#McKinsey: Agency Upheaval? Something’s Gotta Give – My comments #Technology #Leadership

Agency Upheaval? Something’s Gotta

Great post David

I think technology is driving hard in 3 key areas

1/ Demand side is pulling in Supply side – ie Agencies members pulled into client side, journalists joining corp.comms, similar to what happened when Desktop publishing came. This includes consumers pulling in marketing/branding/pricing and others areas from the supply side into the demand domain forcing supply side to become enablers and aggregators.
2/ Reduced barriers for start-ups – the number of tech start-ups have just shot up, though some are getting acquired by large companies, customer impact tech is exposing the rigidity of larger companies when it comes to adoption, again giving the edge to start-ups
3/ Replaces/pulls in other products/services in – Digital camera, credit cards, car keys, TV remote etc are getting replaced/pulled in by smart phones

Technology ‘Empowers’ and ‘Levels’ things.

Programmatic Buying for Dummies – The future is bright, loud and fast!

Programmatic buying

Structural technology trends behind programmatic buying and their influence on marketing operations, the media holding company model and CIOs

Completion date: 14/01/2013

Background of programmatic buying:

The future is bright, loud and fast! A growing global audience is spending more time connected to digital media, hyper-communicating their likes, dislikes leading to too much data, knowledge. Media buyers are now moving their budgets to new areas such as display, standard pre-roll etc, and are buying media in an automated fashion through digital platforms (eg. exchanges, trading desks, DSPs), replacing traditional routes of RFPs, negotiations, insertion orders.  Data associated with audience, ad delivery is vital and must be available in near real-time to enable dynamically informed buying decisions.  

Positive digital interactions with customers, prospects can propel company growth and this brings the focus on four major parameters (shown in the diagram below) that can influence the maturity of Programmatic buying (PB).

Programmatic buying

Technology advancement across platforms:

Functionality and trend

Benefits

Supply Side Platform (SSP)

–          Options across proprietary optimization algorithms (Admel) vs manual or own optimization technology (ApNexus)–          Increasing breadth across ad format acceptance( from basic banner formats to mobile)

–          New features such as private exchange, variable price floor controls, anonymous participation, advertiser-level bid reporting, audience data management

–          Better packaging, positioning of media to buyers–          Increased monetization, operational efficiencies, multi-channel optimization

–          Gives better control and protection to publishers worried about premium inventory or brand association with certain advertisers.

Ad exchanges

–          Self-service, backend platforms enables log-in, set-up, manage campaigns, run analytics and optimize without even talking to a sales person–          Verification systems validate and stop an ad loading if content is not as per advertisers preference( avoid violent, competitor content etc)

–          Some allow buyers, sellers to participate, some allow only ad networks

–           Advertisers have visibility on the site, ad unit and publishers have visibility on which advertisers are buying their inventory and what they are willing to pay

–          Some exchanges allow floor price settings, offering a risk free proposition for publishers ( ad networks don’t tend to offer this)

–          Encourages competition and drives up ad space price per impression, as each impression is valued–          Ad exchanges are different from ad networks that often sell at a lower eCPM to close high volume sales or may not be in a position to quantitatively compare different ad buy offers.

–          Visibility for publishers help them control what advertisers and creative’s they want to encourage on their sites.

–          Few intermediaries in the value chain offer ad budget savings

Demand Side Platform (DSP)

–          Advancements in expertise across algorithmic optimization, knowledge of audience management, breadth of media access, unified campaign tracking and reporting –          Leading vendors have more than 50% of the impression volume RTB enabled. –          Buyers prefer a single platform  that is operationally efficient to access, manage and report inventory supply and campaigns across display, mobile and video

Real-time bidding (RTB)

–          2009 onwards, ad exchanges and SSP’s announced RTB support bringing a surge in activity from DSP’s, ad networks, agency trading desks and other media intermediaries.–          The EU cookie directive which came into effect in May 2011 can bring some challenges to data collection, usage and in turn affect RTB growth. –          RTB’s have cut inefficiencies in the media buying process, offers de-duplicated reach and can cap the number of impressions that audiences would see in a particular campaign–          RTB is an efficient way to buy impressions in real time, having an engine that calculates real time prices can really transform results for advertisers.

Data management platform (DMP)

–          DMP creates a single view of the user by aggregating data across first, second, third party online and offline sources in a unified manner, including segmenting and tagging.–          Leading organizations are building rich user information as a differentiator in an increasingly crowded online advertising area

–          Interactive marketers now have an opportunity to leverage DMPs and run audience based marketing campaigns more effectively than ever before, however, for DMP initiatives, the time and effort required to pull various departments together, such as IT, legal, CRM cannot be underestimated.

Impact of programmatic buying on marketing operations and Media holding company model

Marketing operations will become more efficient and can build a strong foundation based on metrics, best practices for campaign optimization, funds (forecast, reconcile and reallocate), performance reporting. There is a good chance of better campaign ROI not only because of media performance or better targeting but also because of the price squeeze, man power reduction. Positive experience and results from the digital media will, overtime, influence marketing operations team to increase their expectations from traditional marketing channels.

