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NextMark Spawns Bionic Advertising Systems

October 22nd, 2013

NextMark today announced the creation of Bionic Advertising Systems, a new division focused on delivering technology that streamlines digital advertising workflow for digital marketers, their advertising agencies, and publishers.

“The new Bionic brand represents our philosophy of delivering advertising technology that combines the strengths of humans and machines,” remarked Joe Pych, CEO of NextMark, and co-founder of Bionic. “Over the past few years, there’s been a battle of man versus machine in digital media. Neither side is winning. Instead of man or machine, the best ‘systems’ of the future will be a combination of both. The recent announcements by AOL,Yahoo!, and Microsoft around Programmatic Direct validate this belief and heralds a new age in digital advertising: the Bionic Age. As the name implies, our new Bionic unit is 100% dedicated to delivering solutions for this new era in digital advertising.”

Launched today, Bionic Advertising Systems will encompass NextMark’s solutions for digital advertising, including the latest Programmatic Direct technologies. Bionic’s software automates the mundane processes of digital media planning, buying, and ad operations. It frees media planners, buyers, and sellers to spend their time on higher-value tasks. It enables digital media planners to find advertising opportunities, gather information, create and send requests for proposals, negotiate with publishers, build media plans, execute orders, and implement their campaigns with the click of a button. With its modern API-driven architecture, it integrates with popular agency tools such as Doubleclick, MediaMind, and comScore. It’s currently integrating with leading sell-side Programmatic Direct technology providers Adslot, iSocket, and Yieldex. Bionic’s Digital Media Planner aims to tie together the many disparate systems used in digital advertising, giving them a single interface that simplifies the way they develop and deliver media plans.

“’Bionic’ is such a great concept for the digital media industry,” added Chris O’Hara, the business unit’s co-founder and Chief Revenue Officer. “A lot of companies in the space think that algorithms and robots are the answer. We know human creativity can be unleashed by automation, and that digital advertising works best when people are empowered by technology.”

Currently, more than forty advertising agencies are using the Bionic Digital Media Planner to create and execute their media plans. More than 900 publishers and networks are using the Bionic Digital Ad Sales System to promote more than 9,000 premium digital advertising programs—the largest directory of its kind, which also powers the IAB’s Digital Advertising Directory.

To learn more, visit the Bionic website: http://www.bionic-ads.com/

The Great Time Suck

September 24th, 2013
Graph

Nearly 70% of the $9 billion display media market still occurs in the “transactional RFP” channel. Source: Arkose Consulting

This post originally appeared in AdExchanger 

Why Publishers Hate the Transactional RFP Business 

I have been thinking about, and trying to solve, agency digital workflow problems since 2008.

Given the complexity of digital media, the variety of creative sizes, millions of ad-supported sites, and dozens of ad servers, analytics platforms, order management and billing tools, it goes without saying that the digital marketing stack has been hard for any agency to put together.

Recent research has tracked the immense level of complexity involved in digital media planning (more than 40 steps) and the tremendous expense involved in creating the actual plan (up to 12% of the media spend). It all adds up to a lot of manual work for which agencies are not willing to pay top dollar, along with frustrated agency employees, overbilled clients and a sea of technology “solution providers” that only seem to add to the complexity.

Media planning on the agency side is a big time suck. Yet some agencies are still getting paid for it, so it’s a problem that is going to get solved when the pressure from agency clients increases to the point of action, which I think we’re just now hitting in 2013.

But who is thinking about the publishers? Despite dozens of amazing supply-side technologies for optimizing programmatic RTB yield, there are only a few providers focused on optimizing the 70% of media dollars that flow through publishers’ transactional RFP channels.

DigiDay and programmatic direct software provider AdSlot and recently studied the transactional costs of RFPs. The sheer numbers stunned me. Here’s what one person can spend on a single RFP:

  • 5.3 hours on pre-planning
  • 4.2 hours on campaign planning
  • 4.0 hours on flighting
  • 5.3 hours on maintenance
  • 3.3 hours post-campaign 

That’s more than 22 hours – half a business week – spent creating a single proposal and starting a campaign, which, according to the study, has a less than 35% chance of getting bought and a staggering 25% chance of getting canceled for performance reasons after the campaign begins. The result is a 25% net average win rate. That’s a lot of work, especially when you consider how easy it is for agencies to lob RFP requests over the transom at publishers. On average, publishers spend 18% of revenue just responding to RFPs, which translates to 1,600 man-hours per month, according to the study.

