Digital Advertising and Data Targeting- What is it, and How does it work?

Have you ever noticed that anytime that you download an app, start a new service, or shop online-- you must provide your email address among other pieces of information OR you are agreeing to allowing cookies to track you on the site?  In the Digital world where information and access are free flowing, many entities are looking to monetize your visit or use of their app, product or service in some way, hence, the need to agree to giving up your information or being tracked. 

In the old days of advertising, to really get your message out to the masses you had to either buy a print ad in a magazine or newspaper, an “out of home” billboard, a radio ad, or a TV ad.  In those days, it was hard to pinpoint who exactly saw your ad, because there was no way to really track the consumer.  Traditional TV Networks used Nielsen Panels as a way of guaranteeing that a specific audience was being reached.  A Nielsen Panel is “A small group of people that mirrors a large audience or group of consumers—in terms of race, gender and age and how they behave. People who join Nielsen panels share meaningful information just by changing the channel or using an app on their phone. We then use this information to get the Nielsen ratings. A rating is the percentage of a specific population that saw, heard or engaged with a piece of content or an ad.” Source: (Nielsen Panels). The issue with Nielsen panels is that they aren’t always accurate, or fully representative of the population- especially when it comes to minority or under-served demographics.

Today, Digital Advertising has made it much easier to more accurately pinpoint a specific customer and track their online habits via the use of cookies and registration data.  What many people don’t realize is that the information that is provided from registration or from cookies can sometimes be sold, or used with other publishers, content, service, or data providers to more accurately pinpoint you with advertising.  And in many cases, two entities can share data that they have collected from you with each other to verify that you are in fact you, and more accurately target you with ads.

Data Targeting in Digital Advertising is essentially using registration data and any other cookie data that a content provider has from you to target ads.  This in turn creates more efficiencies for a better return on investment (ROI), because advertisers are able to eliminate waste and target only those that they have identified as a target or customer. 

For example, let’s say that you signed up for Facebook, and you are active on the platform.  When you signed up for Facebook, you provided your name, birthday, gender, phone number and email address as registration data.  You agreed to have Facebook cookies track you across the site to provide you with more personalized ads.  You are a basketball fan, so you immediately start to engage with all things Basketball, and you love Micheal Jordan and LeBron James.  You even joined a Micheal Jordan and LeBron James fan pages on Facebook, and you watch a lot of videos across Facebook that includes Basketball.  You also love highly collectable sneakers, and some would call you a sneakerhead.  Since you gave Facebook permission to track your activity across the website via the use of Cookies, Facebook is collecting all this engagement information on top of your registration data to then leveraging this data to advertisers so that they can reach you.    

Now let’s say that Nike, an Advertiser, wants to sell Jordans to basketball fans, Micheal Jordan fans, or sneakerheads.  As an Advertiser, they are looking to target Male Basketball Fans that are between the ages of 25-34, and they have done their research and found that their target audience is active on Facebook.  Nike has identified you as a potential customer because you almost bought a pair of Jordans, but you didn’t follow through on the purchase.  While on Nike.com, you also agreed to the use of cookies to track you—just like you did on Facebook.  You have a Nike account from purchasing other sneakers in the past, so Nike has your name, address, email address, credit card information, phone number, and order history. 

Nike has identified you as someone they want to sell Jordans to based on sales history, and they decide to work with Facebook as an advertiser since their audience is active on Facebook.  Facebook and Nike agree on an advertising campaign, and they share registration data (also known as first party data) with each other.  The sharing of this data is done in something called a “Clean Room”, which is essentially a secure place where both Facebook and Nike can share their data with each other to find a data match.  In this case, since you provided the same email address to Facebook and Nike, they can confidently confirm your identity.  So the next time that you go to a Micheal Jordan fan page or watch a Micheal Jordan video, Facebook will then serve you a Nike Jordan’s ad, and since Nike really wants to make that sale- they have personalized their ad message to you.  This data matching process and targeting can be done between any two entities that have registration, or 1st party data. 

An Advertiser can also take it a step further, and leverage 3rd party data targeting to reach potential customers.  3rd party data is data that comes from the marketplace via pixels that are placed on webpages to collect information from consumers that agree to be tracked with cookies.  There are many companies, such as BluKai that work to place pixels across a multitude of websites, and then they sell their data to advertisers as 3rd Party Data Targeting. So let’s say that Nike has a BluKai pixel on their page, and you have agreed to being tracked via cookies, so BluKai placed a cookie on your browser.  Since you were on Nike.com, BluKai will assume that you like sneakers.  And any person that is buying BlueKai data targeting can then target you with ads, and any Advertiser buying BluKai “Sneaker Fans” data targeting can target you with an Ad.  So let’s say that you finally made that purchase for those Jordans on Nike.com after being re-directed there from Facebook.  You leave Nike.com, and then visit Forbes.com, and Forbes has a BluKai pixel on their site. Adidas is buying the “Sneaker Fans” data target from BluKai, and they have identified you as a “Sneaker Fan” because you were on Nike.com, and you just made a purchase.  BluKai again assumes that you are a “sneaker fan” because you were on Nike.com, and they know that you just made the purchase because they have a tracking pixel on Nike’s website.  Since Forbes.com also has a BluKai pixel on their site, BluKai can then target you with an Adidas Ad since they assume that you are a “Sneaker Fan”.  For more information on 3rd Party Data pro

Although Data Targeting as a practice isn’t perfect, it is so much further ahead in pinpointing specific people and audiences than the Nielsen Panels from the old days.  There is also a bit more accuracy since there is actual data to tie back to a potential customer or consumer, making it easier to show return on investment, or ROI.