Large media holding companies are buying-out leading digital media agencies to keep up with the trend of budgets swinging towards the digital wave. With transparencies and a shorter value chain, the media industry is set to become a high-volume, low-margin business model ( similar to supermarkets) with pricing models moving towards ROI basis instead of activity based pricing. Customers could end up expecting similar transparencies, ROI in traditional media channels.

Positives and negatives of programmatic buying for marketing organizations and CIO’s

Positives

Programmatic buying increases the effectiveness, efficiencies of marketing organizations and increases the probability of bringing the right message to the right audience at the right time.  Today’s CMOs and CIOs have a vital role to play as enablers by leveraging integrated customer information to make consistent customer interactions across channels a reality. Similar to MDM, CDI (Customer data Integration) projects, programmatic buying could trigger data integration across first, second, third party online and offline sources in a unified manner.

Negatives

Targeting precision, ad relevance can bring a creepy feeling to customers who think they are being followed and publishers are trying to keep premium inventory in private exchanges to protect margins and brand. Non-compliance of cookie legislation could attract a fine up to £500,000 and lawsuits, giving more problems for the CIOs and their legal colleagues which could in turn slowdown data integration projects. 

Social networking could have saved Kodak?

Image

The recent past has witnessed a level of hyper-communication in most of the fields with different ideas flowing through, thanks to social networking. We know that there are benefits of two way or multi-way communications where an idea, strategy, thought could be looked from various angles to either build it or sometimes bury it! Whilst crowd-sourcing is a step in the right direction, is it enough? Let’s step back in time – 1970’s and look at a particular company and the importance of culture in addition to communication.

Let’s look at what happened to Kodak or more importantly what did not happen inside Kodak. When Steve Sasson, the Kodak engineer who invented the first digital camera in 1975 and shared his idea with Kodak management, their response to his invention was

‘But it was filmless photography, so management’s reaction was, that’s cute—but don’t tell anyone about it’.

So did the management fail to see the new trend or the thought of cannibalizing their revenue streams blinded them – perhaps both.

For the next 3 decades, the management were in denial about the emergence of this digital trend. While the founder of Kodak, George Foreman managed to embrace a new trend in the right time twice (once when he turned down profitable dry-plate business to move to film and then when he invested in color film even when their black and white business was doing well), the successive CEO’s managed to stay on the same old trend and failed consistently. The next failure, in 1996, was its $500Mn project Advantix Preview film and camera system (this was 10 years after developing its first mega pixel camera). The Advantix preview would allow the users to preview their shots and select the number of picture prints required and this was possible because it was a digital camera. The major cause for failure was the introduction of films into a digital camera just because Kodak was in that business!! Would you really buy a digital camera and still pay for film and prints? So what’s the root cause – Management stopped ‘listening’ thereby didn’t see the impact of the chinks in their armor then went on to refuse embracing the new trend, even worse,  they spent millions of dollars on research to force fit an old trend (films) onto a new trend (digital) using Advantix preview. If Kodak had a two or multi-way communication mechanism ( like social networking today)set-up in 1970’s, 1980’s and marketing-employee relations and other stakeholders picked up on the pro and anti ‘digital trend’ views, and made a futurist decision perhaps Kodak would be bustling with growth today

To look at the issue, let’s draw an analogy between a company and a person. Companies tend to behave like people; in addition to other qualities successful companies and people tend to have a right balance between conviction and self-awareness. For an organisation to start a journey of creating this balance, the following 3 aspects are critical

1/ Multi- way communication (social networking is just one platform) with all stakeholders (customers, employees, prospects, analysts, investors.) can be very helpful provided companies actively listen more and say less.

2/ Marketing/Employee relations to work 2 in a box to understand employees’ views on company’s products, services, new trends, challenges in addition to traditional employee relations work.

3/ Management/Leadership culture that is keen to listen to the findings of Marketing and other departments (after carrying out point 1 & 2).  Conviction and Self-awareness need to go hand-in hand. Management with too much conviction and very little self-awareness will lead to a Kodak moment, too much self-awareness and very little conviction is a non-starter.

Back to the question, social networking could have saved Kodak?  Maybe, it would have atleast created more awareness or noise around embracing the new digital trend which would have received some more attention and over time the management culture could have become a bit more self-aware. Social networking can help with awareness; adoption has to come from within where culture also plays a role. More so now than ever, for a company with competency and resources to be successful, management needs to get their employees behind their strategy and drive the company forward. This does not mean building a strategy in isolation and hard selling to the employees and customers to get their support or this does not mean trying to find a democratic strategy – this means running programs to socialize ideas and to  listen to the views, solutions that emerge and/or to listen and pick up new ideas and monetize them.

Would be keen to listen to your views and experience on this topic!

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