So, we have a situation in which agencies, which are firmly in control of the inventory procurement process, are not only wasting their own time planning media, they are also sustaining a system in which their vendors are wasting numerous hours comporting with it. In short, agencies spray RFPs everywhere, and hungry publishers respond to most. The same six publishers make the plan every year, and a lot of publishers’ emails go unanswered. What a nightmare.

A Less-Than-Perfect Solution

To combat this absurdity, many publishers have placed large swaths of their mid-premium inventory in exchanges where they realize 10% of their value but avoid paying for 1,600 hours of work. The math isn’t hard if you know how agencies value your inventory. Publishers aren’t stupid. Inventory is their business, and most work very hard creating content to create those impressions. These days, every eyeball has a value. Biddable media has made price discovery somewhat transparent for most inventories. Programmatic RTB is great, but not all publisher inventories are created equal. A small, but highly valuable percentage will never find its way into an SSP.

Publishers will always want to control their premium inventories as long as they receive a greater margin after transactional RFP labor costs. Publishers who actually have strong category positioning, contextual relevance, high-value audience segments and a brand strong enough to offer advertisers a “halo” have to manage their transactional business so they can maintain control over who advertises and what they pay. This looks the year that demand- and supply-side software solutions may finally come together to solve the problem of “transactional RFP” workflow.

A couple of new developments:

  • Demand-Side Procurement Systems Are Evolving: Facing significant pushback from clients and seeing new and accessible self-service media buying platforms gain share, agencies are looking hard at tools to gain efficiency. Incumbent software systems like Strata and MediaOcean are modernizing, while new, Web-based tools are gaining adoption among the middle market. Suddenly workflow efficiency is all the rage and agencies that spend 70% of their money in the transactional RFP space want a 100% solution.
  •  Supply-Side Direct Sales Systems Are Available: A few years ago, there were lots of networks and marketplaces for publishers to put inventory before going directly into exchanges. Many were more generous than today’s exchanges, but still offered low-digit CPMs and not much control over inventory. Now there are a variety of systems that plug directly into DFP and enable publisher sales teams to have real programmatic control over premium inventory. AdSlot, ShinyAds and iSocket are rapidly gaining adoption from publishers that want another premium channel to leverage, without giving up pricing control. To succeed, these publishers’ systems must be connected to the platforms that manage demand.
  •  Who Put Peanut Butter Into My Chocolate? What is slowly happening, and will continue in a huge way in 2014, is that demand- and supply-side workflow solutions will come together. What does that mean from a practical standpoint? Planning systems will be able to communicate with ad servers, eliminating double entry work; ad servers will be able to communicate with order management and billing systems, eliminating even more duplicative work; and the entire demand side system will be able to communicate orders directly into the publisher workflow systems and ad server.

Simply put: Agencies will be able to create a line item in a media plan, electronically transmit an order to a publisher, which the publisher will electronically accept, and the placement data will be transmitted into the publisher’s ad server. A line item will be planned, and it will begin running on the start date. Wow.

That’s what we are starting to call programmatic direct. It’s a world with a lot less Excel and email, with thousands of hours that won’t get wasted on transactional RFP workflow for agencies and publishers.

What kinds of amazing things can do with all that extra time?

The Hourglass Funnel Changes Everything

September 19th, 2013

hourglass_branding_funnel

Lately, I’ve been thinking a lot about the hourglass funnel. Most funnels stop at the thin bottom, when a customer “drops” out, having made the journey through awareness, interest, desire and action. After the “action,” or purchase, the customer gets put into a CRM to be included in more traditional marketing outreach efforts, such as calls, e-mails, and catalogue mailings. In the past, marketers often thought about how to turn customers into advocates, but couldn’t figure out how to do it at scale. Companies that were really good at multi-level marketing, like Amway, didn’t have easy-to-replicate business models.

