one place for many use cases across multiple channels has been realised – and we have some key ‘power users’ in the business who understand how that all works. That is pretty significant and has a huge upside.”

He also identified what he describes as two big wins for the firm’s advertisers.

“The first is the ability to give them insights into our data and their data before a campaign is run to help ideate across creative optimisation and the campaign brief process. So it’s not just the audience, it’s also the creative decisions.

“The other win is the ability to segment using internal and external data and clean room data that provides a really highly targeted audience. Post-campaign reports are also more valuable because we can utilise transactional data and other data to tell them how their campaign performed.”

Consolidated platform

News Corp runs dual data warehouses – the CDP is basically the key that unlocks the data, according to commercial data manager Dean La Rosa.

“There’s a misconception that you have to have all these different platforms or architectures supporting your data initiatives. In our case, it can be consolidated, for the most part, into a CDP,” he says.

Like other media companies, the initial focus was very much on advertising use cases, i.e. sharper commercial wins for clients. It still is, says La Rosa, but now the use case has broadened to user experience.

“It sounds ironic that we pitch our products to marketers every single day. Now, finally, we’re starting to pitch them internally. We are working closely with different functions and organisations within our business to utilise the CDP to drive better outcomes.”

According to La Rosa, “We have two sets of clients. We’ve got the users who come and engage with our network. We’ve also got advertisers who come to our network to reach those audiences. We’ve done a pretty good job on the commercial piece for our advertising set of clients. Where our focus is shifting now is to how we can create the best digital experiences for users who come to our network every single day to consume our content.”

Basically, he says, “We want to create a great experience for the users who come to our network so they keep coming back.”