By the end of 2017, companies in the United States will have collectively spent $20.2 billion on third-party audience data and data-activation solutions, according to a new report from the Interactive Advertising Bureau (IAB) and Data & Marketing Association (DMA). Marketers will have invested $10.1 billion of their data budgets not on the data itself, but on third-party providers that are processing, cleansing and integrating that data.
“The State of Data 2017” sheds light on how marketers are budgeting and utilizing this coveted information and is the first industry-wide effort to address the gap between data spending and understanding how that spending is allocated.
The IAB says that by providing credible, practitioner-informed insight, it hopes to “demystify how US companies are investing in audience data (and its associated support functions), helping practitioners benchmark their own spending against industry norms and establish a firmer basis for future investments.”
Consumers have come to expect personalized experiences, which makes audience data more critical in marketing strategies. However, the sheer size of third-party data makes it difficult to analyze and implement without outside help.
“Audience data is only powerful when you can put it to work, and this research shows that US companies are turning to outside help to tap into that power,” said Orchid Richardson, vice president and managing director, IAB Data Center of Excellence in a statement. “These findings must be seen as a call-to-action for more guidance and education across the ecosystem.”
The study also found that across data types, marketers will invest the most—$3.5 billion—on omnichannel identifiers. This illustrates the desire for marketers to identify and engage with consumers across media touchpoints such as display advertising, website content, email and more.
IAB observed that of all data activation solutions marketers budget for, integration, processing and hygiene rank up top with $4.3 billion. Transactional audience data is the second-highest category in terms of spending, at $2.997 billion followed by digital at $2.078 billion. Marketers are spending less on specialty and identity audience data, at $0.886 billion and $0.563 billion, respectively.
Including modeling and segmentation accounts for a relatively small portion of outsourced data budgets. Spending $1.6 billion on analytics compared to $4.3 billion for integration likely stems from the work being done in-house, IAB speculates. Another reason may be that analytics, modeling and segmentation solution services have been bundled with paid media, campaign strategy and other offerings.
“As customers come to expect a hyper-personalized experience, marketers and advertisers are focused on fully optimizing their third-party audience data, and they’re willing to invest in that optimization,” said Neil O’Keefe, senior vice president of content and marketing at Data & Marketing Association. “Companies are spending significant sums on services and technology to assist with key data functions—more money than on the data itself. A key challenge to rein in these costs will be stronger budget oversight and increased focus on developing data talent that can rise to the occasion.”