People-Based Advertising

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Ô People-Based Advertising

Evaluating the impact and future of addressable media In partnership with Signal

North American Edition In partnership with Signal

Published April 2016 Econsultancy London Econsultancy New York Econsultancy Singapore 4th Floor, Wells Point 350 7th Avenue, Suite 307 20 Collyer Quay 79 Wells Street New York, NY 10001 #23-01 London W1T 3QN United States Singapore All rights reserved. No part of this publication may be United Kingdom 049319 reproduced or transmitted in any form or by any means, Telephone: electronic or mechanical, including photocopy, recording Telephone: +1 212 971 0630 Telephone: or any information storage and retrieval system, without +44 207 269 1450 +65 6653 1911 prior permission in writing from the publisher. http://econsultancy.com Copyright © Econsultancy.com Ltd 2016 [email protected]

Contents

Executive Summary ...... 4

Foreword by Signal ...... 6 About Signal ...... 7 About Econsultancy ...... 7

Methodology ...... 8

In context: data-driven display advertising ...... 9 Addressable media or people-based targeting ...... 10 Data coming in first, second and third ...... 10 First party data ...... 11 Second party data ...... 12 Third party data ...... 12 Walled gardens ...... 13

Buying trends for people-based media ...... 15

People-based performance ...... 18

Where do brands go from here? ...... 23 Mobile is vital for brands – but customers hate brands on mobile ..... 24 Fraud remains a real concern ...... 25 Ad blocking ...... 25 Measuring ROI ...... 25 Data governance ...... 26 Data ownership ...... 27 Consumer response ...... 27

Appendix – Respondent profiles ...... 28 Advertisers ...... 28 Media Buyers ...... 31

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Executive Summary

Traditional digital display advertising doesn’t work. Does that sound like inflammatory clickbait? Perhaps, but interaction rates are negligible and larger brand impact is muted by fraud and poor consumer experience. The increase in ad blocking shouts from the rooftops that consumers are deeply unhappy with the status quo. With these unpleasant realities weighing on marketers’ minds, this report explores the hypothesis that smarter, data-driven, people-based display advertising is an important alternative to the legacy model that is failing the online ecosystem. People-Based Advertising is based on an online survey of 350 senior North American marketers and media buyers with moderate to high online ad budgets. The survey was fielded in the first weeks of 2016, covering a broad range of industry verticals. Without question, online advertising as we know it is at a crossroads. Forty-eight percent of North American advertisers agree with the statement that “The current model for display advertising is broken.” And while 39% are undecided, only 12% actively agree that the model as we know it is sound. Simply, it doesn’t work because it’s cheap to inundate consumers with ads and it still relies on a traditional targeting model that leads to irrelevant ads that lack context or content that matter to the consumer. At the same time, most advertisers and media buyers see promise in using data to improve the ad experience for consumers and yield for businesses. They foresee a scenario where fewer, more valuable advertisements do a better job of reaching true, in-market consumers; more than half agree that “…display will be replaced by relevant, data-driven advertising.” Products from Facebook and Google popularized the idea that advertisers could target anonymous but relevant individuals, helping with customer acquisition at the top of the sales funnel. Solutions like these rapidly raised awareness of the possibilities for data-driven display, with 68% of advertiser respondents reporting that they are familiar with it and over two-in- three currently practicing at least one form of people-based advertising. True people-based marketing happens further down the funnel using a specific connection to individual consumers. By tying their first-party data together with enduring digital identities, brands can have a much deeper understanding of their customers and prospects. This allows them to have more successful interactions wherever their audiences congregate. Study responses suggest that this approach works to reduce waste, increase conversion and improve efficiency.

47% 50% Among brands who have deployed people-based 40% advertising, 83% report that it has outperformed 36% standard campaigns on similar media. 30%

20% 13% 10% 4% 0% 0% People-based People-based People-based People-based People-based advertising has advertising has advertising has advertising has advertising has been much less been somewhat been no more or been somewhat been much more effective less effective less effective more effective effective

Familiarity has followed performance. Sixty-five percent of the advertisers who have deployed people-based campaigns report that it has outperformed standard campaigns on similar media. Perhaps even more indicative, the vast majority of media buyers polled (92%) said

