Consumer data and the fight over the future of optimisation

Data is proliferating at a rate of knots. A complex eco-system of information about consumers has evolved, giving rise to a media environment in which media agencies and specialist data providers are all fighting to stake their claim as the rightful owner of this new discipline. For their part, agencies are busily identifying new methods to clean the data to track consumers, anticipate their needs and serve them the right ad at the right time in the right context. The layers are multiplying, with online social connections becoming one of the most recent additions to the melting pot.

Philip Talbot, ZenithOptimedia’s regional CEO, describes data as the ultimate measurement of media spend in a recession-ravaged world where marketers have their gaze firmly fixed on the bottom-line.

“Increased data availability is first and foremost opening up big opportunities in improving ROI and bringing it to more areas across marketing communications especially in areas of generating insights, integrated response management and live optimisation,” he says. “The most daunting challenge is to manage it in an integrated way to make sense out of it and to get the best out of it.” 

The Holy Grail for all interested parties is to be able to pinpoint consumers in real-time, based as much on who they are as on where they are. But, as Talbot notes, this also presents advertisers and media owners with a tricky conundrum of how to cut through the sheer mass of information. 

John Cripps, president of Marketing Decision Science, which has a footprint in Singapore and Los Angeles, believes agencies have been presented with a great opportunity; although it is one that may not last forever. “In the online world, data is exploding,” he says. “It’s granular in nature at an individual level and so much more fine-tuned in the ability to tailor and target individual ads. But since most buyers don’t know in any comprehensive way what happens beyond the click or beyond the TV or radio impression, it is likely they will be seduced by these dazzling online targeting capabilities that are being created, at least in the short-run.”

Keen to surf the wave and feeling confident that the data boom will prove to be more than the fleeting tryst suggested by Cripps, media agencies building their capabilities in the area.

ZenithOptimedia, for example, opened its newly merged performance marketing agency Performics on a global basis this year. One of the agency’s services is data mining and analytics, with ZenithOptimedia claiming Performics is among the most comprehensive agencies of its kind worldwide.

That media agencies should be delving into the data stream headfirst is a no brainer, having long demonstrated a strong appetite for diversifying into new specialisms and revenue streams.
Given their proximity to the planning and buying stages of a campaign, it was only natural that media agencies would be some of the first to explore this brave new world. They also bridge the relationship between advertisers and media owners, but does this make media agencies the best solution for managing the end-to-end process, from mining data to extrapolating meaningful insights from the results?

Competition in the area is rising, both from specialist data agencies and IT giants such as IBM - where data handling is in the DNA. Mohammed Sirajuddeen, CEO of Rapp Asia, believes specialists such as his own agency offer intellectual capabilities others fail to match. Rapp was launched in Singapore two years ago as a data specialist and now has expanded to most major Asia-Pacific markets including India, Japan, China and Australia.

“If you want to do number crunching it makes sense to use a large IT company, but I’ve never seen a company like that add insight,” Sirajuddeen says. “There are boutique agencies, which focus on loyalty in areas like travel and tourism and that’s where traditional agencies don’t excel.”

Talbot also rejects the idea that IT behemoths are the ideal proponents of this new art and pushes the specialist within a large network model that ZenithOptimedia is pursuing. “We have to differentiate between managing data and application of the same. While IT companies will have their share in helping management of data, the application will sit with the communications agencies.”

Shardul Wartikar, partner, business planning Asia-Pacific at Mindshare, agrees, pointing out that  the issue of data ownership is primarily one of talent. “To use data effectively, there is a need for people who understand digital, understand analytics and, furthermore, are in a position to execute the findings quickly. Hence those media/digital agencies which have built analytical capabilities are ideally suited to utilise this data excess.”

Cripps concurs, arguing that IT giants excel at “building software, but fail at analysing data”. But, while he adds that specialists are able to draw on a deeper pool of knowledge, he stops short of endorsing media agencies. “Media agencies will never be as good as the best outside analytics types, largely because it’s not the glamorous part of media, and so they don’t get the respect, pay or mobility they want in this environment. Most analytics functions at agencies have not been a big success and the quality of their people varies dramatically from office to office. There is very little central intellectual capital.”

Even so, media agencies are taking up the data baton and running with it, building new analytics departments and investing in specialist talent, albeit at a slow pace. “The digital space is changing at a tremendous pace, with new innovations and new opportunities being created almost every day,” says Wartikar. “Hence practically everybody, from both the client and the agency side, is on a sharp learning curve. But, while agencies are investing in building their digital planning capabilities, most agencies are yet to start seriously investing in their digital analytics capabilities.”

Barry Cupples, Asia-Pacific CEO at Omnicom Media Group (OMG), says overall investment has been slowed by the global financial crisis.  “Investments in this area are weaker than they would have been in better times,” he says. “Demonstration is the best catalyst for investment in this area. Agency collaboration and cross-client learning is helping combat the otherwise slow pace of investment from clients in this area.”

