Digital Advertising: Hitting the Hyperlocal Target

To increase sales of its Huggies Snug & Dry diapers at Sam's Club earlier this year, Kimberly-Clark wanted to hone in on a highly specific audience within a very limited geographical radius – moms aged 18-34, with children aged 0-2, living within a couple of miles of a Sam's Club. The consumer packaged goods maker also wanted to reach Sam's online-centric audience through display advertising, but without blanketing the Web with ads served up to those uninterested in diapers or not located near a Sam's warehouse.The solution was highly targeted, data-driven digital advertising, a fairly new option that is vastly expanding and moving the needle for brand marketers. A host of data analytics companies, media publishers, online advertising networks and agencies have jumped on board the hyperlocal bandwagon in the hopes of snagging a piece of the lucrative national brand spend pie.Even just a couple of years ago, Kimberly-Clark's current goal of using targeted digital ads down to the neighborhood level, combined with an understanding of shopper segments and purchase behavior, at the large scale necessary would have been an impossibly tall order. "We want to eliminate waste in delivering impressions," says Richard Moulton, marketing director for Kimberly-Clark's Walmart and Sam's Club teams. "It's about getting more segmented and targeted – serving up ads at the right time, in the right place, to the right audience."The targeted digital advertising industry, still in its early stages, has become a highly confusing and fragmented landscape of complex technologies and a tough-to-track value chain. Nevertheless, CPGs have begun to test the targeted waters, shifting some spend to companies combining online and offline data with highly sophisticated analytics technologies – promising digital ad targeting at the ZIP code level (and beyond) that can also be tied to in-store sales.IP Addresses, Cookies and BeyondThanks to improved targeting and back-end measurement, overall online advertising spend has been on the rise and will cruise past print budgets for the first time this year, according to New York-based research firm eMarketer. U.S. online ad spending grew 23% to $32.03 billion in 2011, and it is predicted to grow to $39.5 billion in 2012, which would put it above total U.S. magazine and newspaper spending, according to eMarketer.But while so-called digital geo-targeting – serving up online ads to those in a specific geographical radius – has been around since the mid-2000s through the use of IP address data (the numerical label assigned to a computer on a network), its success was limited in terms of precision. For example, IP addresses for most AOL users came from a Virginia server, even though AOL users lived around the country, so ads served up to AOL subscribers may or may not have been geographically appropriate.And even as proximity targeting became more accurate, usually through the use of Internet "cookies" (a piece of data stored in a computer's browser that can be used as identification and/or proof of where the user is online), it was still no easy task to determine whether these Web surfers were the right audience in terms of lifestyle segment or purchase behavior – that of young moms with infants and toddlers, for example.Neighborhood-Level TargetingToday's hyperlocal offerings use highly sophisticated analytics to layer and combine different types of data with the latest digital technology to serve up ads to an audience of pinpointed prospects in specific neighborhoods – often on a very large scale of millions of impressions. Kimberly-Clark's work in January with Morrisville, N.C.-based hyperlocal data analytics company MaxPoint Interactive on the Huggies/Sam's Club challenge is an example of this.MaxPoint's solution cross-references IP addresses with point-of-sale data provided by retailers, and then uses proprietary analytics technology to determine which U.S. neighborhoods over-index for a certain behavior or lifestyle, such as young moms. It uses the results to determine ad network media buys, which then serve up appropriate display ads to the right target audience."It's basically the concept of 'birds of a feather flock together,'" says Gretchen Joyce, MaxPoint's chief operating officer. "We're not hitting one person or one house, but all of the folks in a neighborhood within the right radius of a store where the client is trying to drive sales. That's what gets the volume you need to not just bring in one appropriate customer into a store, but hundreds and thousands."Historically, Joyce points out, CPGs have spent most of their marketing dollars leveraging print, direct mail, in-store promotions and out-of-home marketing. That is changing, however, as granular digital advertising options can help CPGs get just as targeted as direct mail, but online advertising allows for more flexibility and real-time shifts in algorithms or creative.Connecting Offline to OnlineOne of MaxPoint's competitors in the targeted digital advertising space, Westminster, Colo.