A Look Back At 2011: We’re Wrong About Data

In talking to direct marketers and agencies alike, almost all data is coming from one of two places:

1. the marketer’s own website or
2. a third-party data provider.

Site Retargeting: Essential But Not The Sole Solution

In the case of the marketer’s own website, we’re talking about site retargeting, or more recently, personalized retargeting. This is when pixels are dropped on the marketer’s ecommerce site that gather up clickstream behavior on a user. When that user abandons the marketer’s ecommerce site and goes elsewhere that’s offering up their impressions for bid, an ad is shown that is personally relevant (based on the products she was viewing). (Disclosure: I launched personalized retargeting at Yahoo! in November 2010, but I’ll do my best to present an unbiased POV here.)

First, let me say that if you run any site where there’s an online conversion path and you’re not doing personalized retargeting, do it. It is foundational to any ecommerce site’s marketing strategy. Even if you don’t have online conversion goals, personalized retargeting can be used for branding — it’s a powerful tool for marketing to people who’ve initiated interest in your brand. (By the way, most folks aren’t thinking about it this way, missing out in a great opportunity to re-engage with “brand intenders”, but that’s for another post.)

There are essentially three problems with personalized retargeting:

1. Marketers end up using it as a crutch because it performs so well, but it cannot be the sole strategy. I’ve seen it happen time and time again where marketers start shutting down publisher run-of-site lines only to watch their site traffic plummet. Personalized retargeting only works when there are folks coming to the site in the first place — what some of us affectionately term “feeding the beast”.However, we in product in the display ecosystem also need to acknowledge that while it’s much too easy to make money from retargeting, our advertising customers demand and deserve high performing products in the upper funnel as well. Personalized retargeting is boring. Marketers need more. (And, we need top stop the insanity of non-integrated personalized retargeting campaigns whose brand effects are completely unrealized.)
2. Today, many of the companies offering personalized retargeting as their core product have marketers paying based on an arcane business model popularized by advertising.com more than a decade ago. For the last two years, everyone has been saying how the ad networks are dead. Not so. Tons of retargeting players have cropped up offering end-to-end retargeting solutions.That’s great except for the fact that they’re gathering up the marketer’s valuable ecommerce data and buying remnant impressions at pennies — with the result being that marketers are buying back their own online data at several multiples above the impression’s original value. I’m not saying the service isn’t valuable. The issue is what real value is being delivered versus what’s being charged to marketers.
3. Ninety percent of all retail purchases are still done in-store, so why only focus on the online channel? Yes, I know the online sales channel is growing like crazy, but even in the future, some goods and services will still require an offline purchase path. High consideration items, for example, are likely to be purchased offline. Even for items that are eventually purchased online, they often had an offline component. Think about the iPhone. You’d never buy one without playing with one. This is why Apple was brilliant to put stores all over the place. They don’t care if you walk out of their store after playing with the phone, because they’re fairly certain you’ll go home, noodle on it a bit, and buy one at 2am while your spouse is sleeping.

The point here is simple: What is the online world doing to leverage the other 90% out there? There are a handful of products out there that are attempting to address this problem like Yahoo!’s Audience Match and TARGUSinfo’s AdAdvisor, but the much of the industry is just waking up to this point. Think about it: store retargeting. In this world, offline actions drive marketing activities to the online channel where 40% of our time is spent.

There’s a subtle point here that if high consideration items require some offline touchpoints, then it leads one to realize that low consideration items are the ones being sold online. While this is a gross generalization, it’s an important point that demonstrates why current uses of retargeting fall short as a marketing strategy. Retargeting companies are focused on your online audience, a segment that is possibly your least profitable customer segment.

Using Data Very Very Carefully

The biggest gating factor to using that offline data is that it’s somewhere between “really hard” and “impossible” for most companies to activate that data. At the highest level, the online advertising industry is currently under the legislative microscope of Congress, which has threatened to heavily regulate the industry, so the usage of Personally Identifiable Information (PII) is a touchy subject. Then, you need a large, addressable, verifiable pool of online profiles (cookies) to match with known offline data, so it’s no mistake that Yahoo! and TARGUSinfo are the leaders in this space. Retargeting companies who only see a finite amount of online activity, without full user profiles, can’t offer access to all your customers. Finally, the marketer needs to get their customer data to a safe place where it can be matched against the addressable cookie pool. In thinking about creating marketing programs using customer data, really tough questions come up like:

• Why am I doing this? As a marketer, my customer data are my crown jewels. What are the goals for creating this online program; what will this mean for my relationship with these customers?
• If I do this, do I strip out some data because it’s too sensitive, or am I undercutting my goals by not providing that data? As an example, shopping frequency data could be highly useful for optimizing marketing messaging, but it is highly sensitive.
• What assurances do I have on data leakage? How can I be sure that my data segments, once running out in the online environment via DSPs, Exchanges or Publishers direct, won’t be sniffed out by other data modeling companies and compromised?
• And, probably the most frightening: This means I have to talk to IT. They tell me my CRM data lives in ten places and every time I ask for it in one place, the IT guy tells me it’s nearly impossible. Do I really want to deal with this? (Note: My link to the Nick Burns character is by no means a disparagement of IT at companies. I used to be one of these guys, but this character is only funny because it’s a fairly accurate perception.)

(I would like to thank Natalie Kubitz from Cognitive Match for her contributions and edits.)