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Marketing MathTM

Category Archives: Media

19 Sep

ISBA | The Practice – A Creative Digital And Marketing AgencyGlad to see the ISBA contract framework being more universally utilized. The terms and conditions recommended within this document absolutely provide media advertisers with the necessary legal and financial safeguards to protect their interests. This is, without question, the best “first line of defense” when it comes to transparency accountability Read More

In China, Ad Platforms Are Bypassing Media Buying Agencies

14 Sep

big dataInteresting article from Digiday profiling the fact that advertisers in China, seeking more transparency, are moving budget dollars from agency trading desks to Baidu, Alibaba and Tencent (BAT).

Not surprisingly, the agency community is a little less supportive of this approach due to the lower margins affiliated with BAT (i.e. 5%) versus the 50 percent earned from their trading desksRead More.

Pay TV Cord Cutting Gathers Steam

13 Sep

emarketerAccording to a report from eMarketer, 56 million+ U.S. consumers will go without pay TV access this year. The growth of live streaming and on-demand viewing are key contributors to this trend, along with a decline in viewership.  Read More

Will AI Render Media Agencies Obsolete?

11 Sep

artificial_intelligence

Artificial intelligence (AI) is already reshaping how advertising is developed, planned and placed. The marketing applications being envisioned and adopted by agencies, consultancies, publishers and advertisers are nothing short of remarkable.

From the onset of “Big Data” it stood to reason that the concept of predictive analysis, the act of mining diverse sets of data to generate recommendations wouldn’t be far behind. Layer on natural language processing, which converts text into structured data, and it is clear to see that “deep learning” is on the verge of revolutionizing the ad industry. As it stands, algorithms are currently optimizing bids for media buying, utilizing custom and syndicated data to match audience desires (or at least experiences) with available inventory.

Effective, efficient, automated methodologies for sorting through vast volumes of data to evaluate and establish patterns that reflect customer behavior for use in segmenting audiences and customizing message construction and delivery holds obvious promise.

So, what does this mean for media agencies? Will they be at the forefront of automation technology? Or will they be swept away by the consultancies and ad tech providers that are already investing here?

If media agencies desire to remain in control as the industry evolves, there are real challenges that they will have to address to remain viable:

  • Re-establish role as “trusted advisor” with the advertiser community. Recent concerns over transparency, unsavory revenue generation practices and a failure to pro-actively safeguard advertisers’ media investments from fraud and from running in inappropriate environments have created serious client/ agency relationship concerns.
  • Attract, train and retain top-level talent to re-staff media planning and buying departments. The focus will need to be on bridging the gap between developing, and applying automation technology and providing high-level consulting support focused on brand growth to their clients. Presently, media agencies are not effectively competing for talent, whether in the context of compensation and or personal and career development options being offered by their non-traditional competitors.
  • Provide a framework for addressing the compensation conundrum. Whether this is in the form of cost-based or performance-based fees tied to project outcomes, commissions or hybrid remuneration systems, tomorrow’s successful media agencies will need to establish clear, compelling compensation systems. These systems will need to reflect value propositions that will differentiate them from an expanded base of competitors, while offsetting (to some extent) non-transparent sources of revenue that many media shops have come to rely on in recent years.

This will not be an easy path for media agencies, particularly for those that are hampered by legacy systems, processes and management perspectives that may limit their ability to more broadly envision and ultimately, assist client organizations addressing their needs and expectations.

Either way, the race is on, as management consulting firms are acquiring various marketing and digital media specialist firms and as media agencies raid the consultancies for personnel to build out their strategic consulting capabilities. The key question will likely be, “Which business model holds the greatest promise, in the eyes of the Chief Marketing Officer, for improving brand performance?

 

 

 

 

 

So Long Trading Desks

07 Sep

benchmarkingInteresting article from AdExchanger regarding the evolving agency trading desk model. Embedding specialists on client teams to boost impact and transparency makes good sense, assuming the talent level is there to support that.

Thus eliminating certain “centers of excellence” such as the trading desks and or consolidating agency brands will be a necessary (and welcome) approach. While clients seek the best possible solutions, they do care which business cards agency/ affiliate personnel carry… when they’re paying incrementally for those services.

So, yes, remuneration schema will have to evolve to support this new approach Read More

We Knew Facebook Was Growing Fast, But This Is Incredible…

06 Sep

facebookNice job by AdNews capturing this publisher’s overstatement of its audience.

That said, wonder whether or not the ad agency community would have investigated and uncovered same? No wonder advertisers are rethinking their digital media investments Read More

Increase Your Digital Coverage by 40% In One-Easy-Step

01 Aug

simple is goodConfucius once said that “Life is really simple, but we insist on making it complicated.”