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All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright © Econsultancy.com Ltd 2016 that they and their clients were increasing their people-based media buys, and are willing to pay more for it, with an average premium of 29% Why people-based advertising Companies’ need to cultivate and protect their first party data is well-established, with 70% stating that their effectiveness when using it to target people in their database is either excellent or good. The temptation is to use one of the high-profile data providers in this space, namely Facebook’s Custom Audiences (69% of respondents have used); Google’s AdWords Customer Match (63%) or Twitter’s Tailored Audiences (40%). The vast and varied databases these companies can provide are seductive but present challenges. Seventy-eight percent are concerned with data governance when working within these “walled gardens” and 74% are troubled by the customer data they’re handing over in the process. Understanding the relative utility and quality of data resources is an important cornerstone of building successful people-based advertising. Is people-based advertising a panacea? People-based advertising clearly has benefits but it also carries its own set of challenges. With a target audience that is limited by brands’ own data, reach is a central issue. Fortunately, it’s a problem that can be addressed using a measured approach to second and third-party data. Advertisers are warming to the idea of selectively sharing their data, and so are publishers. By combining data sets, publishers outside the walled gardens are creating viable alternatives. Most importantly, 51% of executives agree that people don’t want ads on their mobile devices. Yet this channel is frequently championed as the ‘killer app’ for brand engagement. Marketers will have to consider how to use devices wisely to interact. The near future of display Concerns aside, advertisers are clearly putting their money where their mouths are and investment in people-based advertising is rapidly making up a significant portion of ad spend. One quarter of respondents noted that people-based advertising comprises more than half of their digital ad spend, with an average of 32%. The growth trend is tied to results, both using the standard measures of display advertising and the harder metrics of direct marketing; 63% of advertisers report that they’ve improved on CTR based campaigns through people-based marketing, while 60% say that they’ve seen higher conversion rates from their addressable media campaigns. Brands see the writing on the wall of standard display. Two-thirds of media buyers and 53% of brands agree that the display advertising we’re used to will be replaced by relevant, data-driven advertising. More practically, 67% of advertisers say they are spending more of their ad budgets on people-based media buys – with 22% saying they plan to increase them at a rapid rate. More in the report…

• What are the issues with display advertising keeping advertisers up at night?

• How are companies managing the data governance issues created by the relative market dominance of brands such as Google, Facebook and Twitter?

• How important is the process of onboarding in the future that advertisers envision?

• Are consumers likely to be less compliant in the future about the use of their data in addressable media?

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Foreword by Signal

Taking the Guesswork Out of Digital Media

Digital media spending continues its pattern of robust growth in North America, where advertisers are projected to invest a record $35 billion in digital display ads this year.

And yet in so many ways, the industry as we’ve known it for 20 years is at a turning point. The challenges of engaging the always-on customer in today’s complex, cross-device environment are chronicled in the press on a daily basis, next to the headlines about bot-driven clicks and consumer rage against annoying ads. Meanwhile, banner-ad click-through rates languish at a paltry .06%.

Quite simply, brand advertisers and media buyers (not to mention consumers and CMOs) are deeply dissatisfied with traditional digital advertising. The programmatic revolution ushered in much- needed workflow efficiencies and economies of scale, but left advertisers waiting for a way to connect with real people rather than just cookies or pixels.

It’s time for a new model that satisfies the industry’s pressing need for targeting efficiency. This breakthrough study of the North American media landscape provides a revealing look at how the next revolution in online media is being fueled by people-based advertising solutions that remove the guesswork from digital media, reduce waste and provide a better consumer experience.

Advertisers are turning to first-party data to tie digital ads to humans and extend one-to-one engagement, addressability, and relevancy across devices and channels. People-based advertising, otherwise known as addressable media, helps brands target the customers they already know, who are also the most likely to convert, with the same accuracy and precision that direct response marketers are achieving in their email campaigns.

The addressable media revolution is already underway. For example:

• One-quarter of North American advertisers spend more than half of their digital budgets on people-based media buys. • 92% of media buyers say they and their clients plan to increase their people-based media budgets this year. • 83% of advertisers who have used people-based advertising report that it has outperformed traditional media campaigns.

These findings paint a picture of an industry on the verge of sweeping change, where early adopters are reaping the competitive advantages of higher performance and return on ad spend. Facebook has whetted advertisers’ appetite for addressable media. Having tasted the superior outcomes that people-based ads provide, brands and agencies are now looking to increase their addressable media buys and extend them to new channels and more publisher sites across the Internet.

We hope that the information in this report provides media buyers and advertisers with new insights into the opportunities presented by people-based advertising. We’d especially like to thank Stefan Tornquist at Econsultancy for the analysis and creation of this report.

Mike Sands CEO Signal

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About Signal Signal is a global leader in people-based marketing. Today, Signal’s technology runs on more than 45,000 digital properties in 158 countries. The platform facilitates billions of data requests monthly, supporting top brands around the world that generate more than $1.5 trillion in commerce, including Allstate, Audi, Crate & Barrel, DeVry University, GAP, JetBlue Airways, Macy’s, 1-800 Flowers, Starcom MediaVest Group, Starwood Hotels and Resorts, and many more.

Signal has been recognised with numerous awards and honours, including being named the third- fastest growing software company in the country, and the 51st-fastest growing company overall, on the 2015 Inc. 5000 list.

Visit Signal.co to learn more.

About Econsultancy Econsultancy’s mission is to help its customers achieve excellence in digital business, marketing and ecommerce through research, training and events.

Founded in 1999, Econsultancy has offices in New York, London and Singapore.

Econsultancy is used by over 600,000 professionals every month. Subscribers get access to research, market data, best practice guides, case studies and elearning – all focused on helping individuals and enterprises get better at digital.

