The Impending Convergence of Advertising and Marketing

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Information about The Impending Convergence of Advertising and Marketing

Published on June 27, 2014

Author: teradata



The seamlessly integrated marketing organization has been a promise of talking heads and wish of marketing executives for years. And it is ultimately armed with an integrated marketing hub - a suite supplying data management, analytics, decisioning and content delivery across all channels. While the individual complexity of businesses and rapid innovation of communication technology make the full vision an ever-evolving process, advancements have already been made with software providers consolidating marketing operations, campaign management and digital messaging applications into integrated portfolios. This has benefited marketing campaign managers, planners and analysts, but a handful of digital marketing functions still use separate, non-integrated systems to accomplish their work. The digital advertising department is one of these functions, but not for long. Today’s customer-focused strategies result in an impending convergence of marketing and advertising.

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WhenOurPowersCombine: TheImpendingConvergenceofAdvertisingandMarketing andWhattoDoaboutIt

The seamlessly integrated marketing organization has been a promise of talking heads and wish of marketing executives for years. And it is ultimately armed with an integrated marketing hub - a suite supplying data management, analytics, decisioning and content delivery across all channels. While the individual complexity of businesses and rapid innovation of communication technology make the full vision an ever- evolving process, advancements have already been made with software providers consolidating marketing operations, campaign management and digital messaging applications into integrated portfolios. This has benefited marketing campaign managers, planners and analysts, but a handful of digital marketing functions still use separate, non-integrated systems to accomplish their work. The digital advertising department is one of these functions, but not for long. Today’s customer-focused strategies result in an impending convergence of marketing and advertising. AdExchanger’s Joanna O’Connell put it this way: “When every CMO talks about delivering ‘relevant, 1:1 experiences,’ she’s implicitly expecting that the technology will show up to help her do that.” 1 In other words, in order to consistently deliver compelling content and offers to customers across their experience with the brand, marketers and advertisers must start to understand each other’s worlds — what they do, how they do it and how data drives their decisions — because, in O’Connell’s words, “this march toward integrated marketing technology is inexorable.” Why Advertising Matters to Data- Driven Marketers In 2002, Kenneth Cooper authored a book titled “The Relational Enterprise: Moving Beyond CRM to Maximize All Your Business Relationships.” In it, Cooper premised that the 360-degree view of the customer was at that time “one of the most overhyped and least understood concepts in business.” Fast forward a decade plus and we’re still talking about how to best deliver an integrated customer experience across all channels of interaction. The reality is that companies have come a long way in integrating and using data in marketing. Many enterprises have brought together parts of their point- of-sale, customer contact, e-commerce and service data by way of an enterprise data warehouse, customer database or marketing service provider. But even as firms undertook these projects, emergent customer technologies began to open up new data sets and enable marketing interactions which look much different than those that came before them. Suddenly, web logs, tags, third-party cookie data and real-time geo- location became important to marketers — and foreign to data managers. At the same time, digital advertising started a transformation of its own, eschewing the “newspaper model” of selling static ad space and replacing it with audience buying, real-time transactions and analytically-driven automation. In other words, digital advertisers became data-driven. They learned that segmentation and measurement could improve results, and recast focus around customers and metrics. Advertising vs. Marketing — What’s the Difference? Though similar in nature, for the purposes of this paper “advertising” refers to paid content placement — for instance, a radio commercial, banner ad or pre-roll video ad. “Marketing” refers to customer interactions in owned channels — email, website content or direct mail — as well as the broader function of managing the overall promotional strategy. In some organizations, these roles are alternately aligned as “acquisition” versus “retention” or “CRM.” 2