Perhaps the same can be said of digital media buying. Too often it seems as though the onset and rapid growth of programmatic buying has created more problems than solutions. An expanded media supply chain with multiple layers of costs, increased levels of fraud, brand safety concerns, visibility challenges, a lack of transparency and perhaps most troubling, eroding levels of trust between advertisers and their agencies.

Growing pains? Perhaps. But something needs to change and this author would like to suggest one potential solution… abandon programmatic digital media buying altogether. Seriously? Why not?

Consider the following and the concept won’t seem so far-fetched:

  • In 2015, advertisers spent $60 billion on digital media, with close to two-thirds of that going to Google and Facebook (source: Pivotal Research).
  • According to the advertising trade group, Digital Content, today this duopoly is garnering 90% of every new dollar spent on digital media.
  • What happened to the magical pursuit of the long-tail and the notion of smaller bets being safer? Economics. The fact is that the notion of the long-tail simply didn’t work as researchers and economists found that having less of more is a better, more statistically sound pursuit. To wit, Google’s and Facebook’s market share.
  • Today, programmatic digital display advertising accounts for 80% of display ad spending, which will top $33 billion in 2017 (source: eMarketer).
  • Between 2012 – 2016 programmatic advertising grew 71% per year, on average (source: Zenith).
  • In 2018, programmatic will grow an additional 30%+ to $64 billion, with the U.S. representing 62% of global programmatic expenditures (source: Zenith).

Come again. Two publishers are getting $.90 of every incremental digital dollar spent and programmatic digital media buying accounts for 80%+ of digital media spend. What are we missing? Is there an algorithm that specializes in sending RFPs and insertion orders to Google and Facebook in such a manner that the outcome yields a 40% or better efficiency gain?

As we all know, there have been numerous industry studies, including those sponsored by the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA), which have suggested that at least 40% of every digital media dollar spent goes to cover programmatic digital media buying’s transactional costs (third-party expenses and agency fees), with only $.48 – $.60 of that expenditure going to publishers.

So, for an advertiser spending $40 million on programmatic digital media, if the law of averages holds true, $16 million will go to cover transactional costs and agency fees. That means that of the advertiser’s original spend, they will actually get $24 million worth of media. While we know that programmatic media can yield efficiencies, can it overcome that type of transactional deficit?

If that same advertiser eschewed programmatic digital and decided to rely on a digital direct media investment strategy, what would it cost them?

Assume that they hired ten seasoned digital media planning and investment professionals for $150,000 each (salary, bonus, benefits), they would spend $1.5 million on direct labor costs. Further, in order to afford their team maximum flexibility, let’s say that the advertiser allocated an additional $1 million annually for access to ad tech tools and research subscriptions to facilitate their Team’s planning and placement efforts. This would bring their total outlay to $2.5 million per annum.

If they were spending $40 million in total, this means that the team would be able to purchase $37.5 million worth of digital media. Don’t forget that placing digital buys direct will greatly reduce fraud levels that can eat up another 8% – 12% of every digital ad dollar, while also greatly improving brand safety guideline adherence. Compare that to the $24 million in inventory purchased programmatically. 

So how efficient is programmatic?

Sadly, most advertisers can’t even address this question, because their buys are structured on a non-disclosed, rather than a cost-disclosed basis. Even if they had line of sight into what the third-party costs (i.e. media, data, tech) and agency fees being charged were, they wouldn’t have a clue as to the fees/ charges that sell-side suppliers were levying, further eroding working media levels.

A simplistic solution? Perhaps. But the fact that the industry continues to drink the programmatic “Kool-Aid” without any significant progress toward resolving the dilutive effect that programmatic transactional costs, agency fees and fraud have on an advertiser’s investment seems a tad irresponsible.  

Ask yourself. What would you do if it were your money? 

 

 

Is Programmatic Advertising Worth the Risk?

26 Jul

RiskConceptually, it is easy to understand the potential of programmatic media buying. It is obvious to most that using technology to supplant what is a manual, labor intensive process to drive efficiencies and improve media investment decisions could be a plus for advertisers, agencies and publishers (not to mention ad tech vendors).

The only question to be addressed is “when” will the benefits of programmatic outweigh the costs and the risks to advertisers?

Proponents of programmatic will argue that this buying tactic has already generated economic benefit for advertisers when it comes to digital media buying. After all, streamlining the processes related to the issuance and completion of RFPs, buyer/ seller negotiations and preparation of insertion orders clearly saves time and reduces labor costs for all stakeholders.

