Why brands should establish ethical principles for data collection

The internet of things is constantly collecting intimate data.

The internet of things is constantly collecting intimate data.

Data collected should provide value to all concerned parties

The Altimeter Group published “The Trust Imperative: A Framework for Ethical Data Use.” The report gathered information from several different sources to provide a well-rounded view of how consumers view data collection and how organizations are starting to rethink data collection practices.

Data collection is becoming more ubiquitous, thanks to the “internet of things” – thermostats, refrigerators, wearables, and of course smart phones, to name a few. Therefore, protecting consumer data, from encryption, to storage, to online marketing, is becoming a brand attribute.

Rethinking the digital cost-benefit analysis

The online marketing axiom, rooted in cost-benefit analysis, is that consumers will trade their personal data for perceived discounts. The internet provides consumers with free services – search engine, photo archive, social media networks, etc. – if the consumer shares personal, friend list or email information.

This appears to be a good deal on the surface. However, upon closer inspection, many organizations use data collection as a profit center, selling data to programmatic media firms, credit reporting operations, database marketing firms, and large retailers. In fact, there is so much consumer data for sale (over 1500 data points for each of the 500 million active internet users, most of them in the United States) that a precise mosaic of the consumer’s lifestyle, actions, interest, food preferences, and ailments can be purchased for marketing purposes.

If this comes as a shock, it shouldn’t be

Most Americans are resigned to the fact that there is nothing they can do to thwart the onslaught of data collection by marketers. This comes from a lack of understanding about digital marketing and a preconceived notion that the Federal Government is looking out for their best interests when it comes to their personal privacy rights.

Why brands should be worried

The internet of things is constantly collecting intimate data. This is changing the nature of data collection from something that requires action to something that just happens. Consequently, consumers are becoming more uncomfortable with how brands will use their data.

As the tension level rises around data collection, trust becomes a serious issue for brands. An Altimeter® survey of over 2000 consumers revealed that over 45% of those surveyed had little or no trust in how organizations use their data.

This lack of trust has a quantifiable effect on business performance. The 2015 Edelman Trust Barometer survey of 33,000 general population respondents found that 63% of people that lack trust in an organization will refuse to buy products and services from it. 58% criticized the organization to friends or colleagues, and 37% shared negative opinions online.

The impact of distrust clearly affects revenue, reputation, and stock price.

How brands can benefit from ethical principles in data collection

Brands should establish principles for ethical data collection, beginning with the expectation that any data collected should deliver value to all concerned parties. This is a litmus test for any “go or no go” marketing initiatives.

A second principle that organizations should consider is data minimization, meaning what is the least amount of data needed to meet the marketing objective? By practicing minimization, brands promote more sustainable and less risky analysis.

To download the report “The Trust Imperative: A Framework for Ethical Data Use” click here.

Additional articles you may find of interest on this topic:

Digital Ad Targeting – What Do Marketers Know About You?

Ad Technology: Programmatic Advertising

The challenges of “Big Data”

Please leave your comments or thoughts below.

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Digital Ad Targeting – What Do Marketers Know About You?

Who is looking at your data?

Who is looking at your data?

More than you suspect – first, second, and third party data

The adoption of programmatic advertising has given rise to using captured data to target banner ad placement across ad exchanges and networks.

This data is referred to as first, second, and third party data. Depending on which side of the buy/sell equation you stand on — advertiser or publisher — these terms have different meanings. What is important to keep in mind is just about all programmatic advertising is data driven marketing, with the intent of making more efficient targeted ad buying.

Not all data is created equal

First party data

First party data refers to data gathered about you through a direct relationship. Even in its simplest form, there are two types of first party data — advertiser and publisher.

For an advertiser, this can be data captured through a registration, check out transaction, cookie content, purchasing history, or merchandise searches. Advertisers use this data in a variety of ways, including showing additional merchandise that may be related to your purchasing history.