-based Datalogix, refers to these types of hyperlocal campaigns as "digital direct marketing." However, the firm, which has a strong heritage in offline direct marketing, determines its target audience differently than MaxPoint.According to Rob Holland, Datalogix's general manager in charge of the consumer products vertical, the company works with the CPG or retail client to determine what audience it is looking to reach. Then, it does a study of those category buyers and creates an online audience by analyzing in-store purchase data and using the Datalogix proprietary database of more than 110 million households."We have the ability to match offline data to online data," says Holland. "Let's say I'm a CPG selling a packaged food product and I want to reach people who buy my product, shop in my category or have other types of product affinities such as skewing toward organic. We can build that audience by matching offline CRM files to online cookie information – we've made the investment to create significant relationships across the Web where we can match millions of cookies and connect our offline databases to our online audiences."Some consider the use of cookies to be a privacy red flag in terms of gathering personally identifiable information, but Holland insists Datalogix's cookie use is anonymous. MaxPoint, however, makes a point of noting its lack of cookie use in hyperlocal targeting, as does another competitor in the neighborhood-level ad targeting space, a Chicago-area agency and unit of IPG Mediabrands called Geomentum.Lisa Bradner, a former Forrester Research analyst and now general manager at Geomentum and its sister company, Shopper Sciences, says the company uses its own proprietary research on shopper segments and behavior and combines it with ZIP code-level geographic data as well as, in some cases, point-of-sale or loyalty data provided by the client to determine the right display ad audience. She does admit that Geomentum sometimes does media buys with partner companies who use cookies, and that cookie use, the retention of the cookie data and other issues typically depend on the client's needs, policies and decision-making.Duking It Out for the Right DataMore data, Bradner points out, shouldn't always be the goal when it comes to hyperlocal targeting. Getting down to the single household level, she explains, may not provide the necessary scale for the client or meet its campaign needs. "Too much data can actually be a trap for the marketer," she says. "It's really about winning the shopper at the neighborhood level."For a longtime player in the digital advertising game such as publisher Yahoo, Sunnyvale, Calif., the secret sauce is in a name and address data file of more than 150 million U.S. consumers, or nearly half of the U.S. population. "Addressability" is the unique key to its geographic targeted offerings, according to Jeff Minich, product marketer, audience targeting, at Yahoo, who says the company provides geo-targeted advertising solutions to clients that combine Yahoo's name and address data with frequent shopper data and measurement courtesy of data partners such as Nielsen Catalina, Cincinnati; Experian, Costa Mesa, Calif.; and Acxiom, Little Rock, Ark."We rely on user registration data to determine what proximity-based segments a user falls into for targeting – so we target based on actual home address vs. a log-in location," says Minich. After all, he explains, users may log in at home, at work, or while traveling, but they tend to do their shopping within 15 miles of home.Yahoo also avoids "cookie churn," or the rate at which cookies are cleared or deleted from a person's computer with its method, says Minich. "It enables us to serve ads to a consistent audience over time."The Learning CurveWith vendors of all shapes and sizes vying for a share of brand spend in hyperlocal digital advertising, it's unclear what kind of solution will take the lead and what type of targeting – from cookies and IP-level targeting to offline point-of-sale or ZIP code algorithms – will prevail in this fragmented universe."Digital advertising is like a jump ball right now," says Bradner. "No one knows who's going to grab it." The only certainty, she adds, is that "the shopper is at the center of everything – and you have to find that shopper."With the landscape still in an era of experimentation, Datalogix's Holland says the industry remains in the early phases of the learning curve – and CPG brand marketers are struggling to meet the challenge and keep up with the pace of change. "This space has really grown up beneath the CPGs and retail advertisers," he says. "There's a lot of learning going on."Through its work with MaxPoint, Kimberly-Clark's Moulton is one of the marketers studying the learning curve, and while he may not fully understand the analytical depths of how MaxPoint's solution works, he is basing his judgment on the campaign's results. Those results are promising thus far, but he points out that the jury is still out – and that hyperlocal, targeted digital advertising remains only a small part of the company's mix of marketing channels."We're seeing click-through rates above industry norms, but we're not yet completely satisfied," Moulton says. "We're pleased with the program's results, and I appreciate its flexibility and ability to shift in real time, but we still want to raise the bar higher."

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