Ten years after Cooper’s pronouncement, advertisers started to look much like the direct marketers that preceded them, and data-driven marketers were handed a new challenge to expand their view into online and mobile experiences with paid content delivery. This advancement has the potential to increase the value of customer data, improve marketing performance and optimize marketing and advertising processes. The new imperative for data-driven marketers is to manage insights and interactions across all touchpoints — whether online or offline, owned or paid. The Real-Time Revolution What has changed to enable a customer-oriented, data-driven approach to advertising? While many new technologies have emerged in the space, the most transformative is the advent and adoption of programmatic buying and selling of ad space, also known as real-time bidding. Instead of buying blocks of ad space as in traditional media, advertisers can now make impression-by-impression decisions on content placement at an individual customer level. Growing from near zero in 2009, this type of media transaction now represents roughly one-quarter of non- search online spend 3 , and will continue to grow and find new application. For instance, internet-connected television is a ripe medium for the application of programmatic buying. This has changed the game for data-driven marketers in that the practice: ~~ Enables individual-level customer targeting of paid content placement ~~ Generates volumes of behavioral data — browsing, ad impressions, clicks, etc. ~~ Drives better results through big data and analytics ~~ Automates the advertising process — moving spend from manual agency media buying to software and associated services Four Reasons to Integrate Marketing and Advertising While different organizations will surely find various and innovative ways to bridge the divide between marketing and advertising, four categories of use are most prevalent in the market today: 1. Message Control – Inconsistent messaging to a customer can cause uncertainty, confusion and loss of future sales. By integrating outbound and inbound campaigns with digital ad campaigns, marketers can ensure they are delivering a consistently relevant experience to the customer, regardless of the channel. One example of this in action involves an electronics — What is digital advertising? Digital advertising refers to any promotional message delivered on an internet-connected device. This includes well-known ad mediums such as text search ads and desktop browser display ads, as well as newer typeslike in-app mobile ads and geo-pinned ads in augmented reality programs. Global digital ad spend grew 13% to $117.6 billion in 2013, representing 22.7% of all ad spending.2 3 A Comprehensive Approach to Interaction Management

retailer seeking to upsell major purchases with accessories and add-ons. Through its loyalty program, this retailer can already reach its customers with direct mail and email. By incorporating online advertising into its decisioning process, someone who just purchased a TV receives an offer for speakers, not for another TV. 4 The key is using actual purchase data to reach individual customers online, whether the purchase was made in- store, on the web or on a mobile device, and extend the concept to other data sources as well. 2. Accelerated Relevancy – For most brands, the majority of website traffic at any point in time isn’t known customers (logged-in) but rather anonymous browsers. This is an issue for web personalization initiatives that intend to create better experiences for customers by dynamically changing web content for each individual. Without a login, the brand can’t connect the web visitor with content relating to their historical relationship with the brand — for instance, past purchases or declared preferences. While that kind of relationship-driven data will ultimately enable the most relevant customer experience, brands can now fall back on anonymized third-party and advertising-related data to tailor the on-site experience prior to a login event. For instance, an insurance company can decide whether to surface auto or home insurance offers based on an anonymous visitor’s browsing behavior on auto review sites or real estate research sites. This is data sourced from a third-party broker (i.e. Exelate) or by analyzing where the brand serves its own ads to that individual. This ultimately accelerates the process of providing content relevancy, resulting in better customer experiences, increased engagement and improved brand loyalty, leading to higher revenues . 3. Discovery and Advanced Insights – An increasingly important type of behavioral analysis involves evaluating customer journeys across various touchpoints leading to a target event such as a purchase, account cancellation or enrollment. These paths are analyzed for early indicators of attrition or opportunities to improve conversion rates. What many of these analyses omit, however, are ad impressions that occur before the “first-click” — that is, before the visitor actually arrives at the website. When advertising, marketing and technical professionals partner on these analytics, all parties can improve their modeling and understanding of customer paths by including both pre-click ad impressions across the web and direct interactions with the brand. 4. Attribution and Spend Management – Many firms are now investing in attribution to better understand the performance of their marketing campaigns. But too often, these implementations are limited to digital or confined to evaluating a direct response. Without evaluating the long-term effect of advertising impressions, how can a marketer understand the result of brand advertising? And without calculating attribution metrics across all online and offline channels, how can an executive accurately account for their marketing spend and revenue generation? By integrating all marketing and sales data and connecting results back into advertising systems, marketers can fully close the loop and optimize spend. A telecommunications company saw a tenfold lift in ad click-through rates when targeting individual customers following a direct mail campaign versus a random segment.5 4

The Advertising Value Chain Advertisers Move Digital Forward Brands continue to shift advertising spend into digital from print, radio and other mass marketing channels. In total, digital advertising increased 17.8% in 2012, more than three times the overall increase in media spend of 5.4%.6 As digital represents a larger line item in the marketing budget, it warrants more scrutiny from C-level executives and investment in optimization processes. It also provides the scale needed for innovation and integration initiatives. The Changing Role of Agencies The traditional role of agencies as generalized media buyers is on the cusp of change. Before programmatic buying, the media agency of record held substantial bargaining power on behalf of the various firms it represented. In addition, agency relationships across media publishers were difficult for a single firm to replicate. However, today’s auction marketplaces for digital media level the playing field for media buyers and make agency expertise in data-driven, result-oriented practices more important. Brands are choosing agencies today for expert services in strategic areas such as lead generation or interactive development, as well as digital consulting and access to exclusive ad inventory. While the agency is and will continue to be the primary media buyer for brands, select marketers have started in-sourcing some programmatic media buying functions such as retargeting or general brand awareness campaigns. The agency still plays a key role in developing creative strategies, but the digital revolution has put the brand firmly in control. “As a business owner, we want to be in direct control of the marketing levers, to adapt as quickly as possible to changing business requirements.” Lee Engel, StubHub— 5 The new advertising value chain

