It’s no secret that spending growth in direct mail is declining as consumer preferences shift toward online and mobile.
Despite this trend, direct marketing professionals are poised for success in the next phase of digital marketing. Their traditional direct marketing skills are a perfect fit for programmatic ad buying, which involves making targeted online display media buys via an automated technology platform and real-time bidding with ad exchanges or trading desks.
Digital ad teams have long relied on ad agencies to design and manage online ad campaigns. Traditionally, online ad programs have employed broad “reach” approaches that entail designing a message, showing it to as many people as possible, and hoping it reaches the right audiences. Now, with the emergence of programmatic ad buying, ad executives now have the ability to decide whether they want to show a specific ad online to a particular viewer, how much they are willing to pay, and which copy to use each time an ad is shown.
Still, many digital advertising leaders don’t have enough information about their customers to make personalized ad-serving decisions in real time. That’s where direct marketers come in: They have the skills needed to bridge the gap between their organization’s internal customer insights and their online advertising strategies. Direct marketers are a perfect resource for advancing the effectiveness of programmatic advertising, given their in-depth understanding of market segmentation, customer valuation, data analysis, and campaign optimization techniques
Programmatic ad buying represents a sea change for agencies as their “Mad Men” world is being overtaken by “Math Men” and online advertising becomes a game of algorithms and statistics. But even those who adopt a programmatic approach don’t know how to establish the value of each consumer interaction at the individual ad impression level if they don’t have access to rich consumer insights. They don’t have the right type of data, experience, or statistics to make informed decisions thousands of times per second. For instance, ad buyers often still rely on often misleading click-through rates to determine whether an ad campaign is working. The problem is that “clickers” are often not buyers, and many clicks are outright fraudulent.
Some ad buyers are using third-party audience descriptors to decide whether each online viewer is an appropriate match for their ad. Unfortunately these categories are simplistic descriptions, such as “auto intender” or “homeowner,” and are often generated from data sources of questionable accuracy. The reality is that these broad-brush generic descriptions are rudimentary compared to the tailored customer segments that direct marketers have already perfected.
However, by applying direct marketers’ customer knowledge and tapping into existing CRM systems that track sales in incredible detail, digital advertising executives and savvy agencies are now beginning to leverage that data for online advertising. They’re using these systems to deploy rich data insights derived from offline customer data into online targeting models that maximize the value of each ad they buy. All of this is done in a consumer privacy compliant manner.
Specifically, digital ad leaders are working with direct marketers to analyze their customer databases and use those insights to send targeted ads to communicate in the most effective manner with the most receptive prospects. They’re also using this existing customer data to serve up appropriate digital display ads to existing customers.
Taking it a step further, leading advertisers are also beginning to use CRM data to measure the effectiveness of online ads based on real, offline sales data and evidence-based customer valuation models. In this new world, online display advertising is starting to look a lot like direct marketing.
All of this means opportunity for seasoned direct marketing executives within brands and agencies to evolve past the days of direct mail and invest their skills into programmatic ad buying. As the growth engine of online advertising, programmatic ad buying is already accounting for $1 billion of annual spend and expected to experience 70% growth rates through 2015 to reach $5 billion, according to IDC.
This trend is much bigger than just online display advertising. The tools of programmatic advertising are steadily expanding into other online formats and even into television. Within a few years it’s likely that “programmatic advertising” within digital ad mediums will simply be known as “advertising.” And direct marketers are ideally positioned to take the wheel.
Dave Helmreich is vice president of sales and business development at AdAdvisor, a Neustar service.