The Cookie Has CrumbledIt’s Time For Another Approach

Online agencies and big brand advertisers are recognizing that cookies are no longer an appropriate solution for reaching every audience. As a result, companies for whom online advertising is critical are looking for alternatives.

This white paper will take a look at the current issues around cookies and present a revolutionary new approach to successful targeting of online audiences.

The Problem with CookiesCookies were invented in 1994 by a member of the Mosaic browser development team that later became part of Netscape. They were originally intended to allow user-side customization of web information. They then became a key technology for successful online advertising. Fast forward to today: cookies are no longer effective and challenged by reach, accuracy and privacy. Take a look at some of the recent statistics:

• A 2011 study by Forrester Research estimated that in 2012, more than 50% of unique users blocked cookies

• Various ad agencies and networks openly report that the number of unique users reachable by cookie-based targeting for national campaigns averages 30% - 35% and is dropping rapidly

• A 2012 study by Google Analytics showed that many of the cookies that were set were duplicates. Google projected that the industry duplication rate was approximately four cookies for every unique user

Do Cookies Reach Your Audience?Both 1st party cookies and 3rd party cookies are limited in reach. First party cookies are based exclusively on the current customer or subscriber list and limit the marketer to cross-sell and up-sell promotions based on the size of the list.

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The Cookie Has CrumbledIt’s Time For Another Approach

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The Cookie Has Crumbled: It’s Time For Another Approach

Third-party cookies are the same cookies placed and sold into the public market through a data management company that bundles multiple sources for resale to advertisers. The process for collecting the cookies, packaging them and reselling them takes time. One major ad network measured the effective lifetime of a cookie and found that it was limited:

• Within ten days the pool of third-party cookies was 81% deliverable

• By 30 days the deliverability dropped to less than 65%

• Within 90 days the same cookie pool had less than 15% deliverability

Third-party cookies are also subject to duplication within the cookie pools. A 50% block rate with an average one in four cookies actually representing a unique user, a data management platform (DPM) claiming 300 million cookies would represent:

• Just over 50 million unique users by day ten

• Only 20 million unique users by day 30

• A mere 10 million users by day 90

How Accurate are Cookies?The challenge with accuracy in online advertising is verifying who you are serving ads to when most of the audience is based on blind or assumed attributes associated with a de-identified cookie.

In a 2012 Acxiom and eMarketer study, different categories of data used in online targeting were evaluated against one another. The study compared single-variable cookies, contextual targeting, single-variable demographic data and multivariate demographic data. The objective was to determine the lift between each category when compared against run of network – or no targeting criteria at all.

The study found:

• Cookie targeting delivered 1.2 versus the control

• Contextual targeting drove improvement of .13 times

• Single-variable demographics saw .55 times, but

• Multivariate analytics data delivered 5.5 times the control group

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The Cookie Has Crumbled: It’s Time For Another Approach

Predictive Modeling and CookiesIn 2011, comScore and Microsoft completed a study to determine the metrics associated with using predictive analytics in online advertising for targeting consumers. The study was based on a closed network of premium sites managed and operated by Microsoft. It measured the degree to which browsing behavior and various ad targeting methods could be correlated to in-store purchasing results. In the end, the results showed a 42% lift – two times the lift generated by single interest cookies, run of network, or contextual-based advertising.

Marketers and statisticians in the offline world have long recognized that the cornerstone of predictive analytics is based on using multiple data factors to statistically weigh variable contributions in order to accurately predict an outcome. Whether the factors are browser history, affluence, distance to the store or age of the consumer – they all contribute to the algorithmic analysis that drives predictive modeling.

Multivariate predictive modeling is a proven technique applied by virtually every CPG organization. It accurately assesses the propensity for audiences at scale to align with a product or service, as well as their likelihood to transact. Multivariate analytics typically delivers between three to ten times lift over campaigns that use single attribute selection criteria.

Predictive modeling is beginning to be tested more often in online campaigns with cookies, but the challenge is that with online data, there is a lack of verified data points on which to build the models.

