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The growing importance of consumer data

Dedric Choi
The growing importance of consumer data Dedric Choi

Let's get the truth out in the open: Far too many advertising dollars are spent reaching too few qualified customers.

There are a variety of reasons for this problem. How many times have you worked with a client and found that its idea of the target audience for the brand or product is significantly different from the actual audience? Similarly, how often have you looked at data around a "targeted" media plan and found that less than 50 percent of impressions were served against your target? Or you were told a site indexed 80 percent female, making a great fit for your brand, only to find 40 percent of your impressions were served to teenage boys.

Badly targeted spend isn't a new problem. John Wanamaker famously said, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." But as demographic reporting tools and analytics continue to improve, the truth of just how much advertising is being wasted on the wrong people is clearer than ever.

It is this reality that has spurred a desire on the part of advertisers for greater control over defining who they are targeting with their advertising. Simple audience definitions based on web behavior and endemic site selection are no longer enough. After all, sites don't buy products, people do, so advertisers want to know who is actually interested in their product and how to target this audience. Providing the data to enable this true "audience-centric" approach to media has become something of a holy grail in the online advertising world.  

You can clearly see this need in the marketplace with the explosion of online data providers. There are a slew of online pure plays like BlueKai, eXelate, and Quantcast that are quickly gaining traction. These players are being joined by traditional offline data providers, like Experian and TARGUSinfo, that are aggressively expanding their offerings into the online space. Sometimes it seems like there is a new data provider coming out of the woodwork every day.

Advertisers who are shopping for data face a number of challenges. The largest of these has been coverage, but this is constantly improving as providers get more and more data. One of the other challenges for advertisers is how to understand and identify what kinds of data they need. Different brands define their audiences in different ways. Some use simple demographic definitions. Others, like car companies, prefer to target "in-market" consumers. CPG companies often like to define audiences based on purchase behavior. For direct response advertisers, it is the challenge of understanding what data will provide a lift in performance. It could be demographics, geography, contextual, or all of the above. 

From a media buyer's perspective, this diversity and ambiguity implies the need for a data-agnostic view of the world. Because the kinds of data that matter vary so widely from advertiser to advertiser and from campaign to campaign, the ideal platform must be capable of using virtually any data source. This provides the greatest amount of flexibility to meet advertisers' needs, whether it is defining a brand target or identifying data elements to drive greater performance. 

The most interesting aspect of this rise in data primacy is how it has coincided with the rise and maturation of ad exchange technology. The advent of real-time bidding ad exchanges holds the promise of transforming the online media world. With exchange technology, advertisers can buy only the inventory they want and pay (or bid) only the price that they want. In this context, data become at once more necessary and more powerful. Additional data enable more effective decisions about whether or not to buy a particular impression based on data regarding the ad viewer. This ability, combined with advanced analytics and predictive modeling, provides insight into the ideal price to pay for each impression. 

The importance of exchange technology cannot be understated, as it allows advertisers to take direct action against the data assets now being made available. Without this, the data would really only be useful for post-hoc analysis. Advertisers could see what demographics and geographies performed well for them; however, they would still be limited in their ability to target those demographics and geographies. Exchanges enable targeting, and additional data make targeting all the more powerful. With more data, you can be more precise in your targeting and also increase the chances of finding specific data attributes that provide lifts in performance.

This is a very exciting time for online advertising and a point of inflection for the industry. The rise of data and exchanges will finally enable online advertising to live up to its long-held promise of precision targeting, reducing wasted spend by targeting only those consumers who promise to be the most valuable. Even more importantly, shining the harsh light of data truth on the online display market will improve both the results and the confidence of advertisers in the effectiveness of their campaigns. 

As advertisers gain confidence in their ability to see a given result for a given advertising spend, the amount they are comfortable with spending is likely to rise along with it. This effect may or may not increase overall advertising spend within a company. However, when media planners experience a greater comfort level with the expected return on their online media investment, this will stand in stark contrast to the relatively uncertain return from traditional media. As a result, the biggest effect of the marriage of data and real-time ad exchanges may be to tip the spend balance heavily toward digital.

Dedric Choi is vice president, partnerships and strategy, [x+1].

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