Data strategy in advertising: A delicate dance at three different parties: Neeraj Singhal
With big data at the top of everyone's agenda and brands trying to establish a more direct relationship with their customers, it is no wonder that building their own first-party data capabilities had been at the core of most advertisers' strategy. A strategy they were forced to pursue because early third party data platforms used probabilistic modeling on small data samples and hence their watered-down data inevitably produced lacking results and eroded the brandsâ€™ and agenciesâ€™ trust alike.
This focus on building out first party data is also clearly reflected in a recent survey by Salesforce which was conducted with 900 leading advertisers across North America, Europe, and the Asia-Pacific region. The conclusion: 80% of the respondents have already invested in their own DMP systems, 59% of them in the last three years.
First Party Data Dilemma
This shift certainly facilitated that advertisers and agencies have smartened up about using data in their campaigns -- which is in all aspects a very welcome development. At the same time, however, this one-sided approach comes with some obvious drawbacks.
First of all, since first party data is collected from existing customers or those who interacted with the company in some way, it is great to strengthen customer retention and can help particularly well with cross-and upselling of existing customers. The other side of the coin, however, is that its value is naturally very limited when it comes to creating impact across the vast parts of the population that is not already actively engaging with the brand. Very few large advertisers are in a position to gather a good range of data attributes across majority of the population and it is also an undertaking that consumes a lot of resources and most of all, takes time. Hence, a first party data-only approach is always limited when it comes to prospecting new customers in the short and medium term.
As a result, advertisers have quickly understood that partnering is not an option, but a must. Salesforceâ€™s numbers again speak for themselves: the focus on first party data is stagnating while second and third party data is growing to all-time highs with 26% and 30% growth rates between 2016 and 2018 respectively.
Second Party Data: Sharing Data Directly
At the first sight, reverting to direct data partnerships with other brands and publishers makes sense since it promises more transparency than what the early third party data providers were offering. But then again, it comes with similar limitations. First of all, a second party data strategy necessitates complex and tedious technological integrations and contractual negotiations with every single partner individually. It is further limited because data partners usually are only willing to do such integrations on the basis of significant revenue promises.
Hence, it necessitates a high degree of commitment from any advertiser or agency while full clarity about the usefulness of the data is only gained once the integration is completed, not speaking of global data owners for whom a local data deal is not attractive enough and who are usually looking to be part of large platforms that can monetize their data across geographies and client verticals.
High Quality Third Party Data
It is logical then that after having considered all the advantages and disadvantages that come with making direct data partnerships, advertisers have reverted back to using high-quality third party data platforms. Going down this path, the ability to distinguish between good and bad providers makes all the difference. The good news is that there are good ones out there, by now even in India and Asia overall.
When choosing a third party data platform to work with, advertisers are well advised to pay special attention to the sources of the data provided, and understand how precise that data is based on its nature and collection. For instance, data that has been user ID-verified and comes from trusted organizations such as banks, telecom operators or purchase data from e-commerce sites, will always be more accurate than inferred or probabilistic data from other sources.
Additionally, advertisers need to understand the internal workings of these third party data providers to see if they apply data quality testing, data prioritization and data refreshing in order to further increase the quality of data segments or if they go the easy route and prefer nice powerpoints over expensive engineering resources.
Once carefully selected and tested, third party data platforms can effectively complement any brand and agencyâ€™s first party data with further meaningful data attributes and the necessary reach to entertain the entire digital funnel. Second party data sources can be connected additionally to fill any possible gaps that justify the necessary resources for a direct partnership. Hence, a successful data strategy and execution means you should consider dancing at all three parties at the same time so you can make the right moves, no matter which music is playing.
The author is VP, Business Development, Zeotap
Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com
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