Smart Zones is the only targeting methodology that is designed to consistently connect browser behavior with offline demographics and purchase history. Using multivariate data technology, Smart Zones seamlessly identifies who the best online prospects are and where they can be targeted – at scale. This use of multivariate predictive modeling allows Smart Zones to deliver an average of five times lift due to nearly 100% reach combined with improved accuracy.

ABOUT SMART ZONeSSmart Zones is a breakthrough audience identification platform that maps nearly 100% of online home, education and business traffic into qualified target-ready audiences – all while protecting user privacy.

Cookies and PrivacyTracking cookies – especially third-party tracking cookies – are used to compile long-term records of individuals’ browsing histories. Ad networks and data service providers (DSPs) collect this tracking information to optimize advertising relevancy for their clients. The cookies are de-identified (scrubbed) of user identity, but actively store the individual’s online usage pattern over time. Still, this creates a serious concern around privacy.

Data management platforms (DMPs) take this a step further by pro-actively contracting with online subscriber and retailer sites to on-board, or place cookies, on their known audiences. DMPs then broker bundles of these cookies as qualified audiences on inventory to advertisers, with royalties flowing back from the DMP to the site owners. This gives advertisers access to qualified inventory from retailers, banks and online catalogues. It also means that first-party sites are now monetizing their customer base – sometimes without their users’ permission.

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The Cookie Has Crumbled: It’s Time For Another Approach

Privacy is a dark cloud that hangs over both advertisers and the Internet advertising industry. Both Microsoft and Mozilla recognized their potential exposure and have elected to block cookies with their browsers. Up until that point, the industry had supported user choice, giving end users the option and tools to choose to opt-out of cookies. It combined this with an industry-standard policy based on self-regulation.

It appears that european and U.S. lawmakers have not fully bought into opt-out implementations, or the concept of self-regulation. Regulators continue to propose and consider more rigorous approaches, such as Do Not Track policies and banning third-party cookies. The result? Big brand advertisers and regulators are very anxious.

Smart Zones: Today’s Answer to the Crumbling CookieSmart Zones is a breakthrough audience identification platform that maps nearly 100% of online home, education and business traffic into qualified, target-ready audiences — all while protecting user privacy.

The Smart Zones approach is analogous to how cable companies define broadcast zones. Using Semcasting’s patented genetic modeling process, concentrations of individuals with similar demographic attributes are aggregated and mapped into audience clusters based on the delivery points of the Internet. Smart Zones uses a patent-pending method to provide sub-zip code level targeting resolution, categorizing nearly 100% of U.S. Internet traffic into over 25 million total zones that are appended with over 750 attributes for life stage, affluence, home ownership, auto interests, political affiliation and network connectivity. At the home level Smart Zones is a true “Big Data” platform that solves the online industry problem of thin and often inaccurate data that is the result of collecting online behavioral data. By creating over 16 million qualified home zones enhanced with 750 offline demographic variables, Smart Zones delivers true multivariate data to each zone that drive accurate predictive models. Rather than inferring interest based on a single online purchase or a single site visit, Semcasting’s premium data enhances each Smart Zone, providing coverage of 225 million individuals and 126 million households across the United States.

Smart Zones has been used in more than 1,000 campaigns in 2012, and delivered a lift of up to 330% across ten industry categories.

While retargeting can often deliver better clickthrough rates (CTR) because users are already prequalified in a session, overall, Smart Zones delivers lift of 125% over the average industry CTR of .07%, and does it at a scale that exceeds retargeting by over 1,000 to 1.

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The Cookie Has Crumbled: It’s Time For Another Approach

Smart Zones: Delivering Reach and Accuracy, with PrivacySmart Zones targeting does not use or depend on cookies. It provides the same availability of 100% of the inventory as zip code targeting but the geographic resolution is much more refined – it is at the sub zip code level based on neighborhoods. It can offer up to 1,000 segments within a zip code. In addition, for each Smart Zone, there is a distinct demographic and psychographic profile. Whether an individual gets served with an ad or not is also based on whether these other qualifying attributes match the goals of the campaign.

Reach is a key issue for advertisers and their agencies. On one end of the reach spectrum there is retargeting. At the other end is geo-IP and Smart Zones. Using a baseline of 50 million impressions, the chart below represents the count of unique users one would be projected to reach in a new campaign.

