The term first started appearing in mainstream conversations back in 2017. In short, CDPs are centralized places to store all the first-party data a company collects from its customers.
“It’s fundamentally a data platform that unifies the data, and processes it, and then activates the profiles across many channels,” said Treasure Data CEO Kazuki Ohta. The key is not just collecting and storing that data, but making it available to use.
The need for CDPs first arose as companies realized they had this data but didn’t know what to do with it.
“What we’re seeing that a lot of brands do is effectively build a data lake or a master data management system, where there’s a lot of data coming together potentially,” said Ryan Fleisch, head of Product Marketing for Adobe’s CDP. “But where a lot of brands are looking for further partnership is: How do I make sense of that data, activate it and make a decision off of it?”
“The transformation of the data, the ability to personalize that customer information, I think is a key value prop of the customer data platform,” said Twilio Segment Vice President Jodi Alperstein. “And really knowing that 360 view of the customer and really being able to identify them, and then be able to put it into action.”
It’s also why CDPs are most commonly talked about in a marketing context, because it’s the most natural extension of using data about customers. After Apple and Google restricted the use of third-party cookies in apps and on the web, marketers needed to find new sources of customer information.
“It’s taking pieces of different marketing technology [and putting] them together so that as the consumer record exists in all those different systems, whether that’s a cookie, a CRM record, an email, whatever it is, we can actually create one profile of that person and then use it more effectively in different marketing,” said Cory Munchbach, COO at BlueConic.
Still, the applicability of CDPs extend far beyond just marketing, into sales, service and any other areas of an enterprise that could benefit from a more complete customer view. “I absolutely think it’s critical to extend beyond that,” said Bobby Jania, senior vice president of Marketing at Salesforce. “We’re uniting marketing with commerce, with service, with sales, with IT. And that really gives our customers, the brands, a 360-degree view of their end customers.”
CDP vendors include companies such as Segment, Amperity, mParticle and Treasure Data, as well as smaller companies like Lytics and BlueConic. Outside of the focused CDP players, marketing cloud vendors like Salesforce and Adobe can’t afford to ignore this trend. And ERP players like Microsoft and Oracle want to extend customer data into purchasing, products and supply chain software.
That ability to determine and personalize customer interactions across an enterprise is what makes the idea of a CDP so tantalizing. “I do think the vision of the CDP is incredible: Who wouldn’t want that, right? Who wouldn’t want to have this rich view of every customer so they can better service that customer, leveraging all the data they have at their fingertips?” said Zanutto.
The challenge is that vision hasn’t always materialized. Early attempts at CDPs led to a few false starts and some disillusioned customers, and the appetite for CDPs almost threatened to fizzle out.
“We were hearing a lot about CDP probably two and a half years ago,” said Valoir principal Rebecca Wettemann. “And then things sort of went quiet.”
Part of that silence was due to the lack of big successes in the industry. “If you roll the clock back two or three years ago, there’s a lot of buzz around CDPs, and how it’s played out has sort of underwhelmed a lot of folks in the industry, at least on the investment side of things,” said Zanutto. Investor enthusiasm has since dimmed. Back then, “the level of enthusiasm would have been a 10 out of 10, and now it’s probably much less than a 10 out of 10, because there hasn’t been a number of big breakouts,” he said.
“Have I seen any kind of large-scale deployment of a CDP where it works as advertised? No.”
But what prevented CDPs from having their breakout moment three years ago? A combination of over-promising and under-delivering, and bad market timing, according to industry practitioners and investors.
“One of the ways that this category has been very bizarre is massive adoption at a messaging level,” but not as much at the practical level, said Munchbach. The pain points CDPs are trying to solve are very legitimate, which is why a lot of vendors want a piece of the pie, she said, but then “there’s this real fall-off between saying you can do it and then actually doing it.”
“Have I seen any kind of large-scale deployment of a CDP where it works as advertised? No,” said Wettemann.
The fault doesn’t entirely lie with CDP vendors, however. Until recently, most organizations didn’t have a mature enough data strategy to get the full value of a CDP. “I think the things that held back the CDP area in the past from having more explosive growth were the fact that it did take a lot of time to set them up and get value out of them because you had to set up a completely new system within your environment to collect and examine data feeds off of customers,” said Zanutto.
Munchbach said she’s never seen a customer example where there wasn’t some sort of data surprise. “There’s such an under-estimating of the readiness that they have on the data side of things,” she said.
And as CapitalG and other investors talked to customers, many of them were “disillusioned or dissatisfied” because they’d done all this work to get their data together, but weren’t as ready as they thought. And “when they go to actually use the data in CDP, they realize there’s still a big gap and they’re not really getting the value they were hoping for,” said Zanutto.
When it comes to getting value out of a CDP, Twilio Segment’s Alperstein admitted that “there’s a value curve for sure,” and that some customers are getting less out of their CDPs than others. But that doesn’t mean all is lost. “I don’t think there’s anybody using the product who isn’t getting some real value from it,” she said.
CDPs may have struck out the first time around, but it’s not over yet. Since 2017, the enterprise tech world has shifted dramatically: The pandemic accelerated the need for digital transformation; regulatory changes and mobile platforms forced a shift toward first-party data; and more options arose for companies looking to outsource complex data operations.
At Segment, demand exploded during the pandemic as enterprises were racing to service their customers digitally, said Segment product marketing Vice President Katrina Wong. And “when you think about the digital footprint, understanding your customers, connecting online … that’s what a CDP helps to do, in a nutshell.”
Consumer protection laws such as GDPR or CCPA, along with the decline in third-party cookies, have also made a first-party data strategy not just competitive but necessary for survival. “If you believe consumer behavior is becoming digital and that consumer privacy is becoming stricter, then CDPs will be required in most of the brands and businesses,” said Treasure Data’s Ohta.
Those regulatory changes, combined with the option of outsourcing complex data operations to companies like Databricks or Snowflake, have pushed companies to be more data-ready this time around.
“What could be different this time around is more enterprises are data-ready than they have been in the past,” said Zanutto. “That’s sort of a secular trend, as more people invest in their data stack and into the data warehouses and data lakes.”
All of those forces combined have brought CDPs to the surface again and spurred more competition than ever.
“It’s just a matter of when, not if,” said Zanutto. In the enterprise tech market, timing is everything, he explained, and coming to market too late or too early can actually be detrimental. “I think there’s a lot of good reasons why now is different, it’s heading in that direction. But is it going to be a year to greatness, or five years to greatness? That’s a really hard question to know.”