Today’s digital advertising ecosystem feels a bit like the early days of Napster. With the press of a button, advertisers can steal consumer data from publishers. But it’s not too late for publishers to take control of their data and avoid the fate of record labels.
Acxiom recently spent a hefty $310M to buy LiveRamp, a company best known for its offline-to-online “data onboarding” service. But the real value of LiveRamp is its ubiquitous ID syncing network. LiveRamp has positioned itself as the switchboard of digital advertising — the router of marketing data across a hyper-fragmented ad tech ecosystem.
A Brief History of LiveRamp
Back in 2010, Facebook got a pretty serious slap on the wrist after inadvertently sharing personally identifiable information with third party data companies. In particular, a company called RapLeaf found a way to scrape referring URLs to match a cookie ID to a specific Facebook profile. Using this match, RapLeaf could target ads based on consumers’ Facebook profiles. Marketers loved it. Privacy advocates did not.
On the heels of that snafu, RapLeaf launched a secondary brand, LiveRamp, which would eventually become the face of the company. The LiveRamp service matched marketers’ offline CRM files with online cookie pools, enabling brands like Ford to deliver ads to drivers whose F150 leases were about to end. To make this work, LiveRamp built data transfer relationships with every major marketing platform — focusing initially on publishers and DSPs, and eventually expanding to a growing list of players in the data management, content marketing, and attribution spaces.
LiveRamp’s bet that data onboarding would be a valuable business proved to be correct, but the far bigger source of value would turn out to be a byproduct of the onboarding service — an ID syncing network that positions LiveRamp at the center of the highly fragmented ad tech ecosystem.
What is ID syncing?
For both technical reasons (every ad tech company operates on a different cookiespace) and privacy reasons (anonymous IDs should be rotated every few months), any real world person will have dozens, sometimes hundreds, of different online identifiers. Yahoo might call me user 1234, and Google might call me user 6789. Knowing that Yahoo’s user 1234 and Google’s user 6789 are the same real world person unlocks lots of interesting marketing use cases. With this match, marketers can:
- measure total ad exposure for each consumer and impose a global frequency cap
- syndicate audience segments to all publisher partners, creating consistent targeting parameters across the web
- deliver sequential creative messages, telling a linear story to each consumer as he moves from awareness to intent
- identify all brand exposures along each consumer’s path to purchase, enabling full-funnel attribution
In the context of a hyper-fragmented ecosystem, marketers often work with many different ad tech partners, and ID syncing enables these partners to operate as an integrated system.
How does it work?
Here’s where things get a little gnarly. Imagine that a brand works with 20 different ad tech companies. In order to create seamless operations, each company must know 19 corresponding IDs, and they must establish these 19 matches for every real world consumer.
By way of example, here is a URL that BlueKai can call to request TubeMogul’s user ID:
When you load that link in your browser, you’ll be redirected to a URL that looks something like this:
This URL notifies BlueKai that TubeMogul identifies me as user 6092720069689058834. With the first half of the sync in place, TubeMogul now needs to make a call back to BlueKai to request my BlueKai user ID. Similar two-way syncs need to happen for every pair of ad tech partners. Now do that for hundreds of millions of consumers. And keep the matches updated as each partner rotates its IDs. It’s a big job.
An alternative approach is to designate a single company to be the hub of all ID syncs. The hub can collect IDs from each participating ad tech partner and then form mutual ID syncs as needed. Think of this as a match maker who knows the full universe of eligible singles and can then introduce couples. LiveRamp has established itself as this match maker, and its ID syncing process looks something like this:
In hindsight, it’s clear that this match maker role is a coveted position in the ad tech ecosystem — a position that would eventually warrant an 11x revenue multiple. But it wasn’t so obvious when RapLeaf pressed the reset button in 2011 and launched LiveRamp. The bet to pursue a data onboarding service has proven to be a smart move. It enabled RapLeaf to move past its consumer privacy issues and build a new reputation as a connector of the online and offline marketing worlds. It unlocked new revenue streams, allowing LiveRamp to tap into CRM budgets, scale its business, and largely self-fund its growth. But through the process, LiveRamp also backed into becoming the de facto hub of ID syncing, the glue that holds together the ad tech ecosystem. This is the real value of LiveRamp, and it’s the reason Axciom made such a big bet on the company.
In a recent post, I highlighted some strange behavior of retargeting campaigns. One of the more surprising experiences was the way Jeep delivered ads to me following a visit to the jeep.com website. As expected, shortly after my visit to jeep.com, I began seeing ads promoting Jeep’s SUVs. But two things were unusual about these ads. First, the ads were sponsored by a local Jeep dealership (Cherry Hill Jeep), not the national Jeep brand. Second, the ads were served by a company called AdGear, which does not fire retargeting beacons on the jeep.com site.
So how did Cherry Hill Jeep know to target me, and how did AdGear execute the ad buy? While hard to say with certainty, I suspect Jeep is using a data management platform to syndicate audiences for local dealership campaigns. Here’s how audience syndication works:
- Jeep partners with a data management platform to track visitors to jeep.com. Based on tags that load on Jeep’s website, it appears Adobe is integrated as a DMP. When I visited jeep.com, an Adobe beacon loaded on the site and recorded my visit in an Adobe database.
- At any time (before or after my visit to jeep.com), Adobe can perform an ID sync with AdGear. The details behind ID syncing are complex, but the outcome is that Adobe and AdGear share with each other the anonymous ID that each company uses to track my online behavior. (“Hey AdGear, it’s Adobe. The guy you call user ID 1234 is our user ID 6789.”) Once an ID sync is in place, Adobe can send information about my jeep.com visit to AdGear, and AdGear can place me in Jeep’s retargeting pool.
- AdGear can then activate a campaign that targets consumers who (a) recently visited jeep.com and (b) are within driving distance of a particular Jeep dealership. Without any technical integration with the jeep.com website, Cherry Hill Jeep is able to run a retargeting campaign.
Retargeting has been around for a while, and this seems like a complex way to accomplish a relatively simple advertising task. Why not just load the AdGear beacon on jeep.com? Assuming Jeep wants to allow all of its local dealerships to run retargeting campaigns, a traditional approach would quickly overwhelm jeep.com with retargeting beacons. Jeep has 40 dealerships in New Jersey alone. Add another 112 dealerships in New York and 27 in Connecticut, and we’re looking at almost 200 beacons just to cover the tri-state area’s dealerships. Scaling nationally, we quickly hit a point at which jeep.com becomes unusably slow due to the presence of hundreds of retargeting beacons. By adopting a single DMP and then syndicating audiences to each dealership’s preferred media buying partner, Jeep is able to execute local retargeting campaigns while preserving a seamless consumer experience on its national website.