How brands are emancipating themselves through data marketing

Google, Facebook, and Amazon have become indispensable in the online advertising business. However, we need more open ecosystems, argues Eichmann, co-founder and managing director of Adlicious. Here are his recommendations for advertisers. ‍

In the US, after forty years of unfettered growth, voices are once again calling for the use of antitrust laws dating back to the 1890s to curb the market dominance of the four largest tech companies—Google, Amazon, Facebook, and Apple. Together, they have a market capitalization of 3.6 trillion US dollars. Even though they operate in different markets, they are united by the fact that they aggregate unique data treasures, continuously expand them, and keep them locked away in so-called "walled gardens," restricted to their own monetization or to partners advertising on their platforms. The global sale of products via digital sales channels—which sparked a real gold-rush atmosphere in the 90s and laid the foundation for a multitude of digital business models—is being replaced by a new world of platforms. While iPhone sales, for example, stalled in 2016 and have been struggling with declining annual sales and revenue figures ever since, Apple's business with mobile apps and services is growing continuously. This development shows that devices are increasingly becoming vehicles for transactions, highlights the immense importance of the GAFA platforms, and demonstrates how they are redefining their business models in the competition for end customers and advertisers—with a clear goal: to enable, promote, and understand as many transactions as possible between third-party providers and end customers on their own platforms. However, platform economies are far more complex than restrictive, monopolistic marketplaces. The more interactions—such as social interaction, commerce, and information gathering—that take place in an ecosystem, the more versatile the monetization opportunities. To name just one example: Google pays 9.5 billion dollars a year to remain the pre-installed search engine on the iPhone, an amount the company amortizes through internet data and advertisements. Since 2017, data has been the world's most valuable resource, replacing oil. Accordingly, the largest data aggregators are transforming their business models.

‍Customer data is more valuable than product sales

‍This transformation is particularly evident in the online retailer Amazon. As can be seen from an email sent by Amazon marketing to merchants, Amazon generated 10.2 billion of its 17 billion total revenue in Germany in 2018 through its marketplace for third-party providers. Consequently, the core business—online retail—has long been less profitable than the platform business. For one thing, Amazon takes a 7–45 percent cut of third-party sellers' revenue. For another, the process of a transaction and the behavior leading up to a purchase generate valuable data that, when enriched with data science analyses, artificial intelligence, and machine learning, allows for precise inferences about purchase intent. If you include all of a customer's interactions on the platform, you get comprehensive profiles that include demographic and psychographic characteristics, from which interests, preferences, and needs can be derived. An ideal environment for advertisers. Based on user profiles and interaction histories, very specific target group segments can be formed, and media budgets can be deployed in a highly targeted manner with minimal wastage. To illustrate: on Amazon, you can design campaigns that include in the targeting every person who exhibits certain demographic characteristics, such as gender, age group, etc., and has viewed and/or purchased one or more specific products. Someone who has viewed or purchased all the Harry Potter books on Amazon will potentially also be interested in other products from the wizarding saga. Based on their profile, a predictive value can also be determined, indicating whether movies, video games, or any other product group is most likely to lead to a purchase. Every interaction and every purchase—regardless of whether the actual sale benefits Amazon or a third party—generates a continuous stream of high-quality data. For marketers, this data provides relevant insights for sales, product, and even financial decisions. For example, where a specific target group segment is in the sales funnel, which marketing message was the decisive lever for conversion, and which environmental factors influenced this positively or negatively. Concerns in the market regarding the dominance of the GAFAs and their influence on the delivery of advertisements are growing louder and louder. Already today, over half of all product searches start on Amazon, which impressively underscores its position as one of the most relevant advertising platforms. Will the gatekeepers of the walled gardens remain the only advertising partners, and what does the European advertising market have to counter this?

