Second-Party Data Can Solve Advertising Relevancy, But Misuse May Stop It In Its Tracks

tomlabandData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Tom Laband, co-founder and CEO at adsquare.

Marketers urgently need to make digital advertising more relevant – particularly on mobile devices where consumers expect, even demand, a more personal touch. But it’s not just based on what consumers want; it’s also driven by the alarming rise of ad blocker use, especially in mobile browsers.

While there is a lot of data available to power more contextually relevant advertising for audiences, each has its shortcomings. First-party data, highly valuable because it is collected by an advertiser or publisher through direct consumer relationships, is limited in scope. Third-party data, which is aggregated by companies that don’t have direct relationships with consumers, offers reach but data quality and costs vary widely.

This is why second-party data is shaping up to be both the biggest opportunity – and challenge – for the industry.

At its core, second-party data is first-party data from other companies, such as publishers, telcos or app developers, and sold to advertisers to add depth and additional meaning to audience targeting. The data, highly valuable because these data owners are drawing from their direct relationship with their customers, provides insights on what audiences do and enjoy in the digital realm. That includes the products they search for, the music they listen to, the content they access and how they act and interact in the physical world.

Yet despite the big business opportunity for data owners, there are not many takers. A recent Forrester Consulting study found that only 9% of US digital marketers and customer insights professionals sell their data, and advertising is just a small percentage. Respondents cited “privacy concerns” and “security controls” as the top reasons why they did not leverage the opportunity. Read between the lines, and these results tell us data owners are worried about losing control over their data after it leaves their hands.

They are cautious for a good reason. It’s an open secret in the industry that some companies, black sheep along the advertising food chain with access to data, are abusing this privilege – enhancing their models and products with data without regard for data ownership. Even worse, data leakage and the blatant disrespect of data ownership have become the new normal in some parts of our industry.

But there is no gray zone for working with data. There is a clear definition of ownership and contracts that determine who is allowed to use which data and for what purpose.

To unlock the full potential of targeting and to make ads so relevant that users do not feel inclined to block them, the ecosystem must work together to make second-party data available to advertisers and their agencies. It must also address the rising concerns around data ownership that threaten its continued growth and health. From my perspective, several things must happen.

No Trivial Matter

First, the market must recognize that misuse of data is not a trivial offense. Everyone in the industry has to agree on this and demonstrate this through their actions and choices, beginning with the resolve to purposely seek partners that uphold the rights and interests of data owners and providers. Even though you might argue companies are not directly harmed when data is misused or compromised, I would counter that an insecure ecosystem – one that potentially discourages brand advertisers and their budgets – will only harm us all in the end.

Defined Usage

Second, the market needs to implement a framework supported by technology to ensure that second-party data is exclusively used for the targeting of a specific campaign, not handed around without recompense. A good blueprint to follow is the mechanics behind iTunes.

It has succeeded in offering a secure streaming platform to uphold the rights of the content owner and enhance the experience of the consumer. The platform allows users to license a movie, stream it in the defined environment and time frame and the movie deletes itself after 24 hours. The existence of a predetermined and defined agreement, enforced by Apple playing the role of a trusted and neutral party, clearly benefits all parties.

Controlled Access

Finally, data owners need full control and transparency over who has access to their data. In the media world this challenge has already been solved for premium inventory within programmatic advertising. Ad exchanges use private marketplaces to select who has access to their inventory, negotiate private deals and unlock new revenues.

The concept of a private marketplace should be applied to data and adapted to meet the needs of data owners. Such an approach would succeed in building trust, providing these companies the needed instruments to make their assets available in a transparent way.

From the advance of ad-blocking technology to increased concern about data leakage, the ad tech industry is marked by hot topics and heated debate. These discussions, focused on understanding the issues and seeking a silver bullet solution to the problems, underline the pivotal role of second-party data to boost advertising relevancy and build a prospering and sustainable economy.

As more brands explore the new opportunities around programmatic platforms and data, we, as an industry, must take charge of keeping our environment clean.

Follow Tom Laband (@TomLaband), adsquare (@adsquare) and AdExchanger (@adexchanger) on Twitter.

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