The subscription is supported by digital transformation services including digital capability programmes, training courses, skills assessments and audits. We train and develop thousands of professionals each year as well as running events and networking that bring the Econsultancy community together around the world.

Subscribe to Econsultancy today to accelerate your journey to digital excellence.

Call us to find out more:

l New York: +1 212 971 0630 l London: +44 207 269 1450 l Singapore: +65 6653 1911

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Methodology

This report is based on an online survey conducted in January and February of 2016, using primarily third-party providers for distribution as well as some internal Econsultancy lists. Respondents from third-parties were offered an incentive to complete the survey. It closed on February 8th with 350 qualified responses. The sample was comprised of brand marketers and media buyers in North America.

Respondents were qualified for the sample based on media spend, knowledge in relevant areas, geography and seniority. More information about the respondents can be found in the Appendix at the end of this report.

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In context: data-driven display advertising

The internet is supposed to be the platform of relevance, based on data about consumers’ interests and behaviors. Display advertising isn’t living up to this promise. The user experience on the ad- supported internet is unpleasant; there are too many ads and they aren’t meaningful. As we’ll see, the opportunity to improve it is there, by moving beyond “spray and pray” and using customer data to deliver ads with genuine benefit to the individual.

Advertisers Figure 1: Agree or disagree - “The current model for display advertising is broken”

11% 1% 9%

39% 39%

Strongly agree Agree Neutral Disagree Strongly disagree

Respondents: 99

Increasingly sophisticated use of data and technology by both brands and consumers alike is throwing the inadequacies of standard display into sharp relief. While programmatic buying has solved a long-standing issue by making buying online display an efficient process, it has also exacerbated many of the usability issues dragging down the experience.

The inundation of ads has driven many consumers to adopt ad blocking software, thereby opting out of the basic premise of free content and jeopardizing the content economy. Although the numbers are relatively modest to date (roughly 10% in North America) they’re enough to scare our respondents; 50% think ad blocking could make the model obsolete.

Add these factors together, and marketers see change as inevitable. Forty-eight percent agree this is the case, and only 12% disagree. A large minority (39%) are undecided, but the weight of the evidence points to change.

If the model is broken, what is its future? To many, the answer is one that’s built on fewer ads of greater impact; a model where ads are more effective and ad space is more valuable. If marketers drill down into the data, seek accurate and relevant sources of information and apply it to intelligent ad targeting, more ads should land, fewer will be wasted and if a critical mass of advertisers are able to function this way, consumers should begin to have a positive relationship with online and mobile ads once more. Approaching advertising in this way is all about engaging with relevant, addressable media.

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Addressable media or people-based targeting Moving toward people-based targeting, otherwise termed addressable media or more broadly personalised/targeted advertising, is the next natural step for the programmatic ecosystem. The term “people-based marketing” has been used broadly to describe any approach that targets an individual, but it’s important to draw a distinction between solutions that rely on anonymity versus known/confirmed buyers. In the first case, a publisher will use what they know about a user to deploy ads against demographic or behavioural traits, but that user is anonymous to the marketer and possibly the publisher as well, at least in terms of self-reported identity. However, in true “people-based marketing” the customer or prospect is a known individual. Brands use their first party data set to identify the real people in their ecosystem. They use data “onboarding” technologies to selectively share that data with publishers and reach their audience where they congregate. It’s also of note that the use of “lookalike” modelling is often connected or even conflated with people-based marketing. This is the capability to use existing customer data to model and target similar audiences across third party publisher sites. The practice is an important complement to other forms of targeting because it can increase reach beyond existing customers in a way that takes advantage of what already been proven to work. As such it’s related to people-based marketing but doesn’t rely on the core value of targeting known individuals. Nearly 30% of executives surveyed stated that they knew the concept well (Figure 2). A further 39% stated they had a general idea which shows that the community can be said to be moving beyond talking about data as a 'good to have' and have begun contemplating the best ways to apply it in the real world.

Advertisers Figure 2: Which of the following best describes your familiarity with the concept of “people-based targeting” or “addressable media?”

45% 39% 40% 35% 29% 30%

25% 21% 20%

15% 10% 10% 5% 0% I am not familiar with I have heard these I have a general idea I know the concept the concept terms, but am not what it is well clear on the concept

Respondents: 211

Data coming in first, second and third Until recently programmatic's potential doesn't seem to have been fully exploited, largely because of the difficulty marketers have had in folding in data sources to get them to work harmoniously within campaigns.

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This can be for many reasons but primarily the challenge has been moving disparate data sets that weren't originally conceived of for this purpose and pressing them into action.

Additionally, the approach of many companies to programmatic trading has happened organically and even those with a reasonably mature strategy find themselves in possession of multiple data warehouses, buying platforms and publisher deals, leading to duplication and data redundancy.

Advertisers

Figure 3: Do you purchase advertising using any of the following targeting mechanisms?

