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Data, Digital Trends

Third Party Data Targeting – An Analysis of Efficiency

By James Mullany

Digital advertising gained popularity for its ability to bring precise targeting at an individual level to advertising. And that is still true today, when executed correctly. There are endless opportunities to improve campaign effectiveness by utilizing a combination of 1st 2nd and 3rd party data sources. Incorporating 3rd party targeting offers no guarantee of an improved ROI. At what point does layering on 3rd party targeting result in a less efficient return on investment? This article evaluates multiple scenarios to identify when the 3rd party data targeting juice may not be worth the squeeze.

The Oracle Data Cloud directory lists over 80 different companies offering 3rd party data segments, and there are many more companies that do not appear on this Oracle partner list. These companies rely mostly on cookie-based tracking, but can also include surveys, credit card transactions, location tracking, etc. How accurate are these datasets? Look at the online segments that Oracle and Blue Kai currently have associated with your device or computer. I’m sure a few segments may be relevant, but it’s likely there are incorrect segments that offset the relevance.

Mother with two daughters watching something on moms phone

These incorrect segments can be caused by cookie deletion, shared devices (especially with kids grabbing your phone) or slow data refresh frequencies, among others. This is an example of the inefficiencies and inaccuracy that are present when accessing 3rd party sources.

In a recent BCM campaign for a leading CPG brand, we targeted a wide set of targets which included homeowners. These segments were acquired from a 3rd party and tested against open-ended run-of-network (RON) audiences, with no difference in creative. The 3rd party segment had an 80% higher CPC than the RON segment. When evaluating on-site purchase intent behavior on a Cost Per Intent metric, however, the RON segment was the top performer. Even if the 3rd party dataset had a 50% higher conversion rate, it would still provide a lower return due to an insurmountable 80% media upcharge. Although the targeting qualifiers differed, the lower media and data costs resulted in the RON segment generating the most valuable ROAS.

Planning Considerations For Utilizing 3rd Party Data

Let’s summarize some of the important considerations when evaluating the activation of 3rd party data:

  • VERIFY THAT THE AUDIENCE YOU’RE BUYING IS REALISTIC
    • If there are 4MM new moms in the US every year and the purchased audience size is 20MM, it’s likely that this dataset is malarkey.
  • REQUEST HOW THE DATA IS COLLECTED AND VERIFIED
    • If the data source is not clear, move on from that partner. There are many other options available that offer transparency into how they build their audiences. This is essential in the era of GDPR.

Chart of structured data layers

  • FOCUS ON AUDIENCE BUYING
    • When structuring an audience, you may use multiple layers such geo, gender, HHI, purchase intent, etc. in order to limit waste. Of course, we want to design precise targeting but it’s likely that you can buy one layer (such as purchase intent) and still get the audience that you’re looking for at a potentially lower media cost.
  • DON’T PUT ALL YOUR EGGS IN THE SAME BASKET
    • Make sure you have a comparative set, such as a different 3rd party source and a more generic targeting set such as run-of-network. This will help determine whether the increased data costs generate a higher return on ad spend than an alternate approach.
  • FOCUS ON A PRIMARY METRIC/GOAL
    • It’s easy to get confused with all of the different metrics, but don’t lose sight of what you’re trying to achieve. If the objective is to generate the highest eCommerce Return-on-advertising-spend (ROAS), then you may not need to use proxy metrics like CTR, bounce rate, etc. to optimize campaign delivery. If the sample size is sufficient and data is statistically significant, focus on the primary metric of eCommerce ROAS.

When used correctly, 3rd party data segments can be an efficient contributor to growing your business through digital marketing efforts. BCM can help you avoid wasted media dollars. Let’s connect and discuss your marketing challenges.

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James Mullany

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