THE 3 TECHNOLOGIES THAT MATTER Three core technologies will be critical to marketers moving forward: 1. Demand Side Platforms (DSP) - Digiday’s Jack Marshall describes a Demand Side Platform as “a piece of software used to purchase advertising in an automated fashion. DSPs are most often used by advertisers and agencies to help them buy display, video, mobile and search ads.” 8 As it evolves, the DSP will become the primary platform for advertising placement decisions across all digital channels including IPTV (digitally-served television) for real- time bidded inventory as well as guaranteed (bulk) media purchases with real-time fulfillment. 2. Data Management Platforms (DMP) - These solutions play a similar role to that of marketing data warehouses, but for anonymous, digital data sourced from web tags, ad systems and third-party data brokers. Increasingly, non-digital customer data can be brought into a DMP as well, with limitations including one-way anonymization and single dimensionality (most DMP’s only support import of attributes about a customer, not transactional events). Digital marketers have gravitated to DMP’s due to their relative ease of implementation, SaaS delivery model and integrated toolsets. Technical requirements such as browser-side ID linking are also met by DMP’s. However, enterprises will soon begin to grapple with the DMP’s lack of offline integration and consider a single customer data hub encompassing known and anonymous, online and offline data rather than a separate customer data warehouse and data management platform. Under that scenario, today’s DMP’s do not cease to exist, but rather become middleware for digital data collection and consolidation, feeding that data into the comprehensive customer data hub. 3. Marketing Performance Management (MPM) – Marketing Performance Management (MPM) solutions increasingly bring together elements of attribution, marketing mix modeling, spend management and predictive analytics to drive budget allocation decisions across paid and owned channels. The visibility into impressions of and interactions with digital ad content makes digital advertising particularly attractive to ROI-focused marketers, but it is critical for brands to avoid the trap of measuring digital ad effectiveness in yet another functional silo. Rather, an independent measurement, forecasting, and optimizing function (with expertise, process and technology to support) drives marketing decisions most effectively across the enterprise. Avoiding the Exchange Conflict of Interest Increasingly, publishers and exchanges such as Google and Yahoo are providing not just access to ad inventory itself, but also a set of software tools to execute media buys. For example, Google’s Doubleclick Bid Manager is a popular application for managing search and display advertising campaigns including those on Doubleclick’s auction-based exchange. However, many large enterprises are recognizing the inherent conflict of interest in a single entity — in this case, Google — representing both the buying and selling parties, especially where its primary revenue stream is derived from publisher partners. In other words, marketers have become skeptical as to whether a company in the business of selling more advertising at higher prices can truly deliver efficiency gains for advertisers with opposing objectives. This has caused marketers to look elsewhere for their ad buying systems, specifically to best-in-class independent vendors who specialize in agnostic performance across all inventory systems and all digital channels. “Marketers will have to bring all of their marketing stack technologies in-house and tie all their systems together so they are speaking the same language. This means that data on customers and prospects must be shared seamlessly across marketing automation systems, CRM systems, content-management systems, data-management platforms and analytics tools.” Russell Glass, CEO at Bizo— 6