No one would argue this premise. However, reducing labor costs associated with traditional buying is but one component of programmatic buying costs. Consider the broad array of programmatic buying related fees and expenses currently being born by advertisers:

  • Data Management Platform (DMP) fees
  • Demand Side Platform (DSP) fees
  • Data/ Targeting fees
  • Pre-Bid Decisioning/ Targeting fees
  • Ad Blocking (pre/ post) fees
  • Verification fees
  • Agency Campaign Management fees

It should be noted, that there are “other” non-transparent charges and fees linked to sell-side platforms (SSPs), bid processing, real-time bidding auction methodology and principal-based buys (media arbitrage) that are born by advertisers and limit the percentage of their digital media spend that actually goes toward inventory.

In a recent Ad News article by Arvind Hickman, the author referenced studies conducted by both the World Federation of Advertisers (WFA) and the Association of National Advertisers (ANA) that demonstrate the magnitude of these programmatic fees and expenses. The WFA study determined that $.60 of every dollar spent on programmatic digital media buying goes to cover “programmatic transactions and fees.” The ANA study suggests that advertisers could be paying between $.54 – $.62 of every dollar on digital supply chain data, transaction fees and supply side charges.

Bear in mind that neither of these studies addressed the impact of media arbitrage or ad fraud. Industry studies, focused on assessing the level of digital ad fraud, fielded by the Association of National Advertisers (ANA) and WhiteOps found that fraudulent non-human traffic in the form of bots was “more prevalent in programmatic environments.” According to the research, display ads purchased programmatically were “55% more likely to be loaded by bots” than non-programmatic ads.

And yet, in-spite of the challenges still being faced with programmatic digital media buying, this media investment model is being rapidly rolled out to out-of-home, print and television.

Who do you think will bear the learning curve costs and risks associated with expanding programmatic to other media categories? The answer, is primarily advertisers and to a lesser extent, publishers.

We certainly understand that programmatic is the future of media buying. That said, rushing headlong into this arena, without satisfactory levels of transparency and or fraud prevention, combined with the upfront costs of the industry’s investment in technology, that are ultimately passed through to the advertiser, are both risky and costly to advertisers.

Is there a need to reach and take risks in order to secure positive progress? Yes. But, it might be best to follow the approach advocated by one of this country’s greatest military leaders, General George S. Patton:

“Take calculated risks, that is quite different than being rash.”

 

 

 

 

 

Has the Time Come and Gone for Digital Advertising Agencies?

28 Apr

We all understand the concept of “specialization” and the potential benefit delivery for certain service providers in select industries. That said, the era of the digital media specialist agency may be drawing to a close.

Think about it, we have specialist agencies for programmatic advertising, paid search, organic search, social media, email, mobile marketing, website development, user experience, social, native and display advertising.

Why? What are the advantages that accrue to an advertiser from this level of specialization? More importantly, how many advertisers are equipped to engage with multiple media agency partners?

Integrating strategy and resource allocation decisions, coordinating roles and responsibilities and effectively managing relationships among several media agencies takes time, energy and money… assets that are tougher and tougher for marketers to come by. Not to mention, the additional costs incurred for overlapping agency services/personnel.

Specialist agencies aside, when it comes to digital media, advertisers are also contending with general market agencies, PR firms, multi-cultural, experiential and promotional agencies that are also involved with their digital marketing efforts. It is damn difficult for a marketing staff to coordinate and optimize digital communications along this many fronts, let alone integrate such efforts with an organization’s “traditional” media efforts. And, let’s face it, the task is not any easier (or cheaper) for an advertiser’s media agency-of-record to take the lead on this task and coordinate multiple disparate agencies working collaboratively and cohesively toward a common goal.

The ultimate question for advertisers may be, why take what is already a complex process and further complicate it by dividing efforts and resources across so many players?

In our contract compliance auditing and financial management practice we have seen advertisers pay a steep price for assembling agency networks that are too broad for their existing teams to effectively manage. This in turn leads to cost inefficiencies related to duplicative services and fees tied to the lack of clear role differentiation across agencies, and in turn, a reduction in working media. Say nothing of the impact on digital media effectiveness tied to communication and briefing gaps that inevitably arise in these scenarios. Perhaps there is a lesson to be learned from the words of William Blake, 18th century English poet and painter:

“The road of excess leads to the palace of wisdom”

We believe that the time has come for advertisers to give more serious consideration to streamlining their agency networks in general, and specifically to pare back the number of agency partners involved with their digital media efforts… beginning with “specialist” shops.

A great place to start is to evaluate the potential for centralizing media planning for traditional and digital media. This is a logical “first step” and will allow marketing organizations to better leverage their data, to improve their targeting and segmentation schema, enhance their resource allocation decisions and integrate all facets of their communication plans. Additional benefits from such a strategy include more collaborative and improved media briefings and streamlined communications across agency partners. Similarly, when it comes to media buying, focusing on fewer partners makes it easier to leverage an organization’s overall media spend, optimize sponsorship and value-add opportunities across media properties, and to minimize agency fees by eliminating redundant buying activities across partner shops.

