What is data-driving advertising, and why do we need it?

Consumers these days have access to an abundance of data about the varied of products and services which are in the market. This is what is making them pickier about the messages they come across and the products they buy. So, advertisers are trying to understand how data can be used to pop up ads in consumers' browsers and social media, where the data originates and how people's preferences influence it. This data can also help them reach their target and control how data moves through the ecosystem. Through marketing agencies, advertisers can collect data at every touchpoint to better understand their audiences, interpret that data to predict future behaviors and make real-time marketing decisions. Moreover, insights from consumer data by leveraging artificial intelligence and big data tools can enable creating personalized messages that resonate their offers, to attract and retain customers. So, data-driven advertising is the smart upgrade from traditional ones.

In 2017, research initiative was carried by IHS Markit consisting of interviews with advertisers, publishers and technology companies to help identify the role of data in digital advertising.  As per the key findings, it was found that data-driven advertising is over 500 percent more effective than advertising without data, and increases the value of advertising units by 300 percent. The research discovered that nearly two-thirds of all digital advertising employed behavioral targeting, which contributed to ninety percent of digital advertising growth. Through a balanced estimate, the agency concluded that digital advertising market was losing nearly half its value if behavioral data were no longer used. Around that time, digital advertising in the EU generated annual revenues of €41.9 billion, with a growth of 12.3 percent year-on-year.

Though data-driven advertising, brands can showcase how they answer the unique demands of audiences and consumers. Further, it gives them an opportunity to maximize ROI. As per a recent study, 88 percent of companies have used data to improve their understanding of each consumer. It plays a vital role in economic growth, lowering barriers to entry and enabling innovation and competition. Even marketers would agree that data is crucial to the deployment of advertising and marketing efforts. There are several other ways in which data helps advertisers. These are, retargeting, programmatic advertising, predictive advertising and recommended advertising.

In retargeting, user data help in driving remarketing campaigns by capturing user's online activity and behavior. When a user visits a brand's website, a remarking code called tag gets triggered, and a cookie file is stored in the user's browser. When the user browses other websites, they will get to see relevant ads of your products through the ad platform. Though it may seem like an invasive advertising strategy, when done right, it can elevate the customer experience.

In programmatic advertising, the space buying process is automated through data analytics that decides which ads can be purchased. It then bids for them in 'real-time' bids conducted via a digital exchange. Here advertisers focus on reaching consumers using user characteristics like demographics, geography, interests, behavior etc. without any human intervention. In contrast, predictive advertising leverages predictive analytics which in turn relies on artificial intelligence and statistical algorithms to predict responses and outcomes. In this, advertisers can identify a potential audience and reach out to them with highly targeted messaging on the right platforms. Here, artificial Intelligence analyzes customer behavior, characteristics, past responses and purchases with the help of statistical algorithms to anticipate future sales and responses. Lastly, in recommendation advertising, advertisers study user preferences in search history to advertise about the searched product and services or related alternatives.

Basically, data-driven advertising helps brands understand about customer journeys, attributes that can lead to successful advertising campaigns. Also, through data-driven advertising, one can learn about consumer's experience of the internet, the amount of time they spend online, and the range and types of sites that they visit.  Further, it makes the personalization process easier and more consumer-centric. In short, it helps brands reach the right audience and connect with them on the Channels they use.