Why Google is taking a risk in linking online ads to offline payments

At the recent Google Marketing Next event in San Francisco, Google revealed a new service designed to close the loop between online advertising and offline card payments. It's a service that should have marketers salivating, but it could easily backfire.

Called ‘Google Attribution’, the system aims to end ‘last click attribution,' the practice in marketing of attributing the purchase to the last advertising touch point that a customer makes, and instead provides a more holistic data driven model to provide a 360 degree view of all of the touch points down to the final purchase.

Google also shared some eye opening statistics on data already being captured - the company has measured more than five billion store visits across 17 countries in the last 30 months and Google's partnerships have captured information about approximately 70% of all credit card transactions in the U.S.

This news raises red flags regarding how the ubiquitous Google will handle consumer privacy and transparency around data capture.

Ore Huiying/Bloomberg

Why so important to Google?

For all the noise around Google’s innovation in home assistants and self-driving vehicles, it is worth remembering just how important advertising is for the company’s bottom line.

According to the most recent 10-Q filing from Alphabet (Google's parent company), 86.5% of its Q1 2017 revenue came from advertising. The lifeblood of the company is connecting advertisers to the right audience to make them purchase more often, and reliable tracking of conversion metrics is critical to its ability to do this now and in the future. With the recent debacle relating to sponsors pulling advertising from YouTube due to association with inappropriate content, diversification of advertising revenue channels is ever more important for Google.

It is also worth noting just how sought after this form of tracking is for marketers.

In a Forrester report commissioned by Google in 2013, it was found that 53% of marketers considered advanced attribution to be a top or high priority in their organization, yet they considered their customer journeys to be too complex to track and limited by budget constraints. Given Google’s prolific nature across online advertising and Android OS devices in the physical world providing geolocation and spending data via Android Pay, they are well placed to actually provide marketers with this Holy Grail of true attribution to transactions.

If they don’t, it is entirely possible that marketers will move on to third parties that can provide them with what they so desperately need, albeit in a more piecemeal form.

What’s in the black box?

Details were scant on how that Google will connect advertising to payments.

Babak Pahlavan, senior director of product management for analytics measurement at Google states rather vaguely: “Data-driven attribution uses machine learning to determine how much credit to assign to each step in the consumer journey — from the first time they engage with your brand for early research down to the final click before purchase. If you collect email information at the point of sale for your loyalty program, you can import store transactions directly into AdWords yourself or through a third-party data partner. And even if your business doesn’t have a large loyalty program, you can still measure store sales by taking advantage of Google’s third-party partnerships.”

Tom Noyes of Commerce Signals provides a more specific take on the identity of these third party data partners in a blog post. “My educated guess is that Google did direct integrations with a handful of large banks and acquirers that would permit them to assess aggregate spend of audiences exposed within the Google Display Network (GDN) and Google Search," Noyes wrote.

The privacy conundrum

Google is between a rock and hard place in terms of delivering consumer products and services that are trusted and widely used, but also is satisfying marketers' demands for high specificity consumer data.

Alienating either one effectively kills their business model.

To placate consumers, Google stresses that Google Attribution is not a threat to personal privacy since measurement of store visits will be aggregated and anonymized and no location data will be shared with advertisers. However, this may not go far enough to provide the level of granularity for Google Attribution to catch light, or to encourage end user trust.

Further, the service is in beta and only available in the US.

Increasingly stringent data protection regulation could seriously stifle adoption overseas, particularly in the EU where the General Data Protection Regulation goes into effect in May 2018. One specific clause of the new regulation stands out as particularly likely to clip the wings of Google’s aspirations - the conditions for consent.

The regulation states: “Companies will no longer be able to use long illegible terms and conditions full of legalese, as the request for consent must be given in an intelligible and easily accessible form, with the purpose for data processing attached to that consent. It must be as easy to withdraw consent as it is to give it.”

Such a requirement for transparency could be a serious impediment in Google’s aspirations to close the marketing circle.