Today, the situation has changed. Social-media platforms give marketers tools to engage customers in their CRMs and bring them back through the bottom of the funnel, turning them into brand advocates — and maybe even salespeople. This is why Salesforce has been snatching up social-media companies like Radian6 and Buddy Media, while Oracle bought Vitrue and Involver. These platforms can help get people talking about your brand– and, in turn, you get to listen to what they have to say. These platforms also can help you understand what it takes to get your customers to move from liking your page to actively sharing your content and to actually recommending your products and even selling them as an affiliate.

The ad-tech revolution of the last several years has supercharged our ability to drive people through this hourglass-shaped funnel. But instead of enabling this movement, we have instead – for the most part — focused  on wringing efficiency out of reaching the customers we’re already very close to getting. For example, programmatic RTB makes it easy to bid on people in the “interest” layer, who behave like existing customers. Additionally, it’s a no-brainer to retarget those customers who have already expressed “desire” by visiting a product page or your website. And technology also makes it increasingly easy to invite customers already in your CRM to “like” your Instagram page, or to offer them incentives to “recommend” products through social sharing tools.

But what about the very top of the funnel (awareness) and the very bottom (advocacy)? Those are the two most critical parts of the marketing hourglass funnel, but the two least served by technology today. While we have tools to drive people through the marketing process more quickly or cheaply, technology doesn’t create brands or turn social-media fans into brand advocates.

However, the right strategy for both ends of this funnel can still boost awareness and advocacy by creating a branding vortex that is a virtuous circle. Let me explain:

Awareness

You can’t start a customer down the sales funnel without making he or she aware of your product or service. Despite all of the programmatic promise in display, technology mainly emphasizes reaching our known audience most efficiently. It simply hasn’t yet proven that it can create new customers at scale. That’s why TV still gets the lion’s share of brand dollars. Cost-effective reach, pairedwith a brand-safe, viewable environment, is what TV supplies.

In my opinion, the digital answer for raising awareness is starting to look less and less like programmatic RTB and more like video and “native” formats, which are more engaging and contextually relevant. Also, new programmatic direct technologies are starting to make the process of buying guaranteed, premium inventory more measurable, efficient and scalable.

Programmatic RTB advocates will argue that you can build plenty of awareness across exchanges, but it’s hard to create emotion with three IAB standard units, and there still isn’t enough truly premium inventory available in exchanges today to generate a contextual halo for your ads. New “native” display opportunities, video and tablet advertising are where branding has the biggest impact. Adding those opportunities to social tools, such as Twitter and Instagram, would help you leverage your existing brand advocates and amplify your message.

Advocacy

Great digital branding at the “awareness” level of the funnel not only helps drive potential new customers deeper into the sales funnel, but also can help engage existing customers. This amplification effect is extremely powerful. Old-school marketers such as David Sarnoff understood that folks make buying decisions through their friends and neighbors. He also understood that, when you’re trying to sell the next big thing (like radio), you have to leverage existing media (print). Applied to digital marketing, this simply means leveraging awareness media — TV, video and “native” advertising — to stimulate word-of-mouth advertising, which is still the most powerful type. By using Facebook and other social sharing tools, the effect of any campaign can grow exponentially in a very short period of time. This virtuous circle of awareness media influencing brand advocates, who then create more awareness among their own social circles, is something that many marketers miss when they lead their campaigns with data rather than with emotion.

Everything In Between

I’m not saying that marketers can simply feed the top of the funnel with great branding and ignore the rest. That’s not true at all; the middle of the funnel is important too. I think it’s relatively easy, nowadays, to build a stack that also helps support all the hard work that brands are doing to create awareness. Most large marketers reinforce brand efforts with “always on” programmatic RTB that targets based on behavior, and all brands employ as much retargeting that they can buy. Once customers are in the CRM, it’s not hard to maintain a rewards/loyalty program, and messaging to an existing social fan base also is relatively simple.

But marketers are making a mistake if they think that this kind of programmatic marketing can replace great branding. With so many different things competing for customers’ attention, capturing it for more than a second is extremely difficult, and the challenge is only going to get harder.

The Datalogix Effect

So what does all this mean for for ad technology? The best way to think about this is to look at theDatalogix-Facebook partnership. Datalogix’s trove of customer offline purchase data essentially enables brands to measure whether or not  all their social-ad spending resulted in more online sales. A few studies have pretty much proven that media selling soap suds on Facebook created more suds sales at the local Piggly Wiggly. In fact, ROI turns out to be easy to calculate, as well as positive.