70% 61% 60%

50% 47% 42% 40%

29% 30%

20%

10%

0% Targeting with first Targeting with Targeting with third Targeting with real party data such as second party data party data time intent data CRM or POS

Respondents: 193

First party data The king of information, first party data, is the brand's goldmine and its prerogative to protect both from a commercial and customer stewardship perspective. Exclusively shared in the relationship between customer and company, this data can be the most personal of PII (personally identifiable information).

Beyond name, age and address, first party data can encapsulate preferences, buying patterns, behavioural information and even contextual information such as browsing patterns and social media content.

This is the data that gives companies the permission to interact one on one with customers, forging a relationship and increasing loyalty and propensity to buy. Unsurprisingly, the majority (61%) of executives stated that they used first party data to buy advertising (see Figure 3).

Alone, however, it isn't enough to make the most of addressable media. Relying solely on first party data ignores the possibility that consumers browsed with you but purchased elsewhere. This is one of the main causes of annoying retargeting ads urging you to buy product you've only just paid for.

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First party data is also historical and may not reflect current purchase intent. A company can have every confidence that its first party data is correct when it sees a sudden flurry of activity in baby clothes for example but without contextual information, this is just a snapshot of a given point in time. To bring more depth to customer information, it's vital to seek context from second and third party data sets. Second party data Second party data bridges the gap between the small but precious cache of first party data available to brands and the vast but less reliable world of third party data. Second party data is the first party data of a specific partner or group of trusted partners. They work together by pooling data resources and allowing varying degrees of access to each other. For example, multiple travel-related websites might combine their data to extend their audience scale and depth beyond the capability of any individual member.

Second party data opens up what’s possible to scale. If it follows the norm, only 2% of visitors to a given brand website will go on to purchase, leaving a pool of 98% of potential customers. 1 By marrying anonymous first party data, gathered through cookies, with second party, brands can identify, track and serve targeted, programmatic ads to these ‘ghosts’. Third party data Third party data is totally unrelated to the advertiser’s own data sets. It is simply a set belonging to someone else that is a good match to the advertiser's own set or – crucially, its own desired set. Where third party comes in useful is finding potential customers for the advertiser that are most likely to convert.

Hand in hand with third party data comes the less explored real-time intent data. It is less explored because fewer advertisers are at a level of maturity that allows them to fold real time insights into an already complex data management and ad buying system.

In essence, it is about gaining greater insight into what potential customers are looking to achieve at the time they are looking to achieve it, involving analysing web behaviour and search terms. It is an additional layer of contextual data to manage and, if in real time, one that has to be meticulously planned for in an automated system.

To exploit this fully requires the partnership of experienced agencies, sound data management and the ability to devote skilled resources.

1https://econsultancy.com/reports/the-role-of-dmps-in-the-era-of-data-driven-advertising/

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Advertisers

Figure 4: Has your organization used any of the following solutions?

Facebook Custom Audiences 69%

Google’s AdWords Customer Match 63%

Twitter’s Tailored Audiences 40%

Yahoo!’s Custom Audiences 33%

Live Ramp 11%

We haven't used any solutions/Don’t 10% know/Not applicable

Another similar service 1%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Respondents: 207

Walled gardens These data sets can be sourced from anywhere and are commonly bought in to enlarge the advertiser's prospecting target group. Social media has proven fertile hunting ground and the major players have devised whole business streams around parsing up their own customer base into target groups that match advertisers' criteria.

In our survey, the most popular of these data sets was Facebook Custom Audiences at 69%, underscoring the proportionate power and market dominance of Facebook and Google. While both these brands and to a lesser extent Twitter and Yahoo guarantee the dual benefits of large but also highly specific customer groupings, they do pose risks to the marketer.

Programmatic's supplier landscape is changing all the time and as with any ecosystem there are cliques where groups pick their favourites and leave others out in the cold.

Operating in a closed ‘safe’ environment (there is a suggestion that there is a lower fraud or brand safety risk in a walled garden) has its benefits but the warning about keeping all the eggs in one basket applies.

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Media Buyers

Figure 5: How are most clients using people-based advertising?

Branding 33%

Loyalty and retention of existing customers 31%

Upselling/cross-selling existing customers 14%

New customer acquisition 14%

Reactivation of lapsed customers 8%

0% 5% 10% 15% 20% 25% 30% 35%

Respondents: 143

People-based advertising uses knowledge about the customer, so it is naturally being used to further existing relationships.

When it works, display advertising starts with attention, and not surprisingly branding is the primary goal as identified by media buyers, if only narrowly so. Marketers understand that the impact of any sort of display advertising is more often in long-term effect rather than immediate click.

For people-based advertising, however, direct actions play a more central role. The focus on retention and upsell/cross-sell is a reflection on the impact of data. When ads are based on customers’ real attributes they are much more likely to elicit an immediate or near-term response.

Many marketers begin with the practice of retargeting – using recent site data to spark ads that target recent visitors with the products they’ve viewed – but move on to more sophisticated retention and loyalty programs. For example, an airline targets current customers who are viewing competitors, using a second-party data pool to reach those customers across a network of travel sites.

