Why second-party data is crucial to marketers

Data sharing is becoming increasingly common as organisations strive to better know their audiences. We look at how key brands are striking these second-party data relationships for customer gain

Data appears nowhere on the corporate balance sheet. But that hasn’t stopped it becoming one of the hottest currencies around, as organisations realise the value to be gained through allowing others to borrow their first-party data – or from borrowing data from others.

It has become a key feature of the data management tools from providers such as Salesforce and Oracle, who have built out offerings aimed at making it easier for clients and networks to extract value from their data sets through sharing.

Data sharing deals are appearing regularly, such as News Corp Australia's announcement that its behavioural, transactional and content consumption data of 12 million Australians will be shared with realestate.com.au's behavioural and content data of six million Australians, with the goal of enhancing both companies’ ability to offer targeting and audience insights. It has also boosted the growth of local companies such as Quantium and Data Republic, the latter raising $10.5 million in funding from Westpac, NAB and Qantas Loyalty in 2016.

Data Republic’s co-founder and CEO, Paul McCarney, says that while the concept of data sharing isn’t new, until now there have been no system to manage it or to determine the value of data. 

“A lot of the challenges you are seeing with the open data movement, and particularly with GDPR in Europe, is around the fact that nobody knows what data is worth, because it doesn’t fit on anybody’s balance sheet,” McCarney says. “And the reason it doesn’t is fungibility [the ability to determine equivalence between units of the same class] cannot be applied to it at the moment.

“You now have five big companies in America who have found a way to join and understand intent, both on the supply of that data and the sale of advertising systems or recommendation engines. And those guys can take over whatever industry they want because they have access to that data asset.”

Hence the interest being shown by many organisations wanting to better monetise their data on their own terms.
According to Nick Abrahams, partner and APAC technology practice leader at law firm Norton Rose Fulbright, there is immediate value in any organisation being able to ‘wash’ their data against that from another party.

“What people are looking for is the great insights – how can we get to know our customers on an individual level,” Abrahams says. “Can we do that with information we have, or can we get a more holistic view if we can see it together with other people’s data?

“A lot of organisations are spending a lot of time and effort trying to better understand what data they have, and make better use of it.”

The NSW Government in particular has led the way as a public sector agency deriving greater value from its data troves, including through work with Data Republic and Quantium. NSW’s chief data scientist and CEO of the Data Analytics Centre, Dr Ian Oppermann, says sharing anonymised data helps his team – and its client, the NSW Government – understand the challenges they are looking at from different perspectives.

“Data is a way of seeing the world,” Oppermann says. “Every dataset gives you a different perspective and allows you to see things differently. Put into analytical environments, it allows you then to understand, predict, follow the journey, do what-ifs, and experiment, in a relatively low-cost way.

“And ultimately if you can keep refreshing it, it allows you to explore the effectiveness of interventions or services.”

One project completed for the Transport for NSW looked at delay propagation across the state’s freight and passenger rail services, drawing in data from a variety of agencies.

“No one has a complete view of the world,” Oppermann says. “It’s a different perspective that State Revenue would see versus what Transport would see versus what Services NSW would see.

“It is hard to imagine a problem that would not be better informed through data from a variety of different sources. Variety is what makes it powerful – every single data set gives you a different perspective on the challenge, problem, service or insight you are looking for. Sometimes that benefit it relatively weak, but quite often a different data set brings a really powerful perspective.”

Oppermann says data sharing is especially powerful when working with larger data sets, especially when seeking to identify anomalies such as fraudulent behaviour. However, he says it does has its limitations at the human level.

“Cohorts and similarly-behaving people are, relatively speaking, quite easy to predict,” Oppermann says. “So when thinking about issues relating to human services, it’s quite possible to identify a set of characteristics which will identify a group of people.

“What has become really clear is that individuals are extremely difficult to predict. It is still really, really difficult to identify characteristics that will describe the behaviour of an individual. That means that the factors you identify with certain sorts of behaviours at cohort level need to be applied with real care when you come back to the individual.”

The options available for data sharing are rapidly increasing. For Oracle, its foray into data sharing has focused on evolving the data management platform it has been building following its acquisition of third-party data specialists BlueKai in 2014.

According to Oracle product specialist, Cameron Strachan, all of Oracle’s DMP customers are asking how to commercialise data.

“Because of the reach of the third-party marketplace into every DSP, into every trading desk, that also means that we can easily commercialise a customer’s own data when they feel like it,” says Strachan. “They start with a first-party marketing use case, but over time they realise they can share. And we essentially provide them with the technology mechanisms to do it.”

In November, Salesforce announced the launch of Data Studio in conjunction with partners, Mamamia and Southern Cross Austereo (SCA). Data Studio is a peer-to-peer trading platform designed to connect data owners with buyers and create new opportunities for audience discovery, sharing and activation.

Related: Why Mamamia is investing in a data management platform

SCA’s head of data and analytics, Kevin Morrell, says his company originally purchased Salesforce’s data management platform (DMP) 18 months ago to improve audience engagement by creating a more targeted audience segmentation model, and has since used its capabilities to build out data-driven advertising products.
He says Data Studio is another way to connect advertisers with audiences.

“What data sharing is allowing us to do is, rather than just concentrating on display advertising, it allows us to get a second bite of the cherry,” Morell says. “We are able to explain a lot more about who those customers are, and where they might be. It allows advertisers to understand that customer, with a whole 360 view.”

One example of a capability enabled through Data Studio is exclusion targeting. “If you are selling mobile phone plans and you are out there in market advertising at a one-to-one level, you don’t want to waste advertising on people who already have you products,” Morell says. 

While Morell says the model does require clients to have large data sets to ensure sufficient matches between with SCA’s data, he says there are still significant advantages to be had over working with third-party data.

“There is a lot of third-party data out there that provides a lot of scale, but it is pretty woolly,” Morell says. “This is giving us chance to enter that second-party data space. There is not as much scale as third-party, but because we are handling it at a client level, we can be very open and transparent about how the segments have been built and what goes into making them, and then we can refine them if we need to. We have everything to gain by being open and upfront about how we put people into the segment in the first place.”

Managing director for APAC at Salesforce for Advertising, Jo Gaines, says the peer-to-peer model offers much greater control for data owners over the traditional marketplace model.

Read more: Salesforce's Aussie marketers roll out DMP to improve media efficiency

“It is changing the type of relationships that our publishers have with brands to prove they are able to trade at scale against audiences,” Gaines says. “Now they can do it in a way that gives them some confidence that they have control and understand the value of their data, and can trade against it. 

“And in some cases, it creates a new line on the P&L – the value of data, and what we can trade it for. Because it is transparent and because it is not clipping the ticket, publishers can understand the true value of their data. They can know exactly what a buyer is prepared to pay for the data and what the demand truly looks like.”

But while the value is coming to be known, it is also clear that not all data is created equal. According to Oppermann, the true defining requirement of value is uniqueness.

“If you have data that no one else on the planet has, you have a really unique asset,” Oppermann says. “A lot of companies suspect they have valuable secondary uses of data, but haven’t really explored them. But that understanding is rapidly changing. The more times people see that in practice they have a unique data set, the more quickly they realise they could do something quite powerful with it.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu


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