This type of attribution seems simple, but I don’t think you can overstate its impact. It’s the way we finally move from clicks and views to profit-optimization metrics such as those offered by MakeBuzz. And this method of tying online activity with offline sales is already having a vast impact on the ecosystem. It shows, beyond doubt, that branding sells product.

Getting the attribution right, though, means that brands are going to have to care about creative and content more than ever. It means big wins for video, “native” ad approaches, and big tentpole marketing campaigns. If quality premium sites can be bought programmatically at scale, then it may also mean big wins for large, traditional publishers.

It also likely means that many retargeters, programmatic RTB technologies and exchanges could end up losing in the long run. Don’t get me wrong: These technologies are needed to drive the “always on” machine that powers the middle of the funnel. But just how many DSPs and exchanges does the industry need to manage its commoditized display channel?

As marketers realize that they are spending money to capture customers that were going to convert anyway, they’re likely to focus less on audience targeting and more on initiatives to create new customers — and turn existing customers into advocates.

[This post originally appeared in AdExchanger]

NextMark Hires Mark Winberry as Director of Product Management

September 11th, 2013

Mark Winberry

NextMark today announced it has hired Mark Winberry as its Director of Product Management. In this role, Mark will lead the group that establishes the roadmap for all products, designs the user experience, and ensures the quality of product upgrades and enhancements. His initial focus will be on NextMark’s newest products that automate digital advertising workflow for “programmatic direct” advertising: Planner for media planners at advertising agencies and Compass for ad salespeople at publishers.

“Mark is a great addition to the team,” said Joe Pych, NextMark’s founder and president. “Skillful product management is critical to the success of our new offerings. Frankly, we’re overwhelmed with the fantastic ideas we’re getting from early clients. It’s a huge challenge to combine that feedback with our own vision to quickly deliver elegant solutions. It requires a unique combination of imagination, work ethic, design sense, technical knowledge, and interpersonal skills to be successful.  Mark’s the right guy for this job.”

Mark brings more than 20 years experience in software development to NextMark. Most recently, Mark served as the Senior Director of Engineering for Acquia – a software and hosting company that enables enterprises to efficiently build, deploy and manage hundreds of Drupal websites. Prior to that, Mark was the president of Trebuchet Development – a Software Development & Scrum/Agile consulting business. Prior to that, Mark served in various engineering and management roles at TomTom/TeleAtlas, Microsoft, Vicinity, Tally Systems, and Terra-Map East. Mark holds a BA in Mathematics from Harding University.

“I am thrilled to be joining the world-class team at NextMark,” said Mark Winberry. “The deep marketing automation experience of this team is unparalleled. That experience, combined with the best Market Intelligence database is enabling us to create the foremost media planning experience in the industry. I’m looking forward to leveraging my product development experience to help NextMark customers grow their businesses by delivering them the highest quality marketing automation solutions!”

Mark is already on the job working to deliver version 2.4 of Planner, which is scheduled to be released next week.

Google recognizes NextMark’s Edmond location as the 2013 eCity of Oklahoma

September 10th, 2013

Edmond, Oklahoma

We’re sometimes asked “why do you have an office in Edmond, Oklahoma?” With so many of our customers located in the New York Metro area, it may seem an unusual location for an office.

The main reason NextMark is in Edmond is because we have a great team there. They joined NextMark along with our 2008 acquisition of Marketing Information Network. These Market Intelligence Specialists are the brains and the brawn that creates the data cards you find our Mailing List Finder and Digital Advertising Directory. They’ve decades of experience gathering, standardizing, cataloging, and curating information about advertising programs in all kinds of media channels – we currently support 18 media channels ranging from trusty old postal mail to the latest digital advertising channels. Their experience shows in the accuracy and comprehensiveness of more than 125,000 listings in NextMark’s directories.

Another reason is the great business environment in Edmond. We’re not the only ones that think so: Google last week recognized Edmond, Oklahoma as the 2013 eCity of Oklahoma for being the strongest online business community in the state. Edmond is one of a select few cities in the U.S. that won this award.

Congratulations to the city and all the businesses in Edmond for being recognized for what we already knew: it’s great to be in Edmond!

NextMark Now Enables Private Deals for Direct Ad Buys

August 23rd, 2013

Top-Secret

NextMark today unveiled new features in its Digital Media Planner tool that enable media planners to record and utilize private advertising deals when creating their media plans.