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Buying trends for people-based media

Media Buyers Figure 6: For relevant clients, please estimate what percentage of their media budget is spent on people-based advertising.

14% 13% 12% 12% 12% 10% 8% 8% 7% 7% 6% 5% 5% 5% 5% 4% 4% 4% 3% 3% 2% 2% 2% 1% 1% 0% 0% 0%

Respondents: 139

Concerns aside, advertisers are clearly putting their money where their mouths are and investment is rapidly making up a significant portion of ad spend. One quarter of respondents noted that people-based advertising comprises more than half of their clients’ digital ad spend, with an average of 32%. The trend looks set only to grow with 22% of brands interviewed stating that they had plans to increase addressable buys quickly with a further 45% also increasing spend but at a slower pace.

Advertisers and Media Buyers Figure 7: How is your/your clients’ media buying changing in relation to people- based advertising?

Advertisers Media Buyers

48% 45% 44%

30%

22%

7% 3% 1% 1% 0%

We are increasing ourWe are increasing our We are keeping our We are decreasing We are decreasing media buys of media buys of media buys of our media buys of our media buys of people-based people-based people-based people-based people-based advertising quickly advertising slowly advertising the same advertising slowly advertising quickly

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Respondents: 198

The limits on people-based advertising have more to do with logistics and scale than budgets. In Figure 7 we see that the vast majority of respondents on both sides of the equation clearly indicating a desire and intent to increase their investment, with 92% of media buyers saying that their clients will be accelerating their people based media buying.

The question is how far they can go and how quickly? The limitations are in technology and brands’ as well as those of their partners. How quickly they can clean and onboard first party data, how large they can grow their first party data stores – these are the questions that marketers need to answer.

Advertisers Figure 8: Why aren’t you increasing your buys of people-based advertising?

Performance issues – ROI isn’t high 32% enough to warrant an increase

Measurement/transparency issues – we don’t get back the data we need to measure 32% outcomes

Complexity issues – it’s too time-consuming and cumbersome to get more people-based 28% advertising campaigns live

Matching issues – we don’t see high enough match rates to increase our 25% investment Privacy/data leakage issues – we’re concerned about how people-based 20% advertising will be perceived and/or about sharing data with a competitor 0% 5% 10% 15% 20% 25% 30% 35%

Respondents: 65

Only 34% of those using addressable media are not increasing their investment in the capability. Of these the vast majority are keeping budgets stable; only 4% are cutting their spending.

For about one-third of these respondents (only 10% of the larger sample) performance has not warranted an increase. But for almost all, they are maintaining their current level of investment with an eye to improvement, which can come via improved data and/or the technology to employ it.

The same percentage of respondents also note their frustration with the transparency, alluding to how the “walled gardens” don’t expose enough about how campaigns work beneath the surface to satisfy marketers.

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Advertisers Figure 9: How important is it that your advertising partners allow you to onboard your own data for targeting?

2% 15%

26%

58%

Vital Very important Somewhat important Not important

Respondents: 204

With an increase in people-based campaigns seen as fundamental by advertisers, there’s a parallel need for first-party data onboarding as shown in Figure 9.

The ability to onboard first party data is important to advertisers. Virtually all believe it’s an important capability, with 73% saying it’s “vital” or “very important” for partners to allow them to onboard their own data for targeting. Suppliers will have to work out how to accommodate advertisers’ increasing confidence while still benefiting from the big data pot.

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People-based performance

One of the biggest successes of addressable media has been to prove to advertisers that they are sitting on a gold mine. By using first party data – the free, readily available, wholly brand owned resource – 60% of respondents stated their campaigns resulted in strong ROI.

Advertisers Figure 10: Which of the following best describes the return on investment from your use of first-party data to target your advertising efforts?

60%

49% 50%

40%

28% 30%

20% 11% 10% 6% 6%

0% Use of first-party Use of first-party Use of first-party Use of first-party It's too early to data has resulted data has resulted data has resulted data has resulted tell in a very strong in a strong ROI in an average in a low ROI ROI ROI

Respondents: 179

The returns on first-party data (such as CRM or point-of-sale) contrast sharply with what’s available on the open data market; 70% describe their first-party targeting results as excellent or good.

Advertisers Figure 11: How do you rate the effectiveness of these targeting mechanisms for reaching “known” individuals (people in your database)?

100% 3% 1% 2% 2% 18% 29% 80% 27% 38%

60% 49% 50% 62% 40% 42%

20% 21% 20% 18% 17% 0% Targeting with first Targeting with Targeting with third Targeting with real party data such as second party data party data time intent data CRM or POS

Excellent Good Average Poor

Respondents: 114

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Media Buyers Figure 12: Compared to media buys without people-based targeting, how would you compare performance based on return on ad spend?

