The Audience Data Value Chain

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The Sell-Sider"The Sell-Sider" is a column written by the sell-side of the digital media community.

Tom Chavez is Founder and CEO of Krux Digital, an advertising technology company.

According to recent analysis (PDF) presented by Tolman Geffs of JEGI, in 2011, roughly 30% of the ~$10 billion in display advertising spend will be via audience-based buying, representing an astonishing 38% CAGR for this segment of the market.  This trend, coupled with the advent of real-time media sales channels, introduces huge opportunity and equally huge risk for publishers.

Responding to this trend is an imperative for publishers.  In preparing for digital media’s data-driven future, publishers must protect audience assets, adopt new techniques to address consumer privacy concerns, and lay the groundwork for making responsible use of consumers’ digital signatures.  Dirty, ill-gotten data is our industry’s blood diamonds, and no one wants to be caught buying, selling, or moving it.  Certainly, protecting data and consumer privacy come first, which is why those issues have been at the center of recent press coverage and industry dialogue.   But perhaps it’s sensible for us to at least begin to explore the challenges of audience monetization at scale.

The good news is that growing demand for consumer targeting offers publishers new ways both to enhance the value of existing media assets and to create entirely new revenue streams from data.  The bad news is that buyers currently have the technological advantage, and middlemen are offering an increasing number of ways to identify audience segments and secure targeted media placements that bypass publishers entirely.

With this post I hope to catalyze further discussion about how publishers can make profitable use of data on their own terms. To that end I’d like to introduce the Audience Data Value Chain, a framework for identifying and organizing all the elements of data management and monetization.

Five Core Functions

As publishers look to make use of consumer digital signatures in a secure, responsible, and profitable way, there are five critical areas of need.  Each of these represents a core business function in data management and monetization.   In my view, it’s difficult and unwise to decouple any one from the others.

  • Monitoring and protecting data assets: Data protection is key not just in terms of meeting the requirements of an evolving privacy regime, but because data itself is one of publisher’s most valuable assets. You can’t monetize something you don’t control.   You don’t control something that’s being pilfered or that others believe they own.
  • Making data collection practices more efficient and more secure: The more pixels and tags that get crammed onto a publisher’s page, the more opportunities there are for third parties to skim data, and the longer it takes for the page to load – an increasingly worrisome issue as search engines start to rank pages according to load time. Orphan pixels from inactive, abandoned campaigns, meanwhile, litter publisher pages. The provisioning and activation of a new pixel can take weeks to complete in some companies.  A process as leaky and messy as tag management circa 2010 cries out for control and automation.
  • Dynamically and intelligently productizing data assets: Millions of users and billions of digital interactions generate billions of fine-grained particles of opportunity for publishers.   In this sense publisher data is like extremely fine gold dust billowing about the crevices of an underground mine. Capturing all that dust, extracting it from the mine, turning it into purchasable bars, shipping them to buyers – all of these aspects call for new technology, new process, new roles.
  • Making audience enrichment and extension scalable: Lots of players have interesting data that, in theory, can be used to create new insight, new value, new reach for publishers.  To date the publisher has had to choose between significant first-party ‘roll your own’ investment or third party co-opetition risk with intermediaries and buy-side players.   Perhaps there’s a way for publishers to gain access to third-party data and increased user reach under safer, more sensible terms.
  • Driving choice for sell-side data monetization: Remember all of the excitement around net markets in 1999?  There was going to be a central marketplace for DRAM's, another one for auto parts, even one for underwear.  What happened?  All the principals resolved that they didn’t like the idea of giving a single intermediary so much pricing power.  They also realized that it was perfectly feasible for them to digitize, streamline, and accelerate their buying and selling while still participating in broker and exchange models where appropriate.  If a central, efficient marketplace with enough supply-side liquidity emerges, then publishers can simply dump their data there and voilà – the sell-side data monetization problem is solved.   Another model worth considering is for publishers to create peer-to-peer connections with any external entity looking for access to data.  Think of it as a real-time handshake from the supply side delivering controlled connectivity to market-ready audience data at scale.

Publishers looking to “do data right” need to take an end-to-end perspective.  A patchwork or piecemeal approach will yield suboptimal results, as any publisher who has managed their display business with disparate systems for order workflow, pricing, inventory management, and ad serving can easily attest.  With an end-to-end mindset, the determination to control their own destiny, and attention to the five critical areas I’ve overviewed here, tip-of-the-spear publishers will define and execute winning data strategies.

As William Gibson put it, “The future’s already here, it just isn’t evenly distributed yet.”

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3 Responses to “The Audience Data Value Chain”


  1. Dave Smith says:

    Nice piece Tom. The former Supply-chain guy in me care really relate.

    Lines up nicely with:

    1) Define the market
    2) Make the capital investment in production
    3) Produce the product
    4) Create the distribution network
    5) Distribute the product

    One learning about what's missing is closing the loop through customer feedback. Somehow, we need to get to a clear understanding of what the consumer really wants. Is it privacy? Is it more-relevant ads? Is it revenue sharing from their data?

    Understanding that consumer value is key to the system working in a sustainable way.

    Dave

  2. James Deaker says:

    Tom,

    I like your perspective and especially the analogy of the data assets being like “fine gold dust billowing about the crevices of an underground mine”.

    You do a good job laying out the core components of a data management and monetization platform, but I believe the biggest challenge is something you allude to in your closing paragraph – the need for an end-to-end solution.

    This will only be possible if data monetization platforms can integrate with other publisher systems (e.g. order management, inventory management, pricing, financial forecasting etc.) and give insight into the data value across Brand/Premium, Audience and Performance/Remnant segments. When that occurs the dream of a holistic yield and revenue management system will truly have arrived.

    I don’t think the data platforms need to create the end-to-end solution, but clearly they need to ensure the right hooks are in place.

  3. Alan Edgett says:

    Tom

    Great article, and I might have to "borrow" your gold dust analogy going forward as that is fantastic! As somewhat noted in the comments, one area I think is critical in this process is the "results" of the profile data + the advertising offered. Obviously this comes from the advertiser and is usually closely guarded, but over the years has been shared with selective ad networks--but oddly, not often with publishers. I'd like to see this change, and am working in this direction, as it provides all parties a key component in proper valuation of the "audience" at impression time.

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