Blurred lines: Direct marketing and digital advertising

Maturing programmatic technologies are causing different parts of the advertising ecosystem to converge, writes Xaxis‘ Richard Lloyd. Are we in for a bumpy ride?

By and large, it’s always been pretty easy to distinguish between the (digital) direct marketing and digital advertising worlds – not only have the channels and tools been different (CRM and email versus banner ads and ad-servers), the goals have always been distinct, with the companies and organisations executing being very separate (internal marketing teams versus digital media agencies).

The rapidly maturing programmatic technology landscape is disrupting this once harmonious ecosystem – advertisers now have the ability to create, maintain and execute buys against individual-level anonymous visitor profiles in a way that simply wasn’t possible even a couple of years ago, narrowing the focus from one to many, to one to few, and increasingly one-to-one.

As these one-to-one strategies start to become more informed by CRM data, owned and managed by the marketer, the boundaries between the worlds of marketing and advertising have the potential to blur.

Of course, that’s not to suggest that these disciplines aren’t still very different, especially in the nature of the data at the core of the approaches.

In the world of direct marketing, individual CRM transactions can be very deep but sparse – for example, purchasing activity, although infrequent, tends to be accompanied by a great deal of valuable data, such as addresses, interests and payment details – not to mention subscriptions to loyalty schemes.

In the CRM world, even a single transaction can result in a wealth of valuable information to sustain an ongoing dialogue with the customer. In addition, CRM data is known to have a longer shelf life; this data tends not to change fast and as such data captured months or even years previously retains some of its usefulness.

When it comes to digital advertising, individual interactions tend to have little value by themselves. Where emerging DMP technologies create value is in the creation of a compound understanding of online visitor behaviour through the cumulative exposure to thousands of individual ad impressions and web interactions.

As a result, DMPs are affording advertisers, publishers and digital media providers an unparalleled depth of insight into digital audiences, powering rich anonymous visitor portraits made up of hundreds or thousands of data points.

These capabilities would have been of limited value had it not been for the programmatic buying revolution that has taken place over the past 4-5 years. With real-time bidding technologies, programmatic makes it possible to leverage this audience insight to make impression-level buying decisions, (ideally) communicating with each visitor using the right ad, at the right time, in the right place.

So how have these worlds started to converge, or even collide?

By synchronising the personal identifiers used in marketing, and the anonymous identifiers (usually cookies) used in advertising, it’s possible to use the data and insights from one world in the other – purchase history can inform ad selection, or browsing data can inform email composition.

The attraction of such capabilities should be obvious: the better you’re able to understand consumers, the more relevant the dialogue becomes and the better the result in terms of engagement and ultimately product sales. It’s no wonder, therefore, that this combination represents a heady proposition for marketers, and companies on both sides of the divide have obligingly moved to attempt to seize the business opportunity.

If only it were that simple. There are still significant barriers to this convergence. In this author’s humble opinion, the chief among these are as follows:

1) Technical difficulties – creating a stable mapping between personal and pseudonymous identifiers is problematic, especially with the continued question mark over the future of the cookie. We’ve seen real progress in this area of late (as evidenced by recent acquisitions such as LiveRamp by Acxiom), but maintaining a stable connection between a person and their myriad digital devices continues to be a challenge.

2) Regulatory obstacles – in markets such as the UK, the regulations covering the use of PII* (personally identifiable information) data are, rightly, much more stringent than non-PII regulations.

Companies or technologies managing data such as names, addresses and email addresses are subject to very different regulatory regimes, and this creates the need to be careful about how such data is transferred or siloed. This represents a challenge for digital ad businesses that have typically only dealt with non-PII data, and so were previously able to exercise greater freedom with their data.

3) Organisational silos – in bridging the gap between direct marketing and digital advertising, we face the legacy of two very different disciplines, and two very different sets of professionals.

Agencies traditionally very strong in direct marketing such as Wunderman are different animals to ad giants such as GroupM. Meanwhile, within the brands there may be organisational silos to break down.

For example, the customer retention department with the keys to the CRM database might sit in an entirely different building to the media department, and may be working towards a different – and possibly misaligned – set of objectives.

Beyond all the considerations mentioned there is also – most importantly – the ethical dimension; moving from ‘can we’ to ‘should we’? How will consumers respond to more targeted, personalised advertising? Clearly, we as marketers will need to be diligent in both testing new methodologies to arrive at best practices and safeguards that will prevent this market from abuse.

Regardless of the barriers, it’s clear to see that the divide between the big players in these worlds is shrinking rapidly – beyond the aforementioned acquisition of LiveRamp, there were the recent acquisitions of Aggregate Knowledge by Neustar, Bluekai by Oracle, Sociomantic by dunnhumby and countless more too numerous to list, all pointing to a near future where advertising and marketing companies who were previously close partners face off against one another in the competition for marketer dollars.

The question is, can these companies continue to work together for mutual benefit or will battle lines be drawn?

My advice to ad tech companies yet to adapt to this rapidly changing market? Keep your friends close, and your frenemies closer…

Richard Lloyd is VP, platform, global, at Xaxis.

*Xaxis neither collects nor stores PII data.