Keeping track of special advertising deals is a challenge for advertising agencies and for their media planning teams. In the past, media planners had to rely on their own memory and files to recall the special deals they’ve made with publishers. And it was difficult to know if others at your agency had already established a deal with a given publisher. With these issues combined with time pressure and the high turnover in those positions, special deals deals are often overlooked and negotiating leverage is lost. Ultimately, advertisers’ working media dollars are wasted every time a deal is missed.

NextMark Planner solves this problem by enabling you to enter your private deals directly onto the publisher’s data card adjacent to their standard placements and prices. With Planner, you can now set your own prices and create your own custom placements. You can see if others at your agency already have a special deal in place. Your special deals are stored securely and only available to authorized planners at your agency.

These special deals come in handy when you’re creating your media plans. Planner automatically displays all your agency’s custom placements and automatically defaults to your special rates. You’ll never again be embarrassed by missing out on a deal.

Along with the previously released private marketplace features, these new features give you a powerful tool to create and maintain your own directory of preferred vendors, contacts, and deals.

You can request your free trial of Planner here: http://www.nextmark.com/planner.

The Unexploited Middle

August 21st, 2013
YieldCliff

Programmatic Direct technology will make it easy for the demand side to exploit this rich pocket of quality inventory.

I recently sat through some great presentations on “programmatic direct” media buying at the recent Tech for Direct event in New York. With almost 70% of digital display dollars flowing through the negotiated (RFP) market, everyone wants to be in the game. One of the presenters, John Ramey of iSocket talked about what has happened to the advertising yield curve for digital display. This curve starts at the upper left corner with premium inventory capturing the highest CPMs, and is supposed to flow gently downward on the x-axis, towards the lowest value of inventory, ending on the lower right corner. A classic marketplace yield curve.  In this world, ESPN can charge $20 CPMs for their baseball section, sites like Deadspin in the mid-tail can charge $7, and the networks and exchanges aggregating hundreds of sports blogs in the long tail can charge $1. Nice and fair, and rational.

This is not what has happened, though.

As Ramey correctly points out, we have a yield cliff now. This is world in which there are two types of inventory: The super-premium, which is hand sold directly for double-digit CPMs; and the remnant, which is sold via RTB on exchanges or surviving ad networks, often for pennies. In this world of the Haves and Have-Nots, there is no middle class of inventory—even though one could argue that $7 inventory on Deadspin might actually outperform its upscale cousin, ESPN. This inventory disparity we have created in the digital advertising industry has nothing to do with supply and demand, but everything to do with the process by which we transact.

Premium mid-tail buying is a great idea. Back in 2009, marketplace platforms like TRAFFIQ were bringing this innovation to the space, and enabling marketers to cherry pick and aggregate premium quality sites that could offer friendly CPMs and URL-level transparency. It’s not a new concept. In fact, I think premium mid tail buying is the canary in the coalmine for programmatic direct; when today’s technology can make it easy to put together a large array of guaranteed buys, and enable fast and easy optimization, then we will have succeeded. Here what was missing in 2009, and what we need to succeed today:

