Viktor Eichmann

How brands emancipate themselves through data marketing

Google, Facebook and Amazon are an integral part of the online advertising business. But more open ecosystems are needed, demands Eichmann, co-founder and managing director of Adlicious. His recommendations for advertisers.

After forty years of free growth, voices are once again being heard in the USA that a legal source of competition law from the 1890s must be used to curb the market dominance of the four largest tech companies — Google, Amazon, Facebook and Apple. Together, they have a stock market value of 3.6 trillion US dollars. Even though they operate in different markets, what they have in common is that they aggregate unique data treasures, constantly expand and seal them off in the so-called walled gardens, restrictively for their own monetization or for advertising partners on their platforms. The global sale of products via digital sales channels — what caused a veritable gold-digging mood in the 90s and laid the foundation for a variety of digital business models — is being replaced by a new world of platforms. While sales of iPhones, for example, stalled in 2016 and have been struggling with annual declining sales and revenue figures ever since, Apple's business with mobile apps and services is steadily growing. This development shows that devices are increasingly becoming a vehicle for transactions, how important the GaFAs platforms are and how they are redefining their business models in competition for end customers and advertisers — with the clear goal: to enable, promote and understand as many transactions as possible between third-party providers and end customers on their own platform. But platform economies are far more complex than restrictive, monopolistic marketplaces. The more interactions — such as social interaction, trading, and information gathering — of daily life take place in an ecosystem, the more diverse the monetization options. To give just one example: Staying installed as a pre-installed search engine on the iPhone cost Google 9.5 billion last year, which the company amortizes via 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 sales of goods

This transformation can be seen particularly well at online retailer Amazon. As can be seen from an email from Amazon marketing to retailers, Amazon made 10.2 billion of its total turnover of 17 billion in Germany in 2018 with its marketplace for third-party providers. The core business — online retail — has therefore long been less profitable than the platform business. On the one hand, Amazon accounts for 7-45 percent of the turnover of third-party providers. On the other hand, valuable data can be generated from the process of a transaction and behavior up to the conclusion of a purchase, which, enriched with data science analyses, artificial intelligence and machine learning, enables precise deductions of purchase intent behavior. If you include all interactions of a customer on the platform, the result is comprehensive profiles that include demographic and psychographic characteristics and from which interests, preferences and needs can be derived. An ideal environment for advertisers. Based on user profiles and interaction chronicles, very specific target group segments can be created and media budget can be used very specifically, with minimal wastage. To illustrate: Campaigns can be designed on Amazon which include every person in the target group, who has 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 Harry Potter books on Amazon also wants to be potentially interested in other Wizarding Saga products. Based on his profile, a predictive value can also be determined, which indicates whether films, video games or any other product group are most likely to result in a purchase being concluded. Every interaction and transaction — regardless of whether the actual sale favors Amazon or a third party — creates a continuous stream of high-quality data. For marketers, this data provides relevant insights for sales, product and even financial decisions. For example, where in the sales funnel a specific target group segment is located, which marketing message was the decisive lever in the conversion and which environmental factors had a positive or negative influence on them. Concerns in the market about the dominance of GAFAs and their influence on the display of advertisements are getting louder and louder. More than half of all product searches already start on Amazon, which impressively underlines its position as one of the most relevant advertising platforms. Will the Gatekeepers of Walled Gardens remain the last advertising partners and what does the European advertising market have to do to counter this?

The Origins of Walled Gardens' 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 sophisticated ad servers, real-time auctions and personalized media campaigns were imaginable, media planners worked with fixed media quotas with publishers and large, Cumbersome paper plans. Tracking and targeting were still in their infancy and were only made possible by two providers at all. In surveys and via login data, they collected fundamentally important information, such as gender, age, etc. Of course, both the quality and the quantitative density of the data collected are not comparable with today's standards. In particular, the low data density made it necessary to work with projections for audiences. Targeting quality, i.e. accurate delivery to the desired target group, suffered as a result. At this time, the first campaigns were created on the publisher side that combined user data with inventory. Here, too, extrapolations had to be worked with and the restriction to data from one's own inventory did not allow any conclusions to be drawn about buying behavior (market data) or personal preferences or cross-platform interactions (affinity data). German web portals and email providers such as GMX did not evaluate messages for advertising purposes and online shops worked with rudimentary analysis tools or kept their potentially competitive data to themselves. As a result, the data existed in a wide variety of formats and in the silos of data-collecting organizations. The GAFAs were able to make use of this initial situation and build up their data treasures. Google diversified its search engine business with various free services, is continuously aggregating more and more high-quality Internet data and is currently dominating 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 USA and is generating increasingly more advertising revenue by shifting search behavior to its own platform and using first-party market data. Apple is keeping a very low profile when it comes to aggregating and using big data. It is well known that Apple uses data and technology to optimize its own business and less to monetize on the market. Facebook analyses every user interaction on the platform — including chat histories — and was able to track users across its own platform with Like Buttons. To date, no provider can even begin to have the same amount of demographic and affinity data as Facebook. The extent of what is possible with this data was shown, 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 at the Crossroads of Media Planning

For marketers, the channels of major platforms are essential and it would not be in the interests of advertisers to boycott them. “Money follows eyeballs — and all eyes are glued to the web.” In other words: As long as we, the end customers, continue to use the platforms intensively, they will remain relevant as an advertising platform. At the same time, for reasons of equal and pluralistic market organization, it is questionable that data that is now essential for a variety of economic decisions and is created as a natural by-product of advertising on the platforms of tech giants is reserved for those few market participants. It must be in the interests of the industry to find a way to share data. Otherwise, you risk that the level of personalization and relevance of advertising messages will suffer across the board and can only be fully achieved on the walled gardens platforms. For a free and open Internet, advertising companies must be able to create relevant and inspiring impressions that resonate with their target group. As long as the sounding board 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 men outside the GAFAs? The basic requirement for advertising to suitable addressees is a suitable targeting strategy and relevant target group data which, correctly integrated into the campaign set-up and with consistent optimization, make a significant contribution 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 of obtaining relevant data for campaign optimization must be found. First-party data, which companies collect themselves from their customers via CRM or logins, is still particularly valuable. They offer a high level of accuracy and are a precise means of understanding existing customers and generating additional reach in a suitable target group environment through extrapolations. Specific target groups and target group segments can be reached through second-party data, which is selectively shared with partners within alliances such as net.ID or Verimi and is subject to stricter guidelines than third-party data. Integrating and assigning data from various sources to a demand-side platform (DSP) requires profound expertise. If data integration into the DSP is carried out professionally, advertisers have a variety of control options available, even outside the GAFAs. In programmatic purchasing, marketers should therefore act holistically and include various purchasing platforms. Providers such as Otto Group Media, Zalando Marketing Solutions or Media Markt Saturn are available in this country. The digital marketing industry offers a wide range of opportunities to interact with target groups. The GAFAs have perfected their offerings to give advertisers easy access to programmatic ad management and precise measurement metrics. However, differentiated goals and sub-goals, precise tracking across various platforms, optimization of target group accuracy and continuous qualitative and quantitative advertising impact measurement are relevant levers for campaign success, which can also be implemented independently of individual platforms. Digital campaigns have the greatest possible impact when a coherent strategy is implemented without limitation to a set of technology providers to achieve campaign goals, because no technology can meet all campaign requirements. Recipients' media quality requirements are constantly growing. Acceptance of advertising materials requires creative, personalized, high-quality and, above all, versatile campaigns to deliver messages to the desired target group in the long term. Here, advertisers benefit from independent experts who can create and evaluate target group-relevant media experiences across all channels.

This post is first posted at W&V appeared.


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