In a post-cookie world, publishers are fortunate to have unfettered access to a rich pool of first-party data, and with a robust data and advertising strategy in place, publishers are well positioned to thrive in a post-cookie world. Especially because the phase-out of cookies is set to disrupt the advertising ecosystem that has relied so heavily on third-party cookies for over 25 years.
Moving forward, first-party data will be the key to driving business growth and successful advertising campaigns. As Adobe has found, businesses that implement data-driven strategies deliver 5 to 8 times as much ROI as businesses without. A statistic confirmed by another recent study, which showed that 81% of marketers reported their highest ROI when using first-party data.
This shift towards data-driven strategies, along with the advent of programmatic advertising is shaking up the marketing world. According to Statista, global programmatic ad spend was $418 billion USD in 2021 and is expected to grow to $725 billion USD by 2026.
With this in mind, publishers must design their data collection strategies for not only their own use, but for the purpose of attracting advertisers on fast-paced programmatic ad exchanges. This article walks publishers through everything they need to know about first-party data and programmatic advertising for maximised ad revenue.
First-Party Data: A Quick Overview
Before delving into the power of first-party data for programmatic advertising, it’s worth refreshing our understanding of what first party data is as well as its specific advantages.
What is 1st-party data?
First-party data is information collected directly from users about their behaviours and interactions with their site. User emails, phone number, and subscription data are examples of first-party data. First-party data and zero party data are closely related - the biggest difference is that the former is collected passively and the latter is gathered proactively by involving the user.
Advantages of First-Party Data in Advertising
First-party data’s advantages are numerous, especially in a post-cookie world. Its specific strengths include:
- Owned by the publisher themselves. This also means that since there are no additional costs associated with its collection, publishers only stand to gain from first-party data.
- Highly accurate and guaranteed data quality. First party data gives publishers reliable insights into their audience.
- High degree of control over data collection and measurement. Not only does this bolster the accuracy from an advertiser’s perspective, but it also means publishers can establish transparency around data collection and privacy.
- Facilitates hyper-focused ad campaigns. First party data allows publishers to segment their audience and helps advertisers to launch granular and targeted ad-campaigns.
What is programmatic advertising?
Programmatic advertising refers to the data-driven automated purchase and sale of digital advertising. In the context of the digital publishing sphere, publishers sell digital ad space on their site and interested advertisers purchase their inventory. It facilitates the purchase and placement of ads, including targeted advertising content, in milliseconds.
It’s a streamlined, efficient, cost-effective and transparent way of facilitating advertising transactions that maximise yield and minimises ad-waste (when an advertising campaign fails to meet its objectives, thus ‘wasting’ the ad-spend).
How does programmatic advertising work?
Programmatic advertising makes the sale and purchase of ad-space on the publisher’s website an instantaneous process. When a user that fits an advertiser’s target audience visits the publisher’s website, an ad-request is created on an inventory of ad exchanges. These ad exchanges, such as Google Ad Exchange, App Nexus and Verizon Media, then launch an auction to interested advertisers. The ad exchange will determine the value of a prospective ad by analysing how far the user matches their target audience. From this, the ad exchange determines a bidding price, and the highest bidder wins.
Key aspects of programmatic advertising
Let’s take a quick look at the main stages and components of programmatic advertising:
DSP stands for Demand Side Platform. Through their DSP, advertisers choose which publisher ad impressions they want to buy and how much they will pay for them. The advertiser is able to refine their target audience and demographic with particular criteria. From here, the DSP automates the decision making process, removing the need for manual management or tracking on the part of the advertiser.
A ‘Supply Side Platform’ is how publishers can sell their ad-space to interested advertisers. This is the software that facilitates cross-platform programmatic ad buying and selling by allowing the publisher to place their available inventory on ad exchanges.
DMP refers to Data Management Platforms and this is the software which publishers use to collect, analyze, manage and activate their audience data. DMPs are a key element of the programmatic advertising eco-system because they communicate key audience data and profiles to DSPs, helping to inform accurate ad-placement that aligns with advertiser’s target audiences.
Open markets are open to any and all publishers and advertisers. In an open market, inventory is bought and sold through real-time bidding (RTB). For publishers, open marketplaces offer wide-cast exposure to numerous buyers. This is a fast and quick way to fill publisher’s advertising space and maximise revenue.