Investment doesn’t come cheap, which raises the question of how agencies charge clients for these  nascent services, which have developed on an ad hoc basis from one agency to the next. ZenithOptimedia has pioneered a response-linked costing structure, Talbot says. “The pace of technology development is so swift, it’s always a game of catch-up for clients and agencies. It’s more an issue of bringing more accountability to what is delivered. In digital language it is becoming more about ‘cost per action’ instead of ‘cost per click’.”

Elsewhere, Rapp has developed a two-step model, with a straightforward fee for project work that may involve number crunching and post-analysis, while on longer-term contracts the agency takes a percentage of the client’s profits if the data work produces positive results. It’s an approach Rapp has deployed with three clients in Japan, India and Singapore.

To date, those clients with immediate access to a rich seam of data on their customers have shown the most interest in turning that information into something meaningful, although Cupples says, “all advertisers have the ability to benefit”.

Retail and direct response categories have historically benefited most from real-time data analytics, while airlines have been progressive in adjusting consumer offers and pricing to maximise yield based on passenger demand within an automated environment. “Their investment was a result of extremely weak industry-wide business performance several years ago,” Cupples adds. “But companies shouldn’t wait for a crisis before reviewing their business model for greater efficiency. Rule of thumb: anywhere there is a consumer choice, an advertiser can benefit from better data insights,” he says.

Cripps says his agency’s work with B2B advertisers has demonstrated they have more to gain than most from data analysis, not just in the online sphere, but also in the offline world.
“When we do our measurement and optimisation work for B2B players, the insights are a big revelation. Until they use the data and modelling, they often have no idea. But when some light is shed, the insights are big and can lead to shifts in tactics and priorities. For example, they might deploy more out-of-home and less direct mail.”

Media owners are also joining the data fray, as they look to offer advertisers a cutting-edge in a market where online inventory is rapidly increasing. As one of the few online publishers to own information on its users via a registration process launched in 2007, the Financial Times is one of a small number of media owners able to respond to demand from advertisers for more sophisticated information on their users. “Based on our three million registered users, they can choose to deliver their online advertising to the demographic criteria of their choice; by user industry, areas of responsibility or business position,” says FT’s regional online director Hiroko Hoshino. “Behavioural targeting technologies also enable us to offer further targeting methods such as domain addresses, sector and company sizes. Due to the popularity of precision targeting, we have introduced tiered CPM rates where we charge premium rates to popular users criteria such as bankers
and C-levels.”

The obvious risk, though, is that someone will push the boundary too far, spook consumers and attract the ire of privacy watchdogs and government regulators, already under pressure from various consumer groups to lay down a marker.  Privacy issues have tainted online advertising for years, with Facebook’s ill-fated advertising system, Beacon, the most high-profile example of how badly it can go wrong. The system sent data from external websites to Facebook to enable targeted advertising. The controversial service was shut down in 2009 following a class action lawsuit.

Despite the warning bells, privacy is sometimes forgotten or rather curiously ignored as a furious data arms race unfolds. As 2010 came to a close, Apple and top app developers were facing a lawsuit alleging they had been illegally shuttling iPhone and iPad users’ personal data to advertisers without consent. It’s perhaps unsurprising that calls for self-regulation fall on deaf ears, but Cupples argues that it remains the most workable solution.

“Legislation and consumer sentiment towards privacy will vary by country, and therefore the onus is on advertisers to self-govern,” he says. “Legislation historically trails technology development. Recently we have seen the US exploring policies that extend the ‘do not call’ register to digital touchpoints, likely driven by irresponsible and intrusive marketers. Immediate diligence is required to protect from losing consumers’ trust in future.”

The FT’s Hoshino acknowledges privacy concerns over online and mobile tracking in particular are reaching feverpitch, and says the publisher is doing all it can to address those issues by working closely with governments and industry bodies such as ADMA in Asia. “Consumer trust is crucial for our business and we follow the UK’s privacy law, which has the one of the strictest policies,” she says.

Agencies for their part are also keen to stress they take a safety-first approach. “We don’t take clients’ names or personal information to protect privacy and where possible we take permission from customers to use data, even offline when a customer makes a purchase, the mailing list is always opt in,” Sirajuddeen says.

Wartikar adds that it would not be in the industry’s interests to underestimate the privacy issue.

“Agencies definitely do not want access to the user data to be completely switched off. The point the agencies are making is that users are going to be served advertising irrespective of whether they agree to provide their browsing data or not. Data access enables the agencies to serve relevant ads to the users, thus making the users’ web experience more enjoyable.”

But as the global financial crisis ebbs away and technology allows for improved data mining, the opportunties for agencies and clients in Asia-Pacific seem boundless. Cripps is predicting the sector to pick up in the near future. “Media markets will begin to mature and maturity will mean increasing use of analytics and data to get the last 30 per cent out of things. You can always find another 30 per cent by using data and optimisation. If marketing decision-making begins to consolidate to the region level, then there will be more scale and I believe data usage and analytics will pick up."

This article was originally published in the March 2011 issue of Campaign Asia-Pacific.