Why independent CDPs are disappearing (and what comes next)

I didn’t make a year-end CDP prediction for 2025 last year, but if I had, consolidation among independent CDPs would have been my top call. With hindsight, I would have been right. This year marks a shift from slow growth to purposeful growth. We can better understand where the market’s headed by looking at how it has evolved.

In just the past few weeks, three leading independent CDPs announced mergers or acquisitions:

As an early client of Lytics, an early employee of the company and a consultant with tens of thousands of hours in the CDP space, I’m disappointed the independents haven’t grown larger.

I have always marveled at the potential of a technology built to create a Customer 360, provide a user-friendly UI for business users, integrate customer records with marketing channels, and enable real-time capabilities. Yet, few brands have fully embraced the totality of what CDPs offer.

The once-booming market has evolved — and brands must evolve with it. But before looking ahead, it’s worth recognizing what CDPs got right and the risks they took along the way.

The light CDPs shined

CDPs illuminated once-dark corners of the customer experience ecosystem, driving adoption across a wide range of technologies.

Identity resolution

Moving from anonymous to known is one of the first use cases CDP vendors promote. When the CDP market was new, identity resolution wasn’t a common topic in marketing departments or among those shaping customer experiences.

Most CDPs relied on basic identity resolution — combining known identifiers and stitching together a daisy chain of signals. However, simple daisy chaining did little to support more advanced rules such as B2B, households or other buying groups. For sophisticated buyers, these limitations made CDPs’ identity resolution capabilities underwhelming.

As a result, we’ve seen brands increasingly turn to dedicated identity providers, integrating them as a core part of their solution architecture. At my company, we’ve observed a significant shift toward these providers as companies seek to capture and apply more relevant customer signals.

Cross-domain tracking

CDPs often claim the ability to track users across sites and apps, but in my experience, this capability is usually oversold. Effective cross-site tracking requires server-side tagging at a minimum, along with a robust identity strategy — something many clients lack. Few have adopted the necessary changes to move to server-side tracking, though they should. In 2025, many are finally making the shift.

MetaRouter offers an outstanding solution for server-side tracking, and Google’s new Phoebe for server-side Google Tag Manager brings significant advantages. As the CDP market evolves, collecting digital signals remains as crucial as ever.

Customer 360

Many CDPs claimed “building Customer 360” as their primary benefit. Despite the false dichotomy between composable and traditional, traditional CDPs build a customer record. The problem? That record often falls out of sync with the brand’s golden record, undermining trust in the solution.

Composable CDPs have done well to seize the opportunity for a zero-copy alternative, but challenges remain. Few brands have their customer record structured for complex reverse ETL, and when they do, it’s often not optimized for CDP consumption. 2025 presents an opportunity for “Customer 101,” an MVP customer data store designed for rapid time-to-value.

Omni-channel

“Right message, right channel, right time” is a tired phrase. Still, CDPs came closer than most to making it a reality. With strong customer signals, embedded ML capabilities and robust integrations, CDPs have been a promising foundation for omnichannel marketing.

However, they’ve struggled with cost considerations — which aren’t inherently user-centric — and are not typically the home of messaging. While CDP AI/ML capabilities are robust, Centers of Excellence managing CDPs must collaborate closely with channel teams to deploy audiences and capabilities effectively. Meanwhile, advancements in AI are shifting more decisioning to the cloud, further reshaping the role of CDPs in the broader CX ecosystem.

Real-time

Outside of programmatic media, few martech categories emphasized real-time activation as much as CDPs. They enable real-time identity adjustments, segment recognition, campaign triggers and site personalization.

Not every brand requires this capability, but the market conversation has driven real advancements in customer experience that often benefit the end user. For example, we work with a storage company, a needs-based business where CDP responsiveness is critical to site personalization. This demand for real-time capabilities will remain strong in 2025 and beyond.

Dig deeper: Real-time customer data platforms: The promise and the reality

Where the market goes next

We’ve identified a few key ways the CDP category has helped advance market dialogue and enhance brand capabilities. With so much consolidation, where does the industry go from here?

Key investments for brands

Get customer data in the cloud 

Brands recognize that CDPs cannot realistically serve as the golden record for customer data. Instead, CDPs are more effective as drivers of customer experiences. As a result, brands are investing in strengthening their customer records to ensure their martech operates with the best possible data. This will lead to better customer experiences and reduced vendor implementation friction.

Make customer data smarter

Brands are increasingly using AI in the cloud. One lead generation company uses AI to analyze and categorize call records. At the same time, a grocery chain has built a churn detection system in Google Cloud that recovers over $60 million in lost sales annually.

Ensure ROI

The days of 2021–2022, when martech investments lacked robust measurement, are over. Now, when implementing new solutions, measurement is embedded from the start. This shift drives more customer intelligence through BI and a greater focus on advanced analytics tools like Google Analytics 4.

Dig deeper: The hidden reasons your CDP project is failing

Key needs for CDPs

End the ‘composable‘ vs. ‘traditional’ dichotomy 

The correct customer data for activation doesn’t depend on how it’s stored. Traditional CDP vendors should expand their reverse ETL capabilities to complement existing offerings. In highly regulated industries, zero-copy solutions may still be necessary.

Embrace best-of-breed

A truly composable approach means supporting brands using the best tools for their needs. Too often, CDPs have required full-suite adoption to unlock their full benefits (e.g., deploying a tag to access ML capabilities). Instead, CDPs should integrate seamlessly with a brand’s existing tech stack — whether using an identity provider’s signals or supporting server-side tagging through a brand’s chosen vendor.

Go deep into experience management

Pure-play CDPs will increasingly be part of a CX stack. The golden customer record will reside with the cloud vendor, and CDPs will shift toward enhancing customer experiences. The winners in this evolving space will integrate smoothly with simple tools and complex marketing technologies seeking to be the decisioning “brain” of the CX stack.

Dig deeper: 12 ways to use a customer data platform