Changing Times for Publishers While some online publishers continue to resist customer- driven, programmatic advertising sales10 , many others are embracing the technology’s potential to improve the customer experience, reduce the cost of sales and optimize revenue yield. Publishers still struggle with the balance between directly sold and programmatic ad space since direct sales often carry higher prices. It will take maturity of process and technology — including sell-side platforms to manage minimum prices, inventory quality and fraud prevention — to continue growth. “Programmatic direct,” where the financial transaction is made directly with the advertiser but ad space is fulfilled programmatically, will contribute in this mix as well. Despite the challenges, publishers continue to make more inventory volume and types available programmatically at a growth rate of 66% in 2013, reaching a level of $20 billion in total by 2017. 11 As they do so, marketers will increasingly be able to integrate and automate their paid content into their overall customer-centric strategies. The Customer in Control Customers continue to exercise their new-found influence from access to information, availability to competition and social voice. Higher expectations of brands result in customer preference for relevancy in advertising, contextualized to their interests. 12 The end-result is more stress for marketers, 78% of whom feel pressure to become more data-driven in response. 13 Achieving the Integration Both technical and organizational challenges must be met in order to successfully bridge the divide between marketing and advertising. Organizationally, translation of terminology and co-ordination of objectives is needed among technologists, marketers, media managers and their outside partners. Technologically, the “known” world of the marketer (who deals with customers identified by their name, phone, email or account number) and the “anonymous” world of the digital advertiser (who conversely deals with non-personal identifiers such as a cookie ID or device ID) must communicate in a privacy-compliant way. This anonymous-to-known translation (and vice versa) is critical to implementing a comprehensive customer engagement strategy. When it comes to co-ordinating or measuring campaigns, often the quickest way to bridge this gap is by partnering with an onboarding service (such as LiveRamp or Datalogix) that specializes in translating email or physical addresses into anonymous identifiers and delivering them to an advertising execution system. 14 While this is often the most efficient first step, a more complete strategy includes both third-party onboarding services as well as a proprietary linkage among IDs (most commonly, cookies) to sync between the brand’s identifiers and those of other digital systems. 15 Once the link is established, data can easily be passed back and forth, and both marketing and advertising systems can benefit from the additional insight. “When we in the digital advertising technology ecosystem talk about [data management], what we’re really talking about is collecting, normalizing, segmenting and activating anonymous digital data — think cookie data, ad server data — initially, and still primarily, for the purposes of paid acquisition efforts in display advertising.” Joanna O’Connell— 7

“Brands recognize the importance of their site- and user-level data. They want to make sure the data is used for their campaigns and never for competitors or their agency’s independent gain.” Marc Grabowski, COO at Nanigans Getting Started with Digital Advertising Alignment 1. Start with the Tactics – Get Onboarded Marketers can achieve an early win when they partner with an onboarding provider (such as LiveRamp) to extend their current campaigns into digital media. While a more comprehensive approach to data-driven marketing is ultimately needed, one that includes both partner onboarding as well as a company’s own linkage between anonymous and known customer identities, initially leveraging existing campaign management and segmentation investments along with an onboarding service can quickly prove effectiveness of integrated communications and generate incremental return on marketing activity. 2. Own the Technology. Own the Data. Enterprises are beginning to see their customer data and supporting technology stack — including that around digital advertising — as a competitive asset. As such, they should recapture control of their advertising data and the proprietary insights it generates back from agencies. While agencies will continue to provide strategic services, brands themselves should be involved enough in the technology-buying process to ensure that at the end of the day they own the data and the insights it generates. This portability should apply to both bringing those insights in-house as well as sharing with other agencies working with the brand. A recent CMO Club poll foreshadows this realization — while only 15% own their media buying technology today, 46% plan to evaluate a direct relationship with technology vendors in the future.16 Companies such as StubHub and Kellogg have already made the jump.7 3. Do Attribution Once. Make it Independent. Make it Actionable. If the customer only makes one purchase, why do companies attribute its revenue multiple times? Attribution shouldn’t reside in a web analytics tool, with a media agency, or with a direct mail house. Instead, attribution should be an enterprise function designed to produce a “single version of the truth” as it relates to marketing performance across all channels and campaigns. This elevates attribution from a tactical activity to a strategic process that can be used to optimize marketing budgets and forecast against revenue goals. 4. Design Campaigns with All Channels in Mind Customers don’t distinguish between channels, so why should marketers? Pull together a cross-channel group that designs campaigns holistically with the customer and desired end-state in mind. Then, disseminate that design across all teams. Better yet, leverage a centralized customer interaction hub to automate and orchestrate content delivery across each outbound and real-time channel. — 8 OMNI-CHANNEL CUSTOMER EXPERIENCE DESIGN

Glossary ~~ Ad Exchange: Provider of real-time auction marketplace for digital ads. Examples include: Google DoubleClick, Facebook Exchange (FBX) and Yahoo Exchange. ~~ Consumer: Someone who purchases goods or services. In a marketing sense, the term “consumer” represents both current customers as well as prospects and the public at large. ~~ Data Management Platform: In digital marketing, a database of advertising data, website data, and third- party digital data. Usually includes reporting and segmentation tools. ~~ Demand Side Platform: Software an advertiser or agency uses to purchase digital advertising from an ad exchange. ~~ Digital Advertising: Paid promotional messages on Publisher properties; categories include display, video, mobile, social and search. ~~ Marketing Performance Management: Software- enabled process for evaluating and using marketing results; typical components include attribution reports, forecasting tools and marketing mix analysis. ~~ Omni-channel: Departing from its retail industry roots, “Omni-channel Marketing” now refers to a holistic approach to customer dialogue across paid and owned channels. 18 ~~ Publisher: Digital content owner; usually generates revenue by selling ad space. Examples include CNN, ESPN, Huffington Post and Yahoo. ~~ Real-Time Bidding: Process by which digital ad impressions are purchased in an auction marketplace. 9

