The Current AdTech Model is End of Life! What can Brands Do ?

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80% of customers and prospects are online everyday but companies only reach a small fraction of them in a personalised way and neither the current adtech model nor the stretegy of walled gardens will solve this challenge for brands.

Consumer want digital experiences to be tailored to them. 63% for example expect brands to use their purchase history to provide them with personalised experiences1 and 89% of US marketers reported that personalisation on their websites or apps resulted in increased revenues2.

89% of marketers agree that understanding user journeys across channels and devices is critical to marketing success3. Only by understanding the journeys a personalised experience can be delivered through the whole customer lifecycle. It is no surprise companies are investing heavily in creating a 360 degree view of their customers, advanced customer analytics, omni-channel and real time campaign management.

However there is one big challenge for almost all brands and that is identifying customers and prospects digitally. While 78% of customers are online everyday4, brands typically only reach 0-1% digitally on a daily basis5.

Unlike Facebook, Google or Amazon, most brands do not have websites or apps where the vast majority of their customers log in on a daily basis. So what can brands do that want to use digital channels to understand their customer journeys and provide an engaging personalised experience? There are basically three strategies to address the digital identification challenge:

  1. Rely on DMPs and other ad tech providers that offer audiences based on third party cookie identification and syncing and probabilistic matching of customer identifiers (Current AdTech Model)
  2. Rely on providers that have a huge opt-in customer base like the social networks Facebook and Google and offer the opportunity to match the brands customer data for people based marketing (Walled Garden Strategy)
  3. Implement a first party customer data strategy building an own identity graph (for cross device and media) over time and strategic partnerships with other brands and publishers (First Party Data Strategy)

Evaluating the strategies against the criteria of:

  • Precision: Do I interact really with my customer or with somebody else?, and
  • Reach: How many of my customers do I reach?,

it is evident that from strategy 1 to 3, reach decreases while precision increases.

When we look at the current ad tech world of third party cookies and cookie syncing it is clear that this model which has been the foundation of digital advertising is getting close to its end of life. Primarily there are two reasons for this trend:

  1. Users are seemingly annoyed by intrusive digital advertising and many go as far as to use ad-blockers and
  2. Regulation especially in Europe with the upcoming general data privacy regulation (GDPR) and even more the proposed ePrivacy regulation is picking up on this trend to enforce users´s wishes.

Source: EU-Comission, EPrivacy fact sheet, January 2017

In a nutshell this will mean that third party cookies will shift from opt-out to opt-in and browsers will enforce these policies like the Safari browser already does on mobile devices today. As a result, only a small fraction of users will give consent and today’s reach advantage of the current adtech model will collapse in the near future.

Marketers are turning more and more to Facebook and Google that do not have this problem as they provide advertising based on user consent and user login. The new duopoly takes nearly all of additional digital advertising spend6. However even brands that have the right identifiers (predominately e-mail address) to do a custom match struggle to get the personalised response data they need out of the walled gardens.

 

That is why brands that are serious about personalisation, omnichannel experience and 360 view of the customer do not have a choice but to embark on strategy of building their own first party data by capturing digital interactions based on digital customer identification This is even more important as digital transformation will heavily rely on customer data to offer personalized digital services and move brands into more platform based business models.

The good news is that brands especially while they are building the customer data asset can combine strategy three with strategy one in the interim and with strategy two long term to make up for the missing reach. The only difference is that they use customer interactions generated by strategy one and two to build up their first party data asset on top of the primary marketing goal rather than leaving the customer data value creation to their advertising “partners”.

I will talk more about how to implement strategy three (First Party Data Strategy) in my next blog post. So stay tuned.

 

References:

  1. Google / Greenberg, U.S., Rising Expectations in Consumer Experiences, March 2017
  2. eMarketer / Evergage, “2016 Trends in Personalization”, June 14,2016
  3. Econsultancy / Google, “Customer Experience is written in data”, May 2017
  4. Eurostat, 78% daily users in Germany 2016
  5. Teavaro Research, 2017 based on interviews and case studies
  6. Fortune, How Google and Facebook have taken over the digital Advertising industry, Jan 04, 2017 http://fortune.com/2017/01/04/google-facebook-ad-industry/

Posted by Dirk Rohweder

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