• by Greg Herbst , Columnist, October 8, 2018

With an ever-growing number of measurable digital signals, a data-driven approach has become the norm across the marketing industry. Greater demand for data means there is opportunity for a thriving market, and in the past few years we’ve seen a proliferation of third-party providers enter the space.

Amid growing regulation, many are wondering if that growth will end. While some are reporting a decline in available third-party data sources, some companies are betting big on data, as with Acxiom selling off its AMS division but holding on to LiveRamp, one of the most trusted marketing data purveyors.

Quietly, third-party data in our industry began undergoing significant changes well over a year ago. Data marketplaces have eliminated segments en masse, but it’s hardly cause for alarm. The truth is that a cleaner, slimmed-down third-party data marketplace is better for both marketers and the data providers themselves.

Eliminating duplication

While third-party data is certainly valuable to marketers, the industry suffers from massive duplication. Marketplaces offer tens of thousands of pre-built segments assembled around insights gathered from third parties. The Bluekai "Little Blue Book"  guide for data buyers listed 41 data providers in late 2014.   Liveramp's partner website currently lists more than 50 partners that start with the letter A.

It’s safe to say that a data marketplace will not sell every single one of these segments in a month, much less an entire year. Marketplaces don’t need all these different suppliers providing them with the same gender or demographic data. There is bound to be overlap, given all the reselling within data providers, and the result offers no benefit to our industry.

Saving on server costs

Data marketplaces are in a similar position to the action hero who desperately needs to lighten the load on a plane in order to take off. The marketplaces can’t survive if they need to pay hosting costs for tens of thousands of data segments that have no benefit to marketers.

Therefore, the exchanges must cull their offerings or suffer. Over the last year, we have witnessed them quietly trimming many thousands of segments and creating preferred partnerships with the data providers who offer data that consistently perform. This shakeout will continue as demand for data transparency increases and bad data is continually weeded out.

Quality over quantity

Culling data segments is ultimately a push toward quality. Just as publishers cut down on their available inventory to deliver cleaner pages with more impact per ad unit, data marketplaces must now limit their offerings to effective, high-quality data segments that deliver marketing and sales lift.

Data marketplaces are recognizing that only the best possible data is going to help them succeed. Duplication leads to a crowded marketplace, little differentiation in performance, and has the potential to damage a marketer’s perception of third-party data.

The next phase appears to be moving towards a designation of “preferred” data sets, promoting suppliers that meet certain thresholds for uniqueness, accuracy and freshness. The marketplaces themselves have a self-interest in diligently assessing, ranking and scoring their direct data suppliers.

The world’s largest advertisers, led by P&G, are pushing for more accountable media. Advertisers want transparency into where their digital media dollars are being spent, and they are now pushing for more transparency into how the third-party segments are assembled. If data exchanges rise to meet these demands, it helps all marketers in the long run.

The continuing conversations about GDPR and other data policies show how much marketers rely on information sources beyond their own first-party data. A cull across the ecosystem might seem frightening to some, but it should benefit marketers, data purveyors and the overall reputation of third-party data itself.