Publishers also lay claim to first party data; however, most likely not due to a direct relationship with you. Publishers monitor their ad networks and store analytical information, such as age, gender, etc., to create interest segments, such as banking/finance, travel, autos, technology, etc. This data creates a behavioral profile of your interest that helps advertisers target their programmatic advertising purchases across the publisher’s network to the pages you view.

Second party data

Second party data refers to one first party entity – advertiser or publisher – sharing information with each other.

For example, Amazon might partner with the New York Times to gain access to its audience behavioral profile. Amazon considers this information second party because it did not collect it. However, Amazon uses the data to purchase advertising space and place a banner ad of items that you recently viewed on the Amazon site.

Third party data

Third party data is information that is collected by an entity that does not have a direct relationship with you. Third party data collectors pay publishers to collect data about their site visitors and create profiles on your tastes, shopping habits, and behaviors as you move around the web. This information in turn is sold to advertisers with the intent of making their ad buy more effective.

The current reality of the internet is that we provide advertisers, publishers, and third party entities with our personal information for free. In turn, our information is repackaged and sold to marketers that use it to provide us with a “more personalized” web experience. Depending on your point of view, this can a good thing or something we should be very wary of.

Additional articles you may find of interest on this topic:

Big brother and marketing ROI

Do your customers suffer from “E-fluenza”?

Measuring Digital Display Advertising ROI

Please leave your comments or thoughts below.

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Ad Technology: Programmatic Advertising

Many marketers have become proponents of programmatic advertising.

Many marketers have become proponents of programmatic advertising.

Welcome to the high-speed trading desk for automated digital advertising placement

Marketers spent more then $3.37 billion on programmatic advertising last year. eMarketer is estimating the programmatic advertising will top $9 billion by 2017. Research studies by the Association of National Advertisers and Forrester indicated that only 23% of marketers said they used and understood programmatic advertising and that 26% indicated they understood the concept but needed to learn more about how to apply it to campaigns.

Kantar Media defines programmatic advertising as using technology to automate the buying and selling of digital advertising. “Programmatic” has different meanings to different people depending on which side — buyer or seller — of the transaction you are on.

The term is founded on an auction concept of buying and selling digital ad space inventory on ad exchanges and networks. Through this automated process, buyers bid for online ad impression through real-time auctions that occur in the time it takes for a webpage to load.

The Interactive Advertising Bureau (IAB) has identified 4 types of programmatic advertising transactions:

Automated guaranteed – refers to reserved inventory at a fixed price between one seller and one buyer. This can also be referred to as “Programmatic guaranteed.”

Unreserved fixed rate – unreserved inventory at a fixed price between one seller and one buyer. This is also known as “Preferred deals or Private access.”

Invitation-only auction – unreserved inventory available at auction prices between one seller and a few buyers. This is also referred to as “Private marketplace or Private auction.”

Open auction – unreserved inventory, available at auction prices between one seller and all buyers. This is referred to as “Real-Time Bidding (RTB) or Open exchange.”

These four types of transactions, based on two criteria, determine how the price is set and what type of inventory is transacted.

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The process of programmatic advertising

In its simplest form the process works like this: in the time it takes for an ad impression to load in a user’s web browser, information about the page it is on and the user viewing history is passed to an ad exchange, which auctions it off to the advertiser willing to pay the highest price. The winning bidder’s ad is then loaded into the web page.

Advertisers use demand side platforms (DSP) software to purchase advertising in an automated process. DSPs allow advertisers to purchase impressions across a wide range of publisher’s sites, but target specific users based on the geo-location and the users’ previous browsing behavior.

Publishers use supply side platforms (SSP) to connect their impression inventory to ad exchanges, DSPs, and ad networks all at once. This allows the publishers to offer their inventory to a large audience and achieve the highest rate possible for the ad impression.

If all of this reminds you of a stock exchange high-speed trading desk, you are correct, which is not surprising because most of these platforms are funded by venture capitalists, private equity firms, and publically traded advertising and media companies.

Additional articles you may find of interest on this topic:

Marketing Automation Platforms (MAPs)

People-to-people Marketing and “Small Data”

The challenges of “Big Data”

Please leave your comments or thoughts below.

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