However, when considering open marketplaces, brand safety and ad fraud are issues to be aware of.
Brand safety is where control is maintained over where an ad is placed. The reason this is a concern is because ads can be placed next to objectionable content or images. This doesn’t necessarily refer to explicit content for example, but can also be about political alignment or specific brand ethos and values.
Private Marketplaces (PMPs)
Publishers can look to sell their inventory on what are known as Private Marketplaces (PMPs). These are exclusive, invitation-only digital marketplaces that facilitate the purchase and sale of ad inventory, connecting publishers to a select handful of advertisers who bid on their ad-space in a closed auction. PMPs combine the efficiency of programmatic advertising with the exclusivity of direct deals, whilst also maintaining ad-security and quality.
PMPs give publishers coveted control over their ad-inventory, simultaneously maximising revenue but still protecting the integrity of their site by ensuring only quality ads are placed there.
Using their high-precision audience segments, publishers can bundle together premium ad placements and offer these at an elevated price. Alternatively, publishers can offer direct access to their first-party data insights as part of advertising deals, giving advertisers exclusive permission to leverage their data insights.
Programmatic Direct or Preferred Deals
Programmatic Direct mirrors traditional advertising deals in that this involves the publisher corresponding directly with an interested advertiser. Unlike PMPs or Open Market, there is no ‘bidding war’ or auction. In this negotiation, the publisher will offer digital ad-space for a specific CPM (‘Cost Per Mille’, refers to the price of 1,000 ad impressions paid by the advertiser). Compared to Open Marketplaces and PMPs, there is more human involvement needed for Programmatic Direct because of the need for direct contact and negotiation. However, publishers may appreciate the added control over who advertises with them.
Programmatic Direct can occur in two different ways:
- Advertisers approach publishers directly, make an offer on a CPM basis and it is at the publishers discretion to accept or not.
- Publishers invite advertisers to purchase their inventory, they enter negotiations, and secure an advertising deal.
How to use first party data for programmatic advertising
When leveraged properly, first party data is a gold-mine for digital publishers and advertisers alike.
For publishers, first-party data can not only help to maintain and cultivate relationships with existing subscribers, but also to reach new audiences too, if a publisher chooses to run their own advertising campaigns. More information about audiences, and more targeting drives the value of their ad-inventory, helping to secure higher minimum CPMs.
For advertisers, publisher first-party data is invaluable for running focused advertising campaigns that target high-value potential customers and promise a high return on investment. Organisations that adopt data-driven marketing are six times more likely to be profitable year-on-year. First party data helps advertisers enhance accuracy and audience relevance, reducing ad waste and, ultimately, driving ROI in the process.
Before looking to sell ad-space on digital marketplaces or direct to advertisers, publishers should implement a robust data-collection strategy to
divide their audience into hyper-focused segments based on demographic factors such as age, location and interests.
To create audience segments, advertisers can take a proactive approach and draw important information from their readers by:
- Creating registration forms with key questions
- Surveying relevant readers or ask for customer feedback
- Continuously studying users behaviour, such as what content they interact with
Audience segmentation is highly valuable for both publishers and advertisers alike.
For publishers, segmenting their audience drives the value of publishers’ ad-inventory, and gives them an intimate understanding of their readers. When leveraged correctly, this can result in better customer retention and help publishers offer personalised user experiences.
For advertisers such a granular and accurate understanding of audience’s likes and dislikes is like gold-dust. This is because they are able to run targeted advertising campaigns, while improving conversion rates, ‘satisfying specific advertiser campaign objectives and maximising yield.’
Making the most of programmatic advertising
Just as quickly as digital publishing changes, so too does advertising. Programmatic advertising has eclipsed more traditional formats and is projected to exceed 91% of all US display ad spending in 2023. Publishers are primed to benefit from shifts towards programmatic advertising in two veins; Not only does programmatic advertising mean that publishers are able to consistently fill out their ad-spaces automatically but also leverage the rich value of their first-party data.
For more help utilising your first party data for various revenue streams, download our e-guide ‘how successful digital publishers achieve significant results by leveraging their data.’