References 1. O’Connell, Joanna. Merge Ahead: Prepare for the Convergence of Marketing and Ad Tech. AdExchanger. [Online] December 2013, 2013. http://www.adexchanger. com/marketers-note/merge-ahead-prepare-for-the- convergence-of-marketing-and-ad-tech/. 2. eMarketer. Worldwide Ad Growth Buoyed by Digital, Mobile Adoption. eMarketer. [Online] September 25, 2013. Growth-Buoyed-by-Digital-Mobile-Adoption/1010244. 3. Marshall, Jack. How Big is Real-Time Bidding Really? Digiday. [Online] November 27, 2013. platforms/big-real-time-bidding-really/. 4. LiveRamp. Case Study - Retail. LiveRamp. [Online] 5. LiveRamp. Case Study: Telco. LiveRamp. [Online] [Cited: Februrary 21, 2014.] case-study-telco/. 6. McCarthy, Alison. Worldwide Ad Spending Forecast. s.l. : eMarketer, 2013. 7. Marshall, Jack. Why StubHub took programmatic in-house. Digiday. [Online] January 13, 2014. http:// programmatic-ads/. 8. Marshall, Jack. WTF is a Demand-Side Platform? Digiday. [Online] January 8, 2014. platforms/wtf-demand-side-platform/. 9. Glass, Russell. The Real Promise Of Programmatic: Always On, Multichannel Marketing. AdExchanger. [Online] January 9, 2014. data-driven-thinking/the-real-promise-of-programmatic- always-on-multichannel-marketing/#!. 10. Joe, Ryan. NY Times Discontinues Programmatic Advertising Role. AdExchanger. [Online] February 19, 2014. ny-times-discontinues-programmatic-advertising-role/. 11. IDC Information and Data. Real-Time Bidding in the U.S. and Worldwide, 2010-2017. 2013. 12. Zogby Analytics. Digital Advertising Public Opinion Poll. 2013. 13. Teradata. 2013 Teradata Data-Driven Marketing Survey, Globel. 2013. 14. Ad Ops Insider. Data Management Part IV: Syncing Offline Data to Your DMP. Ad Ops Insider. [Online] July 22, 2011. measurement-tracking/data-management-platforms/data- management-part-iv-syncing-offline-data-to-your-dmp/. 15. Ad Ops Insider. Data Management Part III: Syncing Online Data to a Data Management Platform. [Online] July 21, 2011. measurement-tracking/data-management-platforms/ syncing-online-data-to-a-data-management-platform/. 16. Kantrowitz, Alex. Poll: Majority of CMOs Look to Buy Programmatic Ads Directly, Bypassing Agencies. AdAge. [Online] November 20, 2013. http://adage. com/article/digital/brands-buy-programmatic-ads- agencies/245335/#!. 17. Grabowski, Marc. Charting a Path to In-House Programmatic. AdExchanger. [Online] December 12, 2013. charting-a-path-to-in-house-programmatic/. 18. Winterberry Group. Taking Cues from the Customer: “Omnichannel” and the Drive for Audience Engagement. 2013. 10

“It is much more cost-effective to send emails to specific segments rather than a blanket ‘broadcast-to-everyone’ approach. It is also best practice because the email is more likely to be relevant.” Source: Econsultancy Email Marketing Roundtable briefing, November 2008 10000 Innovation Drive, Dayton, OH 45342 U.S. and Canada 1-866-548-8348, For International Callers: (937) 242-4030 Teradata and the Teradata logo are registered trademarks of Teradata Corporation and/or its affiliates in the U.S. and worldwide. Teradata continually improves products as new technologies and components become available. Teradata, therefore, reserves the right to change specifications without prior notice. All features, functions, and operations described herein may not be marketed in all parts of the world. Consult your Teradata representative or for more information. EB-8133 > 0414 Copyright © 2014 by Teradata Corporation. All rights reserved. Produced in USA. Teradata is a global leader in analytic data platforms, marketing and analytic applications, and consulting services. Teradata helps organizations collect, integrate, and analyze all of their data so they can know more about their customers and business and do more of what’s really important. With 10,000+ professionals in 77 countries, Teradata serves more than 2,500 customers, including the top companies across all major industries: consumer goods, financial services, healthcare, automotive, communications, travel, hospitality, and more. An ethical and future-focused company, Teradata is recognized by the business media and industry analysts for technological excellence, sustainability, and business value. Visit for details.

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