Smart Zones was designed to the highest standards of online privacy and fully complies with the FTC-proposed Do Not Track legislation and the Consumer Privacy Bill of Rights. Smart Zones only supplies aggregated data at the neighborhood level, with no linkage or access to the identifiable information of any individual. There is no application or usage of cookies or tracking pixels, and no ability to reverse engineer to target an individual. Semcasting and Smart Zones are IAB, DMA and TRUSTe certified.

SMART ZONeS CASe STUDy: CReDIT UNION ReAChThe largest Federal credit union in the U.S. has over $30 billion in assets and more than three million members. The credit union launched a campaign to encourage qualified prospects to sign up to receive benefits such as preferred financing on auto loans, mortgages and home equity lines of credit. The campaign goal was to reach a clickthrough rate of .10%. Clickthrough rates for similar financial institutions average .09% overall; similar offers see a clickthrough rate of .05%. The Smart Zones results included:

• Running at 20% over goal in the first week of the campaign

• Translating into a .12% clickthrough rate at an average of 31,000 impressions per day

• Driving .21% clickthrough rates at 110% of goal by the end of week three

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The Cookie Has Crumbled: It’s Time For Another Approach

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The Cookie Has Crumbled: It’s Time For Another Approach

SMART ZONES CASE STUDY: ACCURACY TARGETING TRAVELERSAn agency representing a leading retailer of online vacation packages wanted to target a highly qualified audience for a holiday sale. The campaign objective was to build brand awareness and to reach potential new customers. Semcasting built a Smart Zones audience with the appropriate household demographic, socio-economic and interest variables. Unlike cookie-based behavioral targeting, the Smart Zones-based campaign allowed the advertiser to accurately verify each user impression prior to any bids being placed in the RTB exchange. The Smart Zones results included:

• More than 3.5 million impressions generated, with an average .08%clickthrough rate

• A CPM average of $9.50, a significant achievement in an industry that has an average CPM as high as $20.

• An ROI of 25 times the $20,000 campaign

SMART ZONES CASE STUDY: PRIVACY FOR A MEDICARE CAMPAIGNProgress Missouri, a multi-issue progressive advocacy organization that works to engage Missouri citizens in issues of immediate local concern, launched a display advertising campaign to specifically target senior citizens in the 4th Congressional District. The objective of the campaign was to raise awareness about the local U.S. Representative’s vote to upend Medicare coverage – a decision that threatened to increase costs for Medicare beneficiaries. The campaign was designed to generate awareness online and to encourage senior citizens to contact the Representative’s office immediately to voice their concern. Semcasting leveraged its offline database and was able to identify physical addresses of senior citizens within the district. Smart Zones addressed the privacy concerns by creating virtual clusters of “look-alike” audiences that shared similar demographic and socio-economic attributes within the district. This approach allowed Progress Missouri to target all qualified online users matching the target criteria without providing any access to personally identifiable information to any single individual. The Smart Zone results included:

• An average of 25,000 impressions per day in the first week.(This translates into a clickthrough rate of .18%, compared to similarcampaign rates of .06%)

• 900,000 qualified impressions generated after two weeks

• An average clickthrough rate of .38%; 533% higher than the industryaverage

Smart Zones represents the optimal combination of reach and accuracy to generate superior results at scale with no compromise in privacy. When measured in equal parts reach to unique users, accuracy of the targeting and click through rates, Smart Zones delivers the optimal ROI of all of the current targeting methods. It can uniquely drive superior ROI results based on its reach to a broader range of users that are all qualified and scored so that campaigns and promotions can be easily and efficiently segmented and optimized.

SummaryThe era of cookies is over; they no longer deliver the results online agencies and big brands need. And those who stay with cookies are likely to be forced to change anyway. In a world of many different approaches to online advertising platforms, Smart Zones stands out. It delivers the reach and accuracy desired by advertisers, with the privacy demanded by consumers and soon to be required by government agencies.

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MARTY AGIUSPRESIDENT

2495 Main Street, Suite 300Buffalo, NY 14214

O: 716 332 7070 C: 716 725 3738 E: marty@marketing-grid.com

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