Today’s column is written by Marc Grabowski, entrepreneur-in-residence at Highland Capital Partners.
In the movie “Groundhog Day,” Phil Connors, played by Bill Murray, meets his high school classmate, Ned Ryerson, over and over again while stuck in an endless time loop.
That aspect of the plot resembles my favorite definition of insanity: doing the same thing repeatedly and expecting a different result. This is today’s largest marketing dilemma. Too many brands are paying over and over again to find existing customers and reach them via welcomed means.
Every year, brands increase their marketing expenditures on publishers such as Facebook, Google, Yahoo and others. Digital ad spending will increase 14% this year compared to 2013, while mobile will grow 85%.
But will brands continue spending while ignoring greater efficiency? There are two reasons many do. The first reason is related to the sheer demand in the marketplace - such is always the case in a bull market. The second reason is because advertisers are not developing a data asset that creates renewable marketing efficiencies.
The Importance Of Efficiency
Operational efficiency is the most important benefit of programmatic, according to participants of AdExchanger’s recent State of Programmatic Media webinar. If this is the case, why are so many brands failing to create greater efficiency on mobile user engagement?
Case in point: Facebook recorded a 61% increase in revenue in the most recent earnings period, compared to the year before. Monthly active users did increase 19% year over year, but mobile monthly active users were up 39% YoY. Facebook didn’t release an impression breakdown from the second quarter of 2013 vs. the same period in 2014 but the sharp increase in revenue, coupled with increase in mobile users, adds credence to the argument that greater inefficiencies live in mobile than on the desktop.
Wake up: If brands do not do a better job of building a mobile data asset, Facebook and Google will dictate how much you will have to pay to reach your own customers.
A brief walk through history shows that most advertisers with performance goals have built some sort of data asset to use independent of any single publisher.
In 1872, Aaron Montgomery Ward produced the first mail-order catalogue. Brands began building massive postal databases that served as a foundation for direct-mail campaigns that would attract and retain consumers. Originally direct mail was thought to be intrusive but quickly become the norm.
Around the turn of this century, desktop computers began connecting with the Internet in homes throughout the world. ExactTarget, Constant Contact and other firms were created to help advertisers build opt-in email databases and communicate to customers through this new technology. At the time, people questioned if the viability of email marketing, especially HTML messages, saying that customers rarely check email and preferred text over something more visually appealing or emotionally persuasive. Over time, this argument fell by the wayside and HTML emails became a standard in our inboxes. Owning a double opt-in email database with two-way communication to a customer base became an art within the overarching marketing discipline.
Direct marketers have been searching for the next data asset ripe for first-party ownership. The creation of massive cookie pools, coupled with retargeting, has proven extremely effective to motivate consumers to reengage with brands on the desktop. Cottage industries arose creating third-party data exchanges allowing marketers to leverage cookies placed by noncompetitive brands.
Today, consumers are shifting their focus from desktop to mobile. Desktop cookie pools are nowhere near the silver-bullet on mobile as they were on the original screen. Unless you use a mobile matching service to attach cookies to Login IDs, such as Facebook Desktop Custom Audiences, it will be very difficult to move communication from desktop to mobile while using cookies alone. Unfortunately, the aforementioned tactic relegates you to rely on Facebook to house your data asset where you will be forced to direct your buys through them, further subjecting you to fluctuations in the Facebook market pricing.
The Best Technology For Communications With Customers
The next frontier for brand data assets is on mobile and must be a unique identifier. Android User ID, IDFA and mobile phone numbers are the three leading contenders to identify customers on mobile devices and communicate effectively. Which is the best?
Android User ID and IDFA are useful for in-app targeting but have one major risk attached to their use: Google and Apple respectively set the rules for use. If Apple decides to randomize IDFA on a monthly or daily basis, for whatever reason, the brand loses everything it has built over time. This leaves mobile phone numbers as the most important asset for data ownership.
The next question: Which vehicles should brands use to communicate with their audience? Desktop communications have been based on email and within browsers. Unfortunately, the browser experience on mobile has proven inadequate for brand-to-consumer communication. Apps are the preferred experience for users on mobile devices.
When you drill down to understand which apps are the most widely adopted, it shouldn't come as a surprise that more mobile users spend more time in their message applications than any other mobile application. Mobile messages are always opened because the majority of communication that comes through messenger channels originates from people trusted by the phone owner. The golden allowance is for a user to allow brands to communicate through messaging apps. The only way to do this is through rich, exciting and rewarding content. Keep in mind that I am in no way suggesting that SMS text messaging is the future.
Over time, brands will build relationships with their customers and will need to understand how their messages ultimately materialize into purchase behavior. This is all coming as iBeacons and proximity-based tracking becomes a reality throughout stores and at the point of purchase.
Brands must build their unique data asset, communicate through "welcomed" channels with beautiful, compelling creative, and then track the results of their expenditures from browse through purchase. Marketers have always needed to do this but now this need has shifted from traditional to desktop and now on mobile.
The opportunity to reduce reliance on publisher and inventory originators by developing a true mobile CRM approach to user acquisition and re-engagement is urgent. It is time to move beyond Groundhog Day and take responsibility for the inefficiencies in our marketing plans.
Successful development and deployment of a mobile data asset will result in the highest lifetime value a brand can build over the next 10 to 15 years.
Follow Marc Grabowski (@MarcTGrabowski) and AdExchanger (@adexchanger) on Twitter.