‍The origins of walled garden market dominance

‍To answer this question, it is worth taking a look at the origins of digital marketing and data-driven media planning in the German market. Ten years ago, long before highly developed ad servers, real-time auctions, and personalized media campaigns were conceivable, media planners worked with fixed media quotas at publishers and large, unwieldy paper plans. Tracking and targeting were still in their infancy and were only made possible by two providers. These providers collected fundamentally important information, such as gender, age, etc., through surveys and login data. Of course, both the quality and the quantitative density of the data collected are not comparable to today's standards. In particular, the low data density made it necessary to work with projections for audiences. This hampered targeting quality, i.e., the accurate delivery to the desired target group. At that time, the first campaigns that combined user data with inventory emerged on the publisher side. Here, too, it was necessary to work with projections, and the limitation to data from one's own inventory did not allow for any conclusions about purchasing behavior (market data) or personal preferences or cross-platform interactions (affinity data). German web portals and email providers like GMX did not evaluate messages for advertising purposes, and online shops worked with rudimentary analysis tools or kept their potentially competitively sensitive data to themselves. In this respect, the data existed in a wide variety of formats and in the silos of the data-collecting organizations. The GAFAs were able to take advantage of this starting position and build up their data treasures. Google diversified its search engine business with various free services, continuously aggregates more and more high-quality internet data, and currently dominates the advertising market with the largest market shares in the digital sector. Amazon opened its platform to third-party providers, has a 45 percent market share in e-commerce in the US, and is generating increasingly more advertising revenue through the shift in search behavior toward its own platform and the use of first-party market data. Apple remains very tight-lipped about the aggregation and use of big data. It is known that Apple uses data and technology to optimize its own business rather than for monetization in the market. Facebook analyzes every user interaction on the platform—including chat histories—and was able to track users across the web via its own platform using like buttons. To this day, no provider can come close to the amount of demographic and affinity data that Facebook has. The extent of what is possible with this data was revealed, among other things, in the Cambridge Analytica scandal. Millions of Facebook user profiles were analyzed without consent and used with a media budget of one million US dollars per day to specifically manipulate the 2016 US presidential election.

‍Programmatic in the field of tension of media planning

‍For marketers, the channels of the major platforms are unavoidable, and it would not be in the interest of advertisers to boycott them. "Money follows eyeballs – and all eyes are glued to the web." This means: as long as we, the end customers, continue to use the platforms as intensively as we do, they will remain relevant as advertising platforms. At the same time, for reasons of a balanced and pluralistic market order, it is concerning that data—which is of essential relevance for a multitude of economic decisions today and arises as a natural byproduct of advertising on the tech giants' platforms—is reserved for those few market participants. It must be in the interest of the industry to find a way to share data usage. Otherwise, there is a risk that the degree of personalization and the relevance of advertising messages will suffer across the board and can only be achieved without restriction on the platforms of the walled gardens. For a free and open internet, it must be possible for advertising companies to create relevant and inspiring impressions that resonate with their target group. As long as the sounding board for this is guarded by the gatekeepers of the walled gardens, this cannot happen. What options do advertisers have to reach their target groups in a targeted manner outside of the GAFAs? A basic prerequisite for delivering advertising to suitable recipients is a suitable targeting strategy and relevant target group data which, when correctly integrated into the campaign set-up and with consistent optimization, contribute significantly to campaign success. Due to the growing importance of data protection and regulatory and proactive restrictions on third-party data, target group data must be viewed in a more differentiated way and new ways must be found to obtain relevant data for campaign optimization. First-party data, which companies collect themselves about their customers via a CRM or logins, remains particularly valuable. They offer high accuracy and are a precise means of understanding existing customers and generating additional reach in a suitable target group environment through projections. Specific target groups and target group segments can be reached through second-party data, which is selectively passed on to partners within alliances such as Net.ID or Verimi and is subject to stricter guidelines than third-party data. The integration and assignment of data from various sources into a Demand Side Platform (DSP) requires profound expertise. If data integration into the DSP is carried out professionally, advertisers have a multitude of control options at their disposal, even outside the GAFAs. In programmatic buying, marketers should therefore act holistically and include various purchasing platforms. In this country, providers such as Otto Group Media, Zalando Marketing Solutions, or Media Markt Saturn are suitable options. The digital marketing industry offers versatile opportunities to interact with target groups. The GAFAs have perfected their offerings to provide advertisers with easy access to programmatic advertising delivery and precise measurement metrics. For campaign success, however, differentiated goals and sub-goals, precise tracking across different platforms, optimization of target group accuracy, and continuous qualitative and quantitative advertising effectiveness measurement are relevant levers that can also be realized independently of individual platforms. Digital campaigns unfold their greatest possible impact when a coherent strategy is implemented without limitation to a set of technology providers to achieve campaign goals, because no single technology can handle all campaign requirements. The media quality demands of recipients are constantly growing. Acceptance of advertising media requires creative, personalized, high-quality, and, above all, versatile campaigns to transport messages sustainably into the desired target group. Here, advertisers benefit from independent experts who can realize and evaluate target-group-relevant media experiences across all channels.

‍This article first appeared onW&V.