Exchanges Gain in Favor Among Direct Marketers

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Ad exchanges displayed marked increases in reach, efficiency, and user quality in the last quarter, a Neustar study says.

Exchanges Gain in Favor Among Direct Marketers
The rise of the ad exchange

The stock of ad exchanges and the demand-side platforms (DSPs) that provide access to them is rising precipitously among marketers, according to a study of some 28 billion ad impressions and 1,300 billion inventory providers conducted by Neustar in the first quarter. Exchanges performed 121% above the indexed average for high-quality users (consumers who engage more than once) and showed a 386% efficiency improvement in reaching new users.

While gains posted by exchanges were in part due to advertisers scaling back social and portal spending in the post-holiday period, their new prominence in digital marketing is noteworthy, says Neustar SVP of Media and Advertising Rob Gatto, who oversees the company's quarterly Media Intelligence Reports (MIR).

“When we started these reports only five quarters ago, exchanges used to have horrible inventory. But they've made constant improvement quarter over quarter,” Gatto says. “One of the things you're seeing here is that marketers are buying audiences instead of context, so a lot of upper funnel activity is moving to the exchanges. When doing retargeting, everybody's fighting for the last touch, and so we're seeing higher frequencies across exchanges.”

Gatto interprets the shift as a sign that marketers are using more offline, first-party data to influence media choices, though the phenomenon remains early-stage. “I'm amazed at the number of advertisers who are still buying media on a contextual basis, not going where their audience is but where they think they are,” he says. “Any time first-part data is used, the performance goes up dramatically.”

The Neustar report found that entertainment and retail clients using CRM information to target their ads registered performances that were 32 to 107 times higher than competitors that didn't call upon first-party data. Companies that accessed third-party data such as demographics, life events, and location to influence media choices also scored well above their industry averages. Consumer packaged goods companies that did so outperformed the average by 28x, education companies by 26x, and telecommunications brands by 10x. (Performance was based on conversions as defined by clients, and could be transactions, video views, page opens, etc.)

There are added benefits to introducing first-party data to the mix, Gatto says; one being advanced personalization for current customers. “There are times you might not want to advertise to them,” he notes, “like a cell phone company that made the sale or a department store looking to get people in twice a month. You don't want to advertise to them the day after they bought.”

It's also a boon to efficient deployment of dollars and, by extension, ROI. “You may go into your CRM data and identify 10 attributes that have been key drivers of delivering the user actions you're looking for,” Gatto says. “But then you find you've been buying only 20% of that audience.”

The MIR indexes the most prevalent digital advertising channels by cost, reach efficiency, user quality, and funnel attribution. It also examines campaign types that drive the most impressions and actions, plus the effect of data usage to target top-performing audiences.

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