Commentary

Segments Are So 2010

Real-time bidding (RTB) has created fantastic new opportunities for display advertising. Scores of data companies have cropped up, enabling you to buy audience segments that are seemingly a perfect fit for your business. For example, if you are an automotive company, you can easily buy the auto-intender segment.  All that is required is to ask your Demand Side Platform (DSP) to serve ads to this highly targeted audience. Digital marketing Utopia -- right? Not quite. 

Unfortunately, the display advertising ecosystem relies on an antiquated mechanism for targeting: the unwieldy, rigid and outdated audience segment cookie. This piece of browser hackery has been leveraged by data companies to create and sell audience segments. It technically works; a user can be identified as belonging to a particular segment and targeted against. However, changing that segment based on learnings and campaign performance is virtually impossible.

Audience segments sold by third-party data companies are almost always black boxes -- you don't know how they add users to the bucket. You might counter: "who cares, provided it delivers me results!". Fair enough, but the reality is that most audience segments don't work and you will quickly question their effectiveness. I'm not being entirely fair; within many audience segments there are likely pockets of users that are performing extremely well. All you need to do is reach into a segment and boot out the users that aren't performing. Segment the segment, if you will. Unfortunately, you can't do this -- cookie-based segments cannot be changed. You are stuck targeting your expensive segment until that cookie 'expires' (typically 7 to 30 days) before you can test your next segment. Sure, you can set the cookie to expire in 1 day, but this is absurd and your life will become a pivot-table nightmare.

What’s missing

A segment is nothing more than your current "best guess" at whom you should be serving ads to. Ideally, this guess would need to be refined constantly based on real-world learning and results. Every aspect of how a segment is created would need to be measured and then modified in real-time. Your audience segment may even change through the course of a single day! We have real-time bidding; what we are missing is real-time segmentation.

Search marketers know a secret

 A search marketer will look at you funny if you ask them about what audience segment they target. SEMs think in terms of keywords. They log in to AdWords or use a bid management platform like Kenshoo, Marin or Omniture to pause keywords, change bid prices and generally manipulate who they are reaching. Without knowing it, they are effectively peering into their segment and modifying it based on real-time learnings. It's highly effective and it works.

The other major concern with third-party audience segments is that your competitors are likely buying the exact same audience segment as you. If that's the case, what is your competitive edge? How can you compete if you are using the exact same approach?

Real-time Targeting

The end-game here is that we cannot use fixed, cookie-based segments. Instead, the targeting intelligence and data should be stored in the cloud where it can be rapidly changed and optimized in real-time. The data used to figure out which audience to target should be query-able and consist of both first-party data and third-party data. DSP's may claim to have 'integrated' with data providers but this is misleading -- they simply mean that these predefined audience segments are available at bid time -- it doesn't mean that the segments can be modified.

The future of display advertising will belong to DSPs that offer tighter integration with third-party data sources. These hybrid platforms will offer increasingly more powerful tools that enable marketers to "program" their campaigns with far more control and precision than ever before.

About Chango

Chango is a media buying platform that specializes in search retargeting. Using keywords, advertisers can find new customers by targeting those users literally searching for the keywords that matter to them, and finding them on display pages.

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