Buying Audience? Time to Forget Cookies

Privacy Issues Aside, the Cookie Has Big Limitations for Advertisers

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Michael Baker
Michael Baker
We all know that the last several years have seen an explosion in online advertising inventory and audience fragmentation. Agencies have promised "disintermediation" of ad networks as ad exchanges and targeting technologies have advanced, bringing literally hundreds of data-gatherers and other "audience brokers" into our business. With more agencies buying more inventory than ever through audience-targeting technologies, it's time for advertisers to think critically about whether and how this trend helps them understand and engage digital consumers.

As the media "context" espoused by publishers wanes in importance, cookie-based "audience segments" and user profiles have become more vital. While this raises well-publicized privacy concerns for some, brand buyers are more concerned with other key limitations of audience buying based on cookies.

  • Scale problems: Ever wonder why all the examples you see about data-buying are about the "Auto Intenders" segment? It's because this is one of the few cookie-based segments with enough scale to be interesting. Similarly, re-targeting website visitors, while effective, doesn't help a brand discover and convert new customers
  • Lack of competitive advantage: Cookie-based audiences are available to all media buyers, and the same data is often sold to many competitors. So not only is the advertiser failing to strategically differentiate, worse, it's paying an inflated cost of media due to competitive bidding on ad exchanges for a limited number of impressions attached to the same cookie list. Indeed, research indicates a 300% cost of media increase on average for cookie based audience buys (in addition to the cost of data).
  • Lost insights: The current agency "trading desk" focus on buying cookie lists is undermining the ability to deliver novel insights about a client's consumers -- the core problem of our time. Cookie myopia misses the importance of creative, media context, and, moreover, the unique mix of all of these elements that cause a consumer to engage with a brand.

We Don't Need Personal Data
It's clear that some consumers are "creeped out" by the compilation of data profiles that come so close to one's actual persona. So, why do we persist? Think about it -- we don't really want the profiles, do we? What we want is the best way to find prospective customers -- the ones who might actually want to buy our products. So why don't more technologies use the data coming from actual responses to send ads to the right people without caring who they are?

At our company we call this "thin" data; not the thicker, cookie-based data that everyone else transacts, but the simple impression level ad data that comes "for free" when a brand advertises. This data includes seemingly low value information, like the time, place, and creative content of an ad. But it all ties to downstream engagement (or lack thereof) between the consumer and the brand. And therein lies the magic; the true opportunity for data driven advertising comes from precise measurement and processing of a brand's own ad media and web site data. We obsess about "one-to-one marketing," but in reality there are discernible "performance patterns" that small clusters of consumers reliably repeat.

Cookies Don't Scale
This industry needs data measurement and processing solutions that work across platforms, including not just display, but mobile, video, and eventually IPTV. I think we can all agree today that this data solution won't be based on a persistent, cross channel cookie. Of course, cookie-based profiles don't play much of a role in emerging digital channels like mobile. It may not seem like it to audience buyers today, but this might be great news for us all.

The cookie enabled advertisers and publishers to more effectively measure digital advertising and it enabled individuals to enjoy a better user experience on the sites they visited. But cookies were not designed to do what today's audience targeting industry demands. Demand-side platforms have become a sexy segment in the past few years because of the scale they give buyers. Imagine how much more value could be derived from DSPs if the scale weren't just about the "push" transaction of buying an audience segment, but were also about the "pull" insights gleaned across multiple media -- media in which cookies based profiles play no role.

Every advertising study I've seen recently points to optimization based on creative being far more effective than optimization based on demographic. That kind of optimization requires the kind of scale that only the most modern DSP technology can provide. So, while you're welcome to enjoy that 30% lift in your .05% CTR, Mr. Profile-Buyer, we'll be busy building the cross-media ecosystem that we'll all be calling digital media, sooner than you think.

Michael Baker is CEO and co-founder of DataXu. Prior to that, he was VP at Nokia, where he created and ran Nokia Interactive after its acquisition of Enpocket in 2007. He was a partner at GrandBanks Capital, and an EVP at Engage.
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