DMP, as the name suggests is a software platform that collects, organises, and activates 1st, 2nd and 3rd party audience data gathered from multiple sources be it online, offline, mobile, generating in-depth customer profiles that help in customised and targeted advertising.
Arguably one of the most important links in the Ad tech World – The data management platform.
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What is a Data Management Platform?
In simple words, it is a collection of data stored in a huge database (or multiple databases). We can sort, filter and analyse this data which is used by marketers, agencies and publishers alike. They then, according to the specific needs, target their ads on multiple channels.
Do you think it will be appropriate to show this ad on a car manufacturers portal, say Ford? Absolutely not.
Another example, a person is looking for prescription eyeglasses and at random a shirt ad gets displayed, not that relevant again.
So, imagine a situation where I know already, whom to target, when to display and where to display the ads?
Moreover, it is not about one person, we are talking about thousands.
But then, why can’t I display my ads on many websites? Why the targeting, you may ask.
The reason is simple, it is a costly affair which doesn’t create value, giving a low return on investment (ROI).
According to Forbes, a survey, conducted with 12 advertising networks, shows that conversion rates for the targeted ads are 6.8%, compared to 2.8% for the non-targeted ones.
And yes, relevancy changes over time, so the ads can be retargeted as well, depending on various other factors which will be discussed later.
Sounds too daunting
Well not at all. DMP is here to your rescue.
Types of Data sources in DMP
First-party data
They are collected from users who visit a particular website, but with their consent and should be within the legal boundary. That website would allow and let DMP access the data directly. This could include email address, first name, last name, address, purchase history, gender and age, and so on.
Second-Party data
This data comes through partnerships with websites. Say, a restaurant owner is interested in data from the Food section of the New York Times. It will be really good information to have so that the restaurant can target those customers and engage them further.
Here, the website is not directly in touch with DMP. Rather, a DMP would be interested in that data and willing to buy them. Without this agreement, DMP could never obtain that data.
Third-Party Data.
This data is found in abundance. Anyone who has data and is willing to sell them to a DMP can do so. The issue with this arrangement is data not being consistent as they are coming from many sources, like public records, transactional data, purchase history, surveys, feedback and so on.
So, if I am a website owner and have decent traffic on my website, I will have that sort of data. I can sell them in the open market for the highest bidder.
How Does a Data Management Platform Work?
To understand the working, first, we will have to understand the role of data in a DMP.
Has it ever happened to you, you had searched for a running shoe last night, and today whatever websites you visit from that device started showing ads related to various running shoes?
Those ads might be from a new company or a store near you or any of the big brands Nike, Adidas.
Sounds familiar, doesn’t it?
So how was this achieved?
It is made possible because of this amazing software, DMP.
In the above example, data has been collected from the device I have used to search for a shoe, which can be a Mobile or laptop or PC. This data primarily comprises Cookie IDs, Android or Apple ID.
Once a large amount of data from multiple sources are collected, the import of data to the DMP happens either directly from those sources or DMP’s partner sites.
As every provider store data that they find convenient, the “integration” of the data is not as easy as it sounds.
Before loading the data into DMP, they are collated first and then converted to the format suitable for the DMP database.
Remember, it is a massive set of data, hence duplication is inherent
So, the removal of duplicates (or the redundancy, as it is technically known) is of paramount importance.
This process of removing duplicates falls under Normalisation, very much the same concept as database normalisation.
In short, it is about improving the data quality which ultimately yields a better value for the stakeholders.
Next is loading and cleaning of data using various rules as per the DMP database. Once the data is populated in the database, it is imperative to organise them.
For that, user profiles are created based on specified rules. These profiles work as “look-alike” profiles in which Advertisers and Publishers would be interested in targeting.
An example would be:
A female, aged 30-35, in Orlando, using an iPhone.
We can use as many attributes as needed, like age, geolocation, gender, browsing history, purchase history, interest area, marital status and many more like them.
At this stage, the data is taking shape. We can design customer profiles.
Armoured with this information, we are now ready to target in our campaigns.
What is the benefit of DMP?
1. Helps in data integration
Data flows in from multiple sources. Point of Sale from physical stores, device cookies, emails, social media, mobile apps, contact centre and many more. So, it is a complex mix of offline and online data. A DMP merges all these with ease.
2. Customer Segmentation
As we need to market our product or services, DMP is powerful enough to let us segment the customers to target them according to our requirements. This is achieved with the help of creating personas, also known as “look-alike” profiles.
With this, we are in a better position to target our customers rather than just flooding our ads everywhere.
3. Better Targeting
Let’s understand with an example:
I am going to Houston from Chicago, and say, I am buying my tickets from Booking.com. Booking.com then passes on my device ID, Cookie ID to DMP.
The advertisers then fetch this data from the DMP and start targeting me with ads for car rental, sightseeing services, which are in the destination city, Houston.
Once I click on the ads depending on my need, say car rental, they then try to engage me or try to sell me their services, maybe some exclusive offers as well.
