The Cost of Data Leakage

If you are a publisher that depends on advertising dollars to fund your operations, data leakage is a critical threat to your bottom line.  If you remember nothing else from this post, remember this – data means audience, and audiences are what advertisers pay to reach.  If they can reach them without  buying expensive content adjacency, they will.

Reaching a specific audience used to be hard.  Really hard.  That’s not to say you couldn’t buy it – any number of vertical publishers were happy to sell you millions of impressions if you wanted, but needed deep pockets and what advertisers want most after reaching a target audience  is to scale it to the hilt for the lowest possible cost. Anyone who doubts that can look toward the meteoric rise of ad networks and programmatic exchange buying, which has rocketed to a double-digit chunk of the display industry spend in just over a year.  Cost is a major factor in driving that.

That’s not to say expensive sponsorships and content adjacency are stupid or a waste of money, far from it – but content adjacency is usually a proxy for an audience, reached at scale in an operationally efficient manner, in the right frame of mind to drive brand awareness and brand recall.  Splashy sponsorships and content adjacency are what we call top of the funnel strategies, and they are expensive because it is incredibly difficult to attract a large audience looking to research a certain brand of car, or an HDTV, or their 401K allocation.  Vertical sites can charge a premium because it is not easy to build a deep, engaged, and reliably large audience. Advertisers are very aware of this.

By allowing advertisers to cookie users via pixel fires out of an ad tag, publishers are enabling their clients and ad network partners to remove them from the value chain.  If an advertiser can build a cookie pool on a publisher’s audience, it can readily retarget that audience for a much lower cost on the ad exchanges by using either a DSP or an Ad Network.  From the advertiser perspective this is a great way to extend reach, lower costs, and drive ROI.  The benefits are so great that it would seem absurd not to try, as if the publisher had simply left an unattended briefcase full of money outside the agency’s door.  Publishers without a way to secure their data are pretty much asking to have their audience filtered away from them.

A cookie pool on the loose has a number of negative impacts – first, it erodes the value of the publisher’s audience by allowing advertisers to access it through cheaper channels.  Publishers make enormous investments in technology and quality editorial to attract their audiences, which eventually becomes a competitive edge.  There is a long list of vertical publishers that have cornered the market in their chosen topic over years of hard work, and a marketer willing to pay premium CPMs to reach that audience is the reward.  If the advertiser doesn’t need the publisher to reach that audience any longer, that audience is suddenly worth less.  The audience is everywhere, on thousands of sites.  It is no longer Publisher X’s Unique Audience, it is CookiePool123, it is a commodity.

Finally, from a technical perspective, data leakage potentially exacts a huge cost on your site’s user experience through page latency.  All those third party ad pixels take time to execute, and in many cases may not work through an iFrame tag, meaning they must finish before the page content can continue to load.  At 20+ms for each call in addition to the time it takes for your ads to load, it doesn’t take much to make for a sluggish site from the user perspective. Anyone will tell you slow pages degrade almost every major site metric, not to mention can have a significant impact on SEO rankings.  Chew on that for a bit!

So what can a publisher do?  Read Next – Managing Data Leakage and find out.

3 comments

  1. Publisher data leakage and the erosion of the value of the audience reminds me of my most recent purchase of a TV. Call me old fashioned but if I am going to spend a fair whack of cash on something I would want to see it, touch it and smell it. I am looking for a rich, tactile, and safe environment in which to chose the telly. In this analogy this would be finding the audience on the quality publishers’ site with high quality, well authored, authoritative content, and then dropping a cookie on their users.

    After quizzing the sales guy in the shop, pawing the goods and making a decision to purchase, I would then go out of the shop, jump on the internet and buy from the cheapest Joe Shmoe e-retailer as they will undoubtedly be able to undercut the bricks and mortar store by having lower overheads. In the case of data leakage, this would equate to me buying through a DSP or Exchange.

    However, next time I want to buy a TV, I go back to the store to find that the retailer has closed down because their business model could not sustain the leakage of customer to online stores. I, the consumer, lose out as I now cannot view, touch, measure up the goods.

    In the publishing world, the actual content originators will be the bricks and mortar store that will be closing down. Authoritative content, like maintaining a walk-in store, is expensive to produce. Without this content production the quality of online editorial content will suffer. There will be less choice, and the choice that will be available will not be backed by the money that it required to properly investigate, author, film, edit and produce high quality content. Ultimately the consumer loses out by only having access to dumbed down cheap to produce content.

  2. I have to say this is an interesting way to think about data leakage – thanks for writing this up Clive, it’s always helpful when someone grounds an abstract concept like this with a real world, tangible example.

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