50% 47%

45%

40% 36% 35%

30%

25%

20%

15% 13%

10%

4% 5% 0% 0% People-based People-based People-based People-based People-based advertising has advertising has advertising has advertising has advertising has been much less been somewhat been no more or been somewhat been much more effective less effective less effective more effective effective

Respondents: 139

Figure 12 makes it clear that when specific customer knowledge is available, it works. There may be limitations to people-based advertising in terms of reach and scale, but not in performance, with 83% of media buyers reporting superior performance across their clients using the capability. Nearly half of these respondents say that it is “much more effective.”

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Advertisers

Figure 13: Compared to the channels listed, people-based advertising performs…

Compared to email marketing… 28% 36% 31% 5%

Compared to paid search marketing… 20% 39% 34% 7%

Compared to SMS marketing… 19% 38% 40% 4%

Compared to standard display advertising… 17% 48% 33% 2%

0% 20% 40% 60% 80% 100%

Much better Somewhat better About the same Somewhat worse Much worse

Respondents: 184

No one digital or traditional channel can do everything. Some are entirely focused on the top of the funnel, like broadcast television, while others like opt-in email exist only to communicate with engaged customers.

In direct comparisons with some of the alternatives, people-based marketing gets strong reviews. That most brands report it outperforming standard display (65% in Figure 13) is expected, but more interesting is the comparison to paid search. Against that channel where user intent is scripted and interaction expected, people-based marketing still gets the nod, with nearly 59% saying their results are better.

People-based marketing straddles the middle of the funnel, while playing a role at both ends. For acquisition, modelling using first-party data offers a way to profile audiences that are valuable and relevant for brands. This type of “lookalike modelling” uses second and third party data to extend reach, based on the benchmarks established by customers.

The mid-funnel is where most marketers first use people-based marketing in the form of retargeting, when recent visitors who are known and clearly in-market for a category of products are shown highly relevant and memorable ads in the days and weeks after first viewing them.

In retention and loyalty, the role of people-based is clear; to combine customer knowledge with the ability to meet and talk with customers wherever they congregate online. For example, a financial institution builds a profile of the customer that’s at risk of leaving. Using that lens, they build a people-based campaign directly addressing the issue and deploy it to publishers where competitors are vying for attention.

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Advertisers

Figure 14: In what ways has people-based marketing been more effective?

70% 63% 60% 60%

50% 46%

40%

30% 22% 20%

10%

0% Clickthrough rate Conversion Interaction rate Lift

Respondents: 154

It’s challenging to measure the true, full impact of display media. Even online, teasing out the effects of media from competing channels and over the long-term demands highly sophisticated measurement approaches and a commitment to analysis that’s often lacking. Since the inception of online display, clickthrough rate (CTR) has been over-recognized as a gauge of performance, even though ample data suggests that the overwhelming impact of display takes place later.

In context, however, it makes sense that CTR is the first response that advertisers give when asked about the improvement of people-based marketing. With retargeting being most brands’ first forays, immediate response plays an important part of the measurement mix. Sixty-three percent of advertisers report that they’ve improved on CTR based campaigns through people-based marketing.

More importantly across the range of marketing goals, 60% say that they’ve seen higher conversion rates from their addressable media campaigns.

Whichever method has been used to measure, people-based marketing has shown to increase effectiveness, supporting the presumption that more personalised, targeted and timely communications are more effective overall.

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Advertisers Figure 15: To target display ads to known customers, how much of a CPM premium would you be willing to pay for people-based advertising?

18% 17% 16% 16% 14% 14%

12%

10% 8% 7% 8% 7% 6% 5% 4% 4% 4% 3% 3% 3% 2% 2% 2% 2% 1% 2% 1% 1% 0% 0% 0%

Respondents: 186

In a well-aligned media world, performance comes at a premium that balances efficiency with access. Advertisers recognize the value in reaching known customers, and place it on a range in Figure 15, above. There’s significant variation that owes to varied sectors and experience, but most responses fall between ten to forty percent, and an average response of 29%.

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Where do brands go from here?

The results from Section 6 show that people-based or addressable media is inarguably an efficient, improved way to go about executing advertising strategy. While it outperforms some of the most significant communications channels, it also needs to be recognised that its USP lies in optimising the mix, not taking it over.

Advertisers and Media Buyers Figure 16: Agree or disagree: Typical display advertising will be replaced by relevant, data-driven advertising.

60% 49% 50% 45%

40% 29% 30%

20% 17% 17% 11% 8% 9% 9% 8% 10%

0% Strongly Somewhat Neutral Agree Strongly agree disagree disagree

Advertisers Media Buyers

Respondents: 103

Clearly, advertisers are ready to use their data for ad targeting. From their view in the middle of the industry, two-thirds of media buyers see the replacement of today’s model with more relevant advertising as inevitable. More practically, 67% of advertisers say they are spending more of their ad budgets on people-based media buys – with 22% saying they plan to increase them at a rapid rate.

An important stage of this evolution will be the extension of people-based advertising beyond the walled gardens of Facebook and Google. Marketers want to interact with their customers across the full range of sites on which they congregate. Ideally, they want to spark these interactions when the customer is in a commercially relevant mindset, which may not be the case on a social site. For example, a travel brand is likely to be more interested in someone browsing rivals’ fares than someone sharing their travel photos.