  • A Centralized Directory:  You can’t buy stuff without knowing what’s available and how much it costs. Other media channels like direct mail have published prices for mailing lists, right down to audience targeting. You want to reach people who have bought something from the Cabela’s catalog in the last six months, and restrict the mailing to men only? No problem. You can find out what it costs, and who sells it. The digital display market needs to be organized in a directory, down to the placement level. You shouldn’t have to wait for an e-mail back from an RFP to find out what known inventory costs. That work is being done now, but has a lot more work to go through before it is comprehensive.
  • An Extensible Platform: Today’s API-driven technology makes it easy to enable buying directly into publishers’ inventory. A link into DFP means buyers can discover availability and start serving ads with a few button clicks. The problem is that agencies want a Single System to Rule Them All. So far, agencies have been stuck with installed, legacy systems that have more to do with billing and reconciliation than media planning and buying. Agencies want new, web-based ways to discover and buy great inventory, but they also want a system that plugs into their existing tools. They are not going to log into another buying system if they don’t have to. A system that can enable premium mid-tail buying at scale either has to integrate directly into existing media management systems—or replace them. Right now, there are a lot of tech companies at work retrofitting old technology or creating new technology that promises to make this a 2014 reality. It’s a horse race, and agencies are starting to place their bets. The winners are the one with the most extensible platforms that are good at integration, and they will be richly rewarded. The rest will fail, or become a point solution in someone else’s platform.
  • The Right Model: This is may be the most important factor in determining programmatic direct success. If you are charging anywhere north of 10% (and some would argue a LOT less than that) to help media buyers aggregate inventory, then you are not a “programmatic direct” technology company. You are an ad network, or media rep firm. The reason for industry consolidation is because disintermediation through technology has its own yield curve: The disruption that occurs always benefits the middle layer first, but markets always rationalize later. Mike Leo, former Operative CEO, told me about how another industry solved a similar problem that was occurring in the media business, where ad agencies were starting to rebel against specialized media buyers who in the middle of the transaction, with opaque pricing methodologies. The year was 1968, and agencies teamed up and decided that a standard rate of 15% was all they were willing to pay for television buying services (and then they eventually bought all of the media buying companies, but that’s another story). Anyway, markets always rationalize themselves, and right now even 15% feels like a big vigorish for agencies with ever-shrinking margins on their media practice.
  • Standards: It’s 2013, and we are still faxing IOs. This is largely because there are no accepted standards—and no protocol—for electronic orders. This is actually not a hard problem to solve, but getting adoption from buyers and sellers is what’s needed. Right now, a few companies are working with groups like the IAB to get real traction with standards, and we need that to succeed to make programmatic direct buying a scalable reality. Electronic orders suck a lot of the viscosity out of the deal pipeline, and start to let the machines do the grunt work of order processing, rather than a $50,000 junior media planner.

The good news is that there has been a tremendous amount of progress in 2013 on all of these initiatives. The promise of true programmatic direct buying is closer than ever, and there is enough real development behind the hype to make these dreams of efficient media buying a reality in the near future. In that future, it just may be possible for a buyer to use demand-side technology to aggregate the “fat middle” of premium mid tail publishers, and start to reward the middle class of inventory owners who are currently getting paid beer prices for champagne content.

We’re hiring: Bookkeeper / Office Manager – Hanover, NH

August 21st, 2013

help-wanted

Would you like to join the NextMark team to help with accounting and office management? NextMark has a new job opening in its Hanover, NH headquarters that can be either part-time or full-time with a flexible work schedule.  For more information and to apply, visit our Bookkeeper / Office Manager job listing.

A Contrarian View of Programmatic RTB

August 7th, 2013
unicorn

Online display would be like this, if branding metrics took profit into account.

I’ve always loved the notion of programmatic RTB. As a data hound and an early adopter of Appnexus , the notion that advertisers can achieve highly granular levels of targeting and utilize algorithms to impact performance is right in my wheelhouse. Today’s ad tech, replete with 300 companies that enable data-driven audience segmentation, targeting, and analytics is testament to the efficiency of buying ads one impression at a time.

But what if driving efficiency in display actually does more harm than good?

Today’s RTB practitioners have become extremely relentless in pursuit of the perfect audience. It starts with retargeting, which uses first party data to serve ads only to people who are already deeply within the customer funnel. No waste there. The next tactic is to target behavioral “intenders” who, according to their cookies, have done everything BUT purchase something. Guess what? If I have searched 4 times in the last three hours for a flight from JFK to SFO, eventually you will get last view attribution for my ticket purchase if you serve me enough ads. Next? Finding “lookalike” audiences that closely resemble past purchasers. Data companies, each of whom sell a variety of segments that can be mixed to create a 35 year-old suburban woman, do a great job of delivering audiences with a predilection to purchase.

But what if we are serving ads to people that are already going to buy? Is efficiency really driving new sales, or are we just helping marketers save money on marketing?

It seems like online display wants to be more and more like television. Television is simple to buy, it works, and it drives tons of top funnel awareness that leads to bottom funnel results. We know branding works, and even those who didn’t necessarily believe in online branding need look no further than Facebook for proof. With their Datalogix offline data partnership, Facebook conclusively proved that people exposed to lots of Facebook ads tended to grab more items off of store shelves. It just makes sense. So why are we frequency capping audiences at 3—or even 10? I can’t remember the last time I watched network television and didn’t see the same car ad about 20 times.

