Marc Andreessen's 2011 declaration that software was eating the world signaled a seismic shift in the technology industry. The marketing industry is about to undergo a similar change: On Madison Avenue and in Silicon Valley, identity is eating the world.
For over twenty years, digital advertisers and social advertising companies have relied on an ecosystem of weakly linked technologies. A core component of this ecosystem is the cookie. Cookies, first introduced in 1994, are antiquated, inefficient tools which cause a massive amount of waste, much of which does not get accounted for.
Privacy advocates rail against them. Consumers feel violated by them. Cookies have also driven an inefficient marketplace of vendors and service providers that sell and manage audiences of dubious value. How dubious? Check out this September 24, 2015 expose from Bloomberg Business Week to get an idea of just how many cookie-based ads aren't even viewed by humans.
On the desktop, cookie targeting is only as as consistent as the user of a browser. For example, consider a family desktop computer. One family member may browse the web for home improvement information, while another adult frequently shops online. The kids play games against their friends, read celebrity gossip and comment on each others' pictures. Cookies do not know that different people are sitting in front of the screen at any given moment, and they combine all that activity together to create a profile of one completely inaccurate "user". Advertisers are investing tens of millions of dollars to acquire and target against these cookie based audiences that have been collected by desktop browsers — even though they are inaccurate. More importantly, in a world where mobile is the future, cookies simply don't work efficiently on phones and the ability to bridge the two worlds is riddled with issues. Every year that desktop usage declines in favor of mobile, cookie usage and audience quality will follow a similar decline.
Cookie based audiences (also called 3rd party data segments, with too many 3rd parties to name) are usually sold to many different ad tech vendors before ultimately being made available to advertisers. They often come with hidden margins that reflect ambiguous packaging and too many middlemen. Buying, selling, and deployment of ad inventory against these cookies is complex and lacks transparency. These investments display alarming inaccuracy due to the chaining together of many disparate technologies and data providers, sometimes referred to as "breakage". It can be argued that 3rd party data segments may be doing more harm than good, including propping up an ecosystem of unnecessary vendors built around them.
Advertisers are making poor investments in services, systems, and acquired third party data, to reach the wrong people with the wrong message. Cookie-based marketing is, in a word, screwed.
Identity: A New Hope
The social media giants — Facebook, Twitter, LinkedIn, and more recently Instagram and Pinterest — are beginning to make the power of identity available to marketers. They're doing it via a mix of powerful tools which will largely eliminate the need for many 3rd party data segments and their related infrastructure. Identity-based marketing is not just going to replace cookie-based marketing, it's going to usher in a world of new opportunities for advertisers.
For example, Facebook's global reach — not Facebook alone, but its network of Instagram, Messenger and more — is huge, and comparable to that of all other publishers combined. It allows marketers to reach people on multiple devices and formats, with targeting granularity across desktop, mobile, video, and local. More importantly, Facebook knows its users' identities.
Identity is an amazing combination of self-proclaimed data (e.g. "I live in New York City"), predictive data garnered through the use of artificial intelligence (e.g. "I just checked in to LAX, therefore I'm traveling"), tracking data from usage of its Like buttons across the internet (e.g. "I liked Hillary Clinton or I liked Jeb Bush"), and social graph data which can measure content consumption patterns (e.g. "I read New York Times articles").
Identity data offers psychographic, technographic, and activity information that cookies simply can't match; and it's getting better as the data appended to the user's identity continues to evolve. Or, as BusinessWeek says: "Facebook traffic is real people."
For instance, because Facebook has Messenger, it can apply artificial intelligence to conclude how users converse with each other to allow advertisers the capability to target people using the language that they converse in most frequently. Similarly, users' photos allow Facebook to detect location and social connection data. These identity-based data sets enable actionable insights and targeting capabilities that are made available through Facebook's ad products and APIs. Twitter, LinkedIn, Instagram, and Pinterest all possess similarly accurate identity profiles, products, and API platforms.
Campaigns on these social networks generally outperform those that leverage cookie-based ad tech systems on metrics that matter to advertisers across all verticals. Even better, their accessibility and ease of deployment means the complexity that is typically required in marketing is being reduced to the point where there are significant cost savings as a result of using these platforms.
Identity means that marketers can reach their exact target audience with the right creative message on a global basis, deploying millions of investment capital via one technology provider. They can then measure the results against their business goals, from awareness to conversion.
This is the reality of identity and the current opportunity for marketers.
Beyond the Walled Garden
The power of identity-based marketing is not limited to social channels. These platforms are the largest consumer databases in the history of the world, and their value will begin to shift out of singular properties into a wider ecosystem over the next couple of years.
With identity-based marketing an advertiser can find a user on a desktop environment, target them with a secondary message on mobile, and a third message back on the desktop.
That connected customer journey can repeat over a prolonged period of time with sophisticated product and consumer based narratives. With Atlas, the ad server technology that Facebook acquired two years ago, this capability will be enabled across all channels: Connected television, digital radio, websites and mobile applications, and eventually, the coming wave of virtual reality enabled devices and applications. Similarly, Twitter just announced another way to extend its identity beyond its core platform to a larger network of applications.
Extending the power of identity beyond the social networks' primary applications will deliver robust capabilities marketers have not been able to easily take advantage of with legacy cookie-based systems.
Closing the Loop on ROI
Identity creates an incredible opportunity for marketers, but it also presents some challenges and departures from traditional digital practices. With no less than five major identity-based social channels to leverage, reaching the right audience on the right channels simultaneously can be challenging without an ability to connect the dots and the expertise to know what products to use at what time. Additionally, identity-based campaigns also generate an incredible amount of valuable data that can be difficult to aggregate, normalize, and analyze.
To empower a market to solve this challenge Facebook, Twitter, LinkedIn, Instagram and Pinterest all offer APIs that offer programmatic access to identity-based inventory. These APIs also offer real-time access to the data that is generated from investments in these platforms. That accessibility makes it much easier and faster to accurately measure the closed-loop ROI of identity-based marketing investments. For example, by combining CRM data with identity-based audience data, a marketer can follow an entire customer life cycle from impression to purchase.
Consider the automotive customer's life cycle: an ad is displayed to a user, that user then visits a website to build a car, requests more information, buys the car from a dealer, re-engages with the dealer's parts and service team over time, and eventually comes back to buy another car years down the road.
Owning the consumer from engagement to purchase and eventually repurchase is the holy grail for every industry. This capability to build customer loyalty is now possible through the power of identity.
Executing on complex initiatives, like the vehicle ownership lifecycle example, is only possible when power of accurate consumer identities are leveraged to power marketing investment at scale. Powerful marketing software, built with enterprise discipline, leverages identity-based APIs. It is built to connect the dots between internal and external business systems, remove waste, add transparency, and turn valuable data into actionable intelligence that impacts marketers decisions on a global scale.
The marketing industry is at an inflection point. Cookies are a dying technology, and soon the cookie will crumble. Identity is the future which will unlock new capabilities formerly only dreamed of by marketers. We are early in this transformation and the sooner marketers leverage the power of identity, the more ahead of the curve they will be, and the more efficient their audience investments will be.