Clearly, the industry will find a balance. The scale and efficiency of the largest publishers will continue to introduce marketers to people-based advertising and be a mainstay of their display programs. At the same time, they will expand on their use of the practice to the constantly changing array of places where people congregate online. Publishers recognise the issues in the industry and the demand for addressable media.

Still, there are significant challenges that face the advertiser that plunging headlong into addressable media isn't going to solve. To discover where this strategy sits in the multichannel, it's important to make a frank assessment of those challenges.

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Mobile is vital for brands – but customers hate brands on mobile With mobile penetration globally at just under 3bn and predicted to rise to over 6bn in less than five years, mobile is a vital channel for brands. Disconcertingly, 51% of executives feel that people don't want ads on their mobile devices.

Mobile interactions with consumers are possible but it's such an intimate device that it's vital to tread softly. Native advertising within social has proven successful on mobile and this offers the potential for personalisation and targeting in a programmatic strategy. Equally email performs strongly on mobile devices, provided it's not as part of a new customer acquisition strategy.

Advertisers Figure 17: Do you agree or disagree with the following statements?

People don’t want ads on their mobile 17% 34% 33% 10% 5% devices

Ad blocking will make the current model for 13% 37% 33% 15% 1% display obsolete

Fraud affects the majority of our display 11% 30% 35% 22% 1% media

The current model for display advertising is 9% 39% 39% 11% broken

We are unclear on the ROI of display 7% 37% 29% 24% 2% advertising

0% 20% 40% 60% 80% 100%

Strongly agree Agree Neutral Disagree Strongly disagree

Respondents: 99

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Fraud remains a real concern Partly due to a sense of helplessness, brands feel fraud is currently a real challenge. By using pre- agreed inventory it is possible to avoid the risks of landing on non-brand safe sites but the issue of bots and viewability is harder to crack.

In part, the onus is on organisations such as the Interactive Advertising Bureau (IAB) to create a national, if not global, standard for viewability. However, while advances are being made towards this many brands are taking the issue into their own hands.

Most find the way to ensure maximum return and minimum wastage is to create agreements within their own agency and partner networks, eliminating uncertainty as to whether two or three seconds of video with the sound off or on constitutes viewable.

Bots are generally still one step ahead of the industry as a whole however reverting to private marketplaces and trusted inventory remains the main way to combat their influence.

Ad blocking Fighting the ad blockers could prove to be a thankless task . Customers don't want to be bombarded with pointless, intrusive advertising. Customers download an ad blocker – for free – and pointless, intrusive advertising is gone. That it is filtering out beautifully relevant and targeted ads matters not one jot to the customer.

Of course, ad blockers are having a big impact on publishers who are deploying a range of different tactics from pleading to the cudgel to get viewers to turn their blockers off.

Some partner with the ad blockers themselves in an effort to promote 'responsible advertising'. As a result, access to some sites is met with messages to the effect: Please remove your blocker and we promise to serve you only high quality, relevant and infrequent ads.

Other publishers simply won't serve content until the blocker is removed, typically a strategy only the most sought-after destinations can deploy.

Alternatives include increasing native advertising or sponsored content that remains immune to ad blocking.

Blockers are gaining traction on mobile too, but here the app ecosystem limits their reach as they have no impact on in-app ads or again, native on social media for example.

As a result, will blocking make the current display model obsolete? Certainly, it would seem to be an uphill battle to convince customers that a carefully curated selection of ads is something they should proactively select.

Some of the most sensible avenues to pursue would seem to be those that involve high-quality inventory (i.e. the sites who are able to insist ad blockers are disabled); native and in-app advertising and other forms of desirable, consumable content that deliver utility to the customer.

Measuring ROI In such an inherently quantifiable sector such as digital advertising it seems strange that it should be so difficult to measure return on investment that is directly attributable to display.

However this is also one of the defining elements of the digital ecosystem. Aside from direct response advertising measured through CTR (see Figure 14), understanding people-based advertising's contribution to a converted sale can be a complicated equation.

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For some time, tactics such as last click attribution have failed to provide the whole picture and advertisers are gradually turning to an assessment of the whole customer journey to understand how ads are impacting the bottom line.

AB or, more rarely, multivariate (due to the number of moving parts involved that can confuse the outcome) testing is one method advertisers are successfully using to understand how customers are impacted by different communications strategies. However, it has to be realised that this is more effective in companies with large sample sizes.

Data governance In Figure 18, advertisers concerns surrounding data are outlined and concerns over governance are a priority. Focusing on the three major third-party players: Google, Facebook and Twitter, nearly twenty percent of executives are very concerned about the implications for data governance while a further 60% are somewhat concerned.

Advertisers Figure 18: As an advertiser, how concerned are you about the following?

As an advertiser, how concerned are you about the following?