4. Improve ROI and the efforts
With a DMP, instead of shooting in the dark, now we know which data to look at, who are my customers, where to target, when to target, the profitability definitely increases with the same or lesser efforts.
DMP works as a super important link, with publishers on one side and advertisers on the other.
One DMP, several use cases.
Multiple channels
These days, it is not uncommon for a person to browse the web with a mobile or a laptop or a tablet. Every device generates data. The same person might call the contact centre for the product he would be interested in. Or an email maybe. Actually, he is using multiple channels to engage with the company. How can we sew this data to create a unique profile?
As an owner, how do we know we are, in fact, talking about the same person?
Well, one of the most important aspects of a DMP is to merge this information so efficiently that this tedious looking task becomes so seamless. It is based on a unique identifier quite similar to the primary key of a database, they call it “Profile ID”.
The benefit? Beating the traditional method of targeting devices, instead, targets the person.
Audience Suppression
Would we want to target the ads for a person who had just bought my product or service?
Downright annoying for that person and a waste of money and time for me.
So, in this case, we will have to set this person in “off” mode in my re-targeting list for that product or service. DMP allows this configuration to be achieved with ease, which will help the DSP (Demand Side Platform) used by advertisers.
Data Modelling and prospecting
Since we have massive amounts of data sourced from 1st/2nd/3rd party, now we can make a “look-alike” profile of target customers according to my requirements (discussed earlier).
In simple words, it serves as a model profile.
This model profile will help in segmenting the customers having similar traits and attributes. These customers are treated as high-value customers as chances of conversion increase significantly.
Remarketing and personalisation
With the power of data in hand, remarketing becomes easier. For example, a woman looking for a dress for her 3-year-old girl. At this juncture, she will definitely come across customised ads while she browses. That’s normal. But what is above normal is that for marketers, this is a golden ticket. How?
Once the little girl reaches 5 years of age, her parents see targeted ads related to her schooling, hobby classes or performing arts classes. Better still, marketers can target personalised ads year on year. Countless opportunities!
What does a DMP do?
Needless to say, a DMP works as a most important pillar for the AdTech industry. Without this, publishers or advertisers would be lost in the ocean of data.
As we have discussed above, a DMP collects, organises, and activates the data. The data comes from 1st party, 2nd party and 3rd party sources.
A DMP, with this data, serves DSP (Demand Side Platform), SSP (Supply Side Platform) and Ad exchanges as well.
All the entities involved can leverage this data to personalise the ads, target and re-target the ads, gather actionable insights, monetise, improve ROI and reduce marketing costs.
Diffrence Between a Data Management Platform and Data Warehouse(Enterprise)
From a bird’s-eye view, the DMP and EDW look the same. However, there are inherent differences in the way they are treated.
Data storage
In a DMP, the data is being gathered from 1st/ 2nd/ 3rd party sources. They are based on cookie ID, Device ID, etc. They are non-personal information.
However, the EDW contains personal data. The reason is, the data belongs to an enterprise, where all the departments like Sales, Purchase, Contact centre, Human resource store their data. Information about employees, name, Number, email id’s etc are stored with it.
Purpose
DMP’s purpose is to have data from disparate sources, merge them in one, organise and finally activate them. The intent is to incorporate intelligence that gives actionable insight.
Whereas, EDWs are for storage, querying, reporting and exporting to different channels. Here, the intent is to reduce the load on departments so that they fetch and generate reports according to their need.
Handling and operating
EDWs (or Data lakes, as they are sometimes called) are a complex set of software.
Often, we need technically trained people to administer and operate. That is not the case with a DMP.
Behaviour
These EDWs support reporting and analysis, but not in the way DMPs do.
EDW doesn’t have any specific requirement to match and merge the data, so it won’t include cross channel identity resolution, which is DMP’s most critical component.
Cost
EDW is a software mostly used in an enterprise and, because of its complexity, costs around 100K USD, whereas DMP’s can be obtained at one-tenth of the cost, nearly 10K USD.
Build or Buy
Every organisation has a unique set of requirements. With this in mind, most of the companies would like to build their own EDW. As it is a speciality software, it takes a lot of effort to build one.
Depending on feasibility, they are built in-house or may be outsourced.
However, in the case of a DMP, mostly AdTech/Martech companies would like to procure third-party software from the companies specialised in them.
So, the ultimate question, which one is better?
Well, the answer lies in the intention.
EDW helps in organisation-wide decision making, while DMP is more useful to the marketing team to target customers and increase sales.
In the end, there is no one size fits all.
They both are excellent software packages and if we can harness the power of both of them, business is bound to become more profitable.
Conclusion
Data Management Platform is one of the most agile platform available in the Adtech space. DMP helps is solving a lot of problems for marketers which they are facing in terms of identifying and targeting the rightful audience for their spends and generating better ROI.
While the platform is not easily accessible to the masses, since the cost is slightly on the higher side. But it certainly provides an immense value, once added to any companies Martech arsenal.