What is a Segment anyway?

While the Third Party Data Menu may be organized by Appetizers, Entrees and Deserts, don’t expect to know what kind of beef is in that burger, whether the fish was Farmed or Wild, or if peanuts are in the Ice Cream Sundae.  Second Party Data or Transparent Data, on the other hand, is like a Farm-to-Table restaurant where the ingredients are transparently sourced and the food is better for you.

The term Segment is often used interchangeably in our industry with the term Audience.  Even within ownerIQ when I ask “What is a segment?” a software engineer might refer to a very specific, granular data point auto-generated by our pixel platform and assigned to a Cookie ID or MAID.  On the other hand, sales and marketing folks explain a segment as grouping of users for a marketing campaign around some common interest like Millennial Gamers or Active Moms.  

Can both be right?  Not exactly. While a Segment can be used to create an Audience, or an Audience may be made up of just one Segment, they are not interchangeable terms.

A segment refers to each of the parts into which something may be divided.  Consumers can be divided in many different ways to create segments based on their shopping and purchase activity. A travel website, for example, might track how often customers are buying plane tickets, rental cars or hotels and then create segments of customers based on how often they travel.  Potential segments might be up to 3 trips per year, 4-12 trips per year, and more than 12 trips per year. This process is called “Market Segmentation”.

Travel Frequency Segments

  1. Up to 3 trips per year
  2. 4-12 trips per year
  3. More than 12 trips per year

Market segmentation means dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics.  In dividing or segmenting markets, analysts and marketers look for common characteristics such as shared needs, common interests, lifestyles or similar demographic profiles. The overall aim of market segmentation is to identify high yield segments – that is, those segments that are likely to be the most profitable or that have growth potential – and strategically grouping those segments together into an Audience to utilize for marketing activation.

Brands, Retailers and Publishers are becoming increasingly sophisticated about using First Party Data they have gathered from their engagement with customers online and in App for Market Segmentation.  Continuing our example of the travel website, for an upcoming sales promotion for Hotel+Flight packages the website might want to build an audience utilizing all customers from their Travel Frequency Segments B and C, so including all customers that traveled at least 4 times per year.  But what happens if that campaign does not hit KPIs in the initial launch and the marketer suspects the audience is under-performing?

Luckily, with First Party Data marketers can cross-reference other data points, focus in on more granular segments, or step back to look at broader segments.  This arms marketers with an “almost” unlimited variety of options for building audiences with market segmentation. In this case, the marketer might suspect that the overall campaign performance might be improved by adding the product category purchased in addition to the purchase frequency.  So an adjusted group of 3 audiences might look like this:

Frequent Traveler Audiences

  1. More than 4 trips per year with hotel
  2. More than 4 trips per year with flight
  3. More than 4 trips per year with rental car

In the end, the marketer may find that even though customers are frequent travelers, the sub-set of customers that frequently secure rental cars are far less likely to convert for Hotel+Flight packages than those customers that commonly buy flights and/or hotels.  This leads us to a key attribute of First Party Data. First Party Data always gives marketers control of Market Segmentation for Audience creation.

Second Party Data can be simply defined as First Party Data shared by one Brand, Retailer or Publisher with another Brand, Retailer or Publisher.  So really the data itself in both cases is the same, the difference is just that the data originator and the advertiser are different entities. In Programmatic Advertising, Second Party Data relationships are driven by mutually beneficial relationships – most commonly endemic relationships between Brands and Retailers, but not exclusively by any stretch.  All brands, retailers and publishers can benefit from data monetization and transparent data. The key with 2nd Party Data is that because the source is transparent and the relationship between the marketer and data originator is direct, the marketer still retains a full Market Segmentation toolset for audience creation and optimization.

On the ownerIQ platform we utilize a building block approach to Market Segmentation that enables Advertisers to interact with the transparent 2nd Party Data available in the CoEx Data Marketplace.  Below is an overview of how segments are built, how they fit together, and examples for each segment type and level.

Adnet Segments are the most granular segment type, generated by App data partners upload or Analytic Tags placed on partner sites, and are grouped into Micro Segments.  Micro Segments are grouped into Macro Segments which are groups of Product Types, Brands or Partners. Finally Macro Segments can be grouped into Market Segments. ownerIQ’s CoEx Data Marketplace allows Advertisers to utilize segments at any level or type, or groups of segments (aka Segment Groups), for Targeting, Optimization and Attribution for advertising campaigns.  All of these segments and Segment Groups can be used to create an Audience for use in the ownerIQ DSP or any other DSP with permission by the Data Originator.

Third-Party Data can be compared to 2nd Party Transparent Data by comparing a Black Box to a set of Russian Dolls.  Second Party Data, just like First Party Data, enables market segmentation to identify the right audience. The ownerIQ Data Hierarchy along with our Taxonomy of over 6,000 Product Categories and 55,000 Brands provides the data normalization necessary for marketers to be able to perform Market Segmentation effectively using consumer data collected across hundreds of Retailers, Brands and Publishers both online and offline.

With 3rd Party Data there is just one take-it-or-leave-it audience option.  Third Party Data is a menu-style listing of “Audiences” which were put together with a secret “Market Segmentation” process using unidentified “Segments” from an undisclosed “Data Source”.  The only thing the buyer of that segment knows is that the audience is named “Ink Intenders”. If you are an Ad Agency running a campaign to drive sell through for Ink Cartridges this audience might look pretty interesting.  After all they’re Ink Intenders right?  

Unfortunately,  while the Third Party Data Menu may be organized by Appetizers, Entrees and Deserts, don’t expect to know what kind of beef is in that burger, whether the fish was Farmed or Wild, or if peanuts are in the Ice Cream Sundae.  There’s no Medium Rare here, you’ll take it just as the Chef makes it or you’ll have none at all. Even if you have a Peanut Allergy and you might have a fatal reaction, the contents of that Sundae will be forever hidden from you because there are no exceptions when it comes to 3rd party data.  Even if there’s a Sundae inside, it’s still a Black Box.


Categories:Posts from 2014


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