Consumer backlash or new privacy regulations in response to people-based advertising, e.g. 21% 61% 14% 4% Facebook, Google, Twitter

Giving the “walled gardens” too much information about your customers when using 20% 54% 21% 5% their solutions

Not receiving user-level data from the “walled gardens” like Facebook and Google, for uses 19% 58% 18% 5% like attribution

Data governance issues in connection with people-based advertising solutions offered by 18% 60% 18% 4% Google, Facebook and Twitter

0% 25% 50% 75% 100%

Very concerned Somewhat concerned Unconcerned Don't know

Respondents: 202

In essence, these companies have huge and largely unfettered access to customer data; far more wide-ranging than the consumers themselves are aware of.

As an advertiser capitalising on this store of data, there is no small amount of trust required on behalf of the advertiser that its people-based advertising through Facebook or Google will be done using this data appropriately.

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Data ownership Partnering with any of these entities has great implications for brands looking for reach and highly targeted customer groups but a vital stage is missing when it comes to working with those segments.

Instead of campaign data flowing back to the advertiser, the terms of their partnership agreements mean that much, if not all, of the resulting customer interaction data is owned by these third-parties and not the advertisers. Nearly 75% of respondents were very or somewhat concerned that they would not be able to break their data out of these organisations' walled gardens.

Some data sharing agreements revert the ownership of the data back to publishers and advertisers but the area is muddy at best. An important first step in a successful long-term addressable media strategy is having a clear vision of data governance and advertisers are right to be concerned.

Executives also stated that they were somewhat concerned about providing walled gardens with too much of their own proprietary data. It is important to note that data shared with these suppliers is anonymised and should see no transference to competitors who might be able to make use of it.

Third parties will argue that the more data is greater than the sum of its parts, allowing the generation of deeper insights and even better targeting.

Advertisers do however, want to avoid sharing information, even anonymised, that gives unique insight into customer behaviours that forms the bedrock of their USP.

Consumer response Over large majority executives (82%) are concerned that a consumer backlash over their data being used could impact either their addressable strategy or reputation. Equally, new regulations responding to such concerns that would subsequently limit the data resource from companies such as Twitter and Google would also affect advertiser effectiveness.

In terms of avoiding a backlash, it is incumbent on advertisers to make sure they are delivering value to the customer, even if it is just through an ad. In general consumers are aware of the value of their information and expect it to be used well.

A backlash as a result of Facebook et al misusing data is of greater concern to advertisers as they have less control but, as has already been mentioned, one way to mitigate any exposure to risk with third parties is to spread it, making sure that advertisers' people-based strategies are not wholly reliant on these single providers.

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Appendix – Respondent profiles

Advertisers

Figure 19: What best describes your position at your company?

35%

29% 30% 28%

25% 23%

20%

14% 15%

10% 6% 5%

0% Board level C-level/General VP/SVP/EVP Director/Senior Manager Manager Director

Respondents: 320

Figure 20: What is the size of your average monthly spending on media?

40% 35% 35%

30% 25% 25% 22%

20% 17%

15%

10%

5% 1% 0% <$10,000 $10,000 to $100,000 to $500,000 to >$1,000,000 per $99,999 per $499,999 per $999,999 per month month month month

Respondents: 218

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Figure 21: Are you more focused on B2B or B2C marketing?

35%

65%

B2C marketing B2B and B2C (equally)

Respondents: 218

Figure 22: Do you have direct responsibility of the following areas of your business?

Customer acquisition 64%

Marketing analytics 63%

Digital marketing strategy/budgeting 60%

Ad operations 43%

Audience development 38%

Programmatic 31%

Audience monetization 27%

None of the above 1%

0% 10% 20% 30% 40% 50% 60% 70%

Respondents: 211

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Figure 23: On which types of media do you buy advertising, directly or via a third party?

100% 100%

90%

80% 69% 70% 65% 57% 60%

50%

40%

30%

20%

10%

0% Online websites Offline magazines, Mobile site(s) Mobile app(s) catalogs, newspapers, etc. Respondents: 211

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Media Buyers

Figure 24: What best describes your position at your company?

35% 32%

30% 27% 25% 25%

20%

15% 11% 10% 6% 5%

0% Board level C-level/General VP/SVP/EVP Director/Senior Manager Manager Director

Respondents: 165

Figure 25: Do you have knowledge of any of the following areas of your business?

Media buying 100%

Media strategy and budgets 77%

Advertising products 62%

Advertising technology 60%

Programmatic buying 53%

Audience monetization 37%

0% 20% 40% 60% 80% 100%

Respondents: 158

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Figure 26: On which of the following platforms does your organization buy inventory?

100% 100%

90%

80%

70% 64% 60% 60% 56%

50%

40%

30%

20%

10%

0% Offline magazines, Online websites Mobile app(s) Mobile site(s) catalogs, newspapers, etc.

Respondents: 144

Figure 27: Roughly, what is the monthly media spend of your average customer?

45%

40% 38%

35% 32%

30%

25%

20% 16% 14% 15%

10%

0% <$10,000 per month $10,000 to $99,999 $100,000 to >$1,000,000 per per month $999,999 per month month

Respondents: 144

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