The other thing that RTB misses out on is profit. RTB drives advertising towards lowering the overall cost of media needed to drive a sale. Even if today’s attribution models were capable of taking into account all of the top-funnel activity that eventually creates an online shopping cart purchase (a ludicrous notion), we are still just measuring those things that are measureable. TV ads, billboard ads, and word of mouth never get online credit—yet I believe they drive most of the online sales. Sorry, but I believe the RTB industry creates attribution models that favor RTB buying. Shocking, I know.

So, what is true performance and what really drives it? For most businesses, performance is more profit. In other words, the notion that a sales territory that has 100 sales a day can generate 120 sales a day. That’s called profit optimization. If I can use advertising to create those additional 20 sales, and still make a profit after expenses, than that’s a winner. RTB makes it cheaper to get the 100 sales you already have, but doesn’t necessarily get the next twenty. Getting the next batch of customers requires spending more on media, and driving more top-funnel activity.

The other thing RTB tends to fumble is how real life sales actually happen. Sure, audience buying knows what type of audience tends to buy, and where to find them online, but misses with frequency capping and a lack of contextual relevance. Let me explain. In real life, people live in neighborhoods. The houses in those neighborhoods are roughly the same price, the kids go to the same school district, the people have similar jobs, and their kids do similar activities and play the same sports. The Smiths drive similar cars to the Joneses, they eat at the same restaurants, and shop at the same stores. If the Smiths get a new BMW, then it’s likely the Joneses will keep up with a new Audi or Lexus in the near future. When neighbors get together, they ask each other what they did on February Break, and they get their vacation ideas from each other. That’s how life works.

What media most closely supports this real-life model, where we are influenced most by our neighbors?  Is it serving the Jones family a few carefully selected banners on cheap exchange inventory, which is highly targeted and cost effective? Or is it jamming the Smiths and Joneses with top-funnel brand impressions across the web? The latter not only gets Smith, the BMW owner, to keep his car top-of-mind and be more likely to recommend it—but also predisposes Jones to regard his neighbor’s vehicle in a more desirable light. That takes a lot of impressions of various types of media. You can’t do that and remain efficient. The thing is—you can do that and create incremental profit.

Isn’t that what marketers really want?

[This post originally appeared in AdExchanger]

Complexity is the Digital Ad Agency’s Best Friend

July 24th, 2013
Agencies are afraid of change, but change always happens. Is your manual workflow a "red stapler?"

Agencies are afraid of change, but change always happens. Is your manual workflow a “red stapler?”

I once heard Terence Kawaja remark that “complexity is the agency’s best friend.” It’s hard to argue with that. Early digital agencies were necessary because doing things like running e-mail campaigns, building websites, and buying banner ads were really complicated. You needed nerdy guys who knew how to write HTML and understood what “Atlas” did. Companies like Operative grew admirable services businesses that took advantage of the fact that trafficking banner ads really sucked, and large publishers couldn’t be bothered to build those capabilities internally. The early days were great times for digital agencies. They were solving real problems.

Fast forward 13 years. Digital agencies are still thriving, mostly by unpacking other types of complexity. “Social media experts” were created to consult marketers on the new social marketing channel, “trading desks” launched to leverage the explosion of incomprehensible RTB systems, and terms like “paid, owned, and earned” were coined to complexify digital options. It’s hard being a marketer. So much easier to hand the digital keys over to an agency, and have them figure it all out.

Some of that complexity is dying, though.

Have you ever done any advertising on Google? It’s not that hard. You can get pretty good at search engine marketing quickly, and it doesn’t take anything more than common sense, an internet connection, and a credit card to start. Facebook advertising? Also dead easy. Facebook’s self-service platform is so intuitive that even the most hopeless Luddite can target to levels of granularity so minute that you can use it to reach a single individual. Today’s platforms leverage data and offer great user interfaces and user experience mechanisms to make the complex simple.

This has created the OpenTable effect. Remember when you had to call 8 different restaurants to get a Valentine’s Day reservation? What a pain in the ass. I used to always get to it late, and usually spend a few hours getting rejected before finding a table somewhere. Today, I log into OpenTable, type in “11743” and see all the available 8:30 reservations for two in Huntington. A few clicks, and I am locked in. Would I ever go back to doing it the old way? Sure, why not? Call my beeper if you need me. Please “911” me if it’s important.