Major holding company media agencies and larger independent media firms, with broad resource offerings and the scale to provide “one-stop” service certainly stand to benefit from consolidation. As do ad technology firms such as Adobe, Oracle and Google that provide advertisers with the tools to manage certain digital functions in-house. It should be noted that while the large media networks of a holding company will benefit, specialized, stand alone digital media shops within those holding companies may face challenges related to such a consolidation.

In closing, we wanted to address the topic of the “rise of the management consultancies” as legitimate competitors to traditional agencies. As it relates to media planning and placement, we believe that the large ad agencies and holding companies will retain an edge in this area for some time to come. However, vulnerability in the areas of strategic consulting and customer connectivity (i.e. data integration, user experience and system development) is where we believe consulting firms will continue to make significant inroads with CMOs as marketers seek to fulfill corporate mandates to assist in digitally transforming their businesses. As this is occurring, some agencies have announced plans to expand their resource offerings to compete with the likes of Accenture, IBM, PwC and Deloitte in this area. Realistically, at least in the near-term, agency constraints on talent and functional expertise represent significant hurdles before an attack in this area can be mounted… while concurrently defending their current base of business.

 

Does Anyone Really Want Advertisers to Solve the Attribution Dilemma?

14 Mar

conspiracyIt has been decades since the concept of Marketing Mix Modeling (MMM), the forerunner to Attribution Modeling, was introduced. The concept was relatively straightforward, marketers would apply statistical analysis to sales and marketing data to quantify the impact that each element of the marketing mix had in driving brand sales and profit. Once the causal relationship had been modeled, marketers would then be able to accurately forecast outcomes and inform resource allocation decisions.

While the concept may have been straightforward, the solution, for most marketers, has been elusive. Why? First and foremost, MMM has some inherent challenges, particularly when it comes to quantifying the impact of longer term brand equity development tactics versus those focused on short-term sales. Secondly, these models have not fared well in accurately assessing the impact of various media types on outcomes to assist in refining allocation decisions.

Fast forward to the late ‘90’s when we experienced an explosion in online media, the birth of e-commerce and the introduction of “Big Data.” The emergence of digital media and the attendant level of data that marketers where now able to gather led to the launch of “Attribution Modeling.” The goal, to assess and quantify what marketing and media touchpoints influenced an advertiser’s target audience, and to what extent, across the purchase funnel in an effort to optimize media spending across the ever expanding gamut of media alternatives.

While there are multiple variations of attribution models to consider, most marketers have relied on single-source attribution models, often using a “last click” approach which assigns responsibility for an outcome to one event. While simple, this flawed approach to attribution modeling gives too much credit to digital media, at the expense of traditional media and other marketing touchpoints.

Sadly, for advertisers that are doing both MMM and Attribution Modeling, it is rare that the feedback from these related, but different approaches synch. Further, there remain audience delivery measurement (i.e. cross-channel measurement), multi-touch attribution challenges that introduce a layer of complexity that drives up the cost of attribution modeling.

That said, since the onset of these two modeling tools being introduced, the industry has dramatically evolved its data gathering capabilities, enhanced CRM and DMP capabilities, conceived of and launched programmatic media buying, where algorithms have replaced media buyers and now we’re seeing the use of artificial intelligence bots, such as Adgorithms’ “Albert” that can plan and place media and create content. Heady stuff to be sure.

This got the cynic in me thinking; “Well if we can master all of this from a technology perspective, surely we should be able to cost efficiently and effectively master attribution modeling.” That led to idle speculation about whether or not the ad industry really wants advertisers to solve the attribution modeling dilemma?

After all, what if John Wanamaker was wrong? What if more than half of his ad spend was wasted? Remember, the marketing and media choices available to him in the 19th century were considerably more limited than those available to advertisers today. Would accurate attribution models eliminate some of the following marketing and media options from consideration?

  • Television
  • Radio
  • Magazine
  • Newspaper
  • OOH
  • Cinema advertising
  • Product placement
  • Direct mail
  • Email
  • Sponsorships
  • Online display
  • Online video
  • Podcasts
  • Paid search
  • Organic search
  • Mobile
  • Social media
  • Native advertising
  • In-store advertising
  • In-store displays
  • On-package advertising
  • Trade promotions
  • Price promotions
  • Couponing
  • Affinity marketing
  • Affiliate marketing
  • Applications
  • Earned media

Crazy. Right? Reminds me of a quote by the American journalist, Gary Weiss:

“One problem with the focus on speculation is that it tends to promote the growth of the great intellectual cancer of our times: conspiracy theories.”

What do you think…

 

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