Programmatic advertising is known for its vast reach, precise targeting, engaging ad formats, and superior campaign control. User (or customer) data can further enhance the targeting and thus the ROI of the programmatic campaigns. This data can come from either a Customer Data Platform (CDP) or a third-party Data Management Platform (DMP).
More and more marketing teams invest heavily in their data capabilities and martech (adtech) stacks to use their data. The acceleration can be attributed to the planned departure of the 3rd party cookies, which are set to retire within a year. While comparing data platforms and providers, marketing teams may face the dilemma of investing in a CDP, a DMP, or both to make their programmatic campaigns more targeted and relevant.
The fundamental difference between the two data unification technologies is the kind of data they store and mobilize. While a DMP focuses on collecting, storing, mobilizing, and activating the third-party data(through cookies & tags) primarily, a CDP is used to unify data from the first-party (transactional, subscription, & CRM) second-party or third-party sources.
Another notable difference between the two is the user data identifier. CDP stores PII (Personally identifiable information) data, whereas a DMP stores anonymous data.
Together with DSPs, CDP & DMP make up a crucial technology trio in the programmatic space. Here is an exciting insight into the adoption patterns of these technologies. In the US, DSPs are used by 87% of the marketers, while only 46% & 36% use a CDP and DMP, respectively. Whereas when we look at Canada & the UK, CDP is the most commonly used programmatic technology, followed by a DMP and a DSP.
Source - eMarketer
What is a CDP?
A CDP provides a 360-degree view of the customer by combining data from multiple touchpoints. It considers the CRM data, data from POS, online transactions, and subscription data, among others. All this data is part of first-party data that the brands get from their customers with explicit consent, making it even more critical.
As mentioned above, the data in a CDP has a personally identifiable key assigned to each customer, which creates a multi-faceted persona of each individual, which later can be grouped into segments to target online. This data can be connected to multiple marketing and advertising tools for various purposes.
Additionally, a CDP can assimilate data from 3rd party sources like DMPs to further enrich the data lake.
CDPs use both first-party cookies and third-party cookies to gain a comprehensive customer view. However, the absence of third-party cookies will have some effect on the brand’s personalization strategy. In fact, CDP could end up playing a more prominent role in personalization. Reports suggest that the CDP market will grow at a CAGR of 34% by 2025.
What is a DMP?
A DMP collects anonymous data online, mainly through 3rd party cookies and website/app tags. The data stored in a DMP is in the form of segments that can be targeted using a DSP (Demand Side Platform) to deliver ads programmatically.
Advertisers and Agencies use DMP to create audience segments for their marketing campaign, consisting of Display Ads, Video Ads and even Search and Social campaigns.
Using DMP, marketers can scale audiences and considerably improve campaigns’ performance by reducing ad wastage.
In one of our previous articles, we discussed why a DMP is a crucial part of the programmatic ecosystem in detail.
So what’s best for Programmatic Advertising?
A CDP and a DMP need not compete for marketers’ attention and investment. They have varied functionalities and can work in tandem with each other when it comes to programmatic advertising. A CDP, which stores a centralized and unified customer view, can be used to create highly homogenous customer segments, which in turn can be pushed into a DMP to be targeted programmatically.
This first-party data can be used to target existing customers through DSPs to retain them and upsell or cross-sell products.
Additionally, marketers can create lookalike audiences using their first-party data to reach a bigger pool of relevant prospective customers.
Additionally, the rich PII data allows marketers to create personalized campaigns based on a customers’ past interactions, behavior, and recommendations.
Though both data technologies work great together or even individually, a marketer needs to evaluate the efficacy of implementing these before making commitments. A CDP works wonders when it comes to personalization and works well with many marketing and advertising technologies. But to make use of a CDP, organizations need to have enough first-party data and data science resources to make sense of that data. This makes CDPs expensive and time consuming as compared to other data solutions.
A DMP, on the other hand, is usually a third-party service that creates audience segments that, when activated through programmatic advertising, improve overall campaign effectiveness.