So, with all of this innovation making the complex simple, and all of these platforms democratizing access to advertising inventory, analytics, and reporting, why are digital agencies still making a living off of the lowly banner ad? Is there a good business left in planning and buying digital display media?

Programmatic RTB is coming on strong, now representing the way almost a quarter of banner inventory is purchased. That’s a good thing. Platforms like Rubicon Project and Appnexus are making it easy to build great businesses on top of their complicated infrastructure. Marketers can hire an agency to trade for them, or maybe just build their own little team of smart people who can leverage technology. That seems to be happening more and more, making managing RTB either a specialist’s game, or not an option for the independent agency.

Really complicated, multi-channel, tentpole campaigns and sponsorships can never be automated. They represent about 5% of overall display spend, and that’s really where a digital agency’s firepower can be leveraged: the intersection of creativity and technology. That sector of digital involves a lot of what’s being called “native” today. Working with content owners and marketers to build great, branded experiences across the Web is where the smartest agencies should be right now.

How about the rest of the money spend on digital display—the 70% of money that goes through the transactional RFP space? A lot of agencies are still making their money buying reserved media, trafficking ad tags, and doing the dreaded billing and reconciliation. Marketers who pay on a cost-plus basis are starting to wonder whether spending money to have expensive agency personnel create and compare spreadsheets all day long is a good use of their money. Agencies that do not get paid for such work are seeing their margins shrink considerably, as they grind away money paying for low value tasks like ad operations. Clients don’t care how long it took you to get the click tag working on their 728×90. Just saying.

A lot of this viscosity within the guaranteed space is being solved by great “programmatic direct” technologies. Right now, you can use web-based systems to plan complex campaigns without using Excel or e-mail, and you can leverage web-based tools to buy premium inventory directly from great publishers—the kind of stuff not found inside RTB systems. Protocols and standards are being written that will, in a few short months, make the electronic IO a reality. Systems are being built with APIs that can enable trafficking to go away completely. Yes, you heard me. People should not have to ever touch JavaScript tags. That’s work for machines.

This future (“programmatic direct”) has been coming for a long time, but it is still met with resistance by agencies, some of whom are continue to benefit from complexity—and others who are (rightfully) scared of change and what it means for their business. Looking at legacy workflow systems, you wonder why they are so hesitant to leave them, but the cost of switching to new systems is high in terms of emotion and workplace disruption—and previous attempts to “simplify” agencies’ lives didn’t really work out that way.

So, how can digital agencies start to change, and embrace the new world of programmatic direct tools, so they can turn their energy to strategy and client care, rather than be an “expert” in processes that will eventually die?

Part of that is learning to recognize if you have a “wizard” on staff. The Wizard is the guy that has truly embraced complexity within the agency. He is the “systems guy” who knows how to pull complicated reports out of legacy workflow platforms. He probably knows who to write the occasional SQL query, and he knows where all the bodies (spreadsheets) are buried. When a web-based technology salesperson comes calling on the agency, and shows the CEO or VP of Media what web-based programmatic direct buying looks like, they are showing an agency a world where a lot of complexity is suddenly made simple. That demo shows the future of digital media buying: a directory-driven, centralized, web-based method of planning, buying, and serving inventory. Just like search! C-level agency executives and media people want it. They want their employees focused on strategy and analytics…not ad trafficking. But to get it, they invariably tell you to go see the Wizard. “Fred is our ‘systems guy.’ He’ll know whether this can work for us from a technical standpoint.”

That’s when innovation dies. Fred, the Wizard of the legacy systems, will shut down any innovation that comes his way. Complexity is Fred’s best friend. When you are the only guy that can pull a SQL query from your data warehouse, or reconcile numbers between SAP and your agency’s order management system, then you are a God. Fred is God…and he doesn’t want a downgrade. Complexity is the reason great digital agencies were built, and continue to thrive. Tomorrow’s big challenges are going to come from complexities in cross-channel delivery and attribution, and keeping up with new platforms that are delivering amazing native marketing opportunities, not being the next at reconciling ad delivery numbers from servers.

When innovation comes knocking on your door, don’t let Fred answer it.

[This post was originally published in AdExchanger]