According to emarketer, digital ad channels will overtake traditional advertising globally by 2021. However, not all digital advertising is growing. There’s a clear demand for higher quality and more relevance from both advertisers and consumers - and therefore a need for optimized audience segments. A study from market research company Epsilon indicates 80 percent of consumers are more likely to make a purchase from brands that offer personalized experiences.
In a world where consumers expect to be served with relevant ads, publishers are wisely prioritising their audience segmentation capabilities, with many consolidating audiences from different properties into one unified platform so their total audience can grow and segmentation opportunities can flourish. This kind of activity is being done so advertising reaches the right consumers rather than getting lost in a one-size-fits-all approach. But how does segmentation work? And is it easy for publishers to monetize?
Audience segmentation in a nutshell
In a nutshell, segmentation is the first step in determining who your marketing should target. Segmentation helps advertisers and publishers to know which audience groups exist so they can identify which groups to target. So if BMW wants to target men between 25-35 to advertise a new car and a publisher knows this group often reads articles about rap music, it can make sure the car brand’s advertising appears more frequently alongside rap articles.
Typically, different audience segments include the following:
- Demographic segmentation; where factors such as age, education, income, gender, and occupation come into play
- Behavioural segmentation; where purchase, consumption and lifestyle patterns factor in to the equation
- Psychographic segmentation; which takes into account the psychological aspects of consumer behaviour including lifestyle, personality traits, values and interests
- Geographic segmentation; which creates different customer groups based on geographical boundaries and is a good way to work out who, say, lives in a city and who doesn't
Nowadays some of the most important segments are socio-demographics including gender, age and household income. With a good understanding of these factors, brands can ensure a publisher puts their ad in front of the right consumer. Socio-demographic data has long been the “holy grail” and continues to be essential, but behavioural data, where you truly start to understand the habits of consumers, is now just as important. This type of data usually combines behavioural information with socio-demographics data so you can put the right ad in front of a consumer when they are actually in the market to buy something that a brand wants to sell. Having a holistic view also gives you the ability to target users who spend more time on your site, which in turn benefits both parties: these users will consume more ads from the advertiser and increase the ad revenue for the publisher.
3rd party data becomes less and less useful
With so many scandals over recent years around how social media brands place advertising next to negative content or generate fake audience data, there’s also been a move away from third party data and a trend to become less dependent on global players like Facebook and Google. This has made audience segments based on first party data much more valuable for publishers and their ad customers, who want to ensure brand safety and benefit from the close relationships that many publishers have with their readers.
In the wake of GDPR and consumers getting used to having more control over how their user data is used by brands, there is also more of a focus on data privacy and consumer rights. A lot of the media industries and programmatic buyers are afraid of what they are buying from third parties as there’s a possibility of it backfiring. This means the publisher has a big advantage if they have data collected in the right way and are transparent towards advertisers and consumers.
Drive revenues with AI-powered audience segments
One of the most powerful ways to generate data for audience segmentation is by using an AI-powered DMP to connect different online and offline data sources. This allows a publisher to find and group all users relevant to an advertiser for a given campaign. By running machine learning algorithms on the available data, the DMP automatically finds additional users that look and act like the most valuable ones, thereby significantly increasing the size of the segment and the effectiveness of the campaign. Which in turn means higher revenues for the publisher.
Having a solid tech foundation in place is key, as publishers who use a DMP to combine historic offline data with online data will achieve a solid understanding of what makes the consumers they are looking to target tick.
Meanwhile, if a publisher is to start monetising segmentation successfully it needs data literate employees who have the right understanding of the digital ecosystem. In our own office, we recently got a new coffee machine and the man installing it had such a passion and knowledge for coffee that all I wanted to do that day was to drink as much coffee as possible. As a publisher you need to sell your first party data (and the segments created with it) with the same passion and be open and transparent with how the process works. In turn, this should lead to happy customers and inspire repeat business.
For publishers looking to sell audience segments and tempt advertisers away from the market dominating platforms, they must become like superheroes. You must be the superhero that this ecosystem needs in a time of scandals and uncertainty; be the superhero that will bring transparency and value back to the digital ecosystem. You have to prove to advertisers that your first party data is more reliable and safer than the problematic third party data and black boxes they are used to.
Nils Ove Riise is customer success manager for the EMEA region and an expert on programmatic advertising.