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Not All Inventory Was Created Equal (Mediapost 5.2.12) 0

We’re heading into a phase of the online ad business that’s clearly based on the concept that not all inventory was created equal.  The fervor around the viewable ads issue, coupled with the rapid development of Data Management Platforms (DMP) which make marketers smarter about how they spend their money, leads us to a situation where placement, audience and performance of creative can influence the value of the inventory that’s available.  That means changes are in store for the media buying community.

To date, most online ad pricing has been one dimensional, and tied either to context or a basic set of data parameters, but the issues mentioned above are becoming hot buttons and leading us towards new opportunities.  These include dynamic pricing, upfront markets and a changing perception of the landscape for supply and demand of online inventory. 

It’s inevitable that there will become a finite supply of premium, higher quality inventory for advertisers as more advertisers become smarter.  The potential resolve on the viewable ads issue means more marketers will be competing for a smaller set of inventory, whether it be contextual, audience-based or more likely a combination of both.  Conversely, the market for junk inventory will drop.  This creates a situation where demand and supply lead to a fluctuating marketplace, more like financial markets.   This could lead to realistic upfront markets finally being established in the online space, which have not previously been required.  In the past, there was the perception of limitless supply for premium inventory, but that’s simply not the case.  The best sites and the best placements are being bought in advance, and that’s going to happen more often.

The other factor that leads to this situation is the increased use of DMP’s by marketers.  As more marketers become intelligent about the ways they spend their money, they could end up competing for the same inventory, or at least similar customers.   Right now, the use of a DMP is a competitive advantage for a marketer, but it will become table stakes in the next 12-18 months, and the result is the long tail of media will be become more valuable, and the “extra-long” tail will be devalued as more marketers squeeze value out of the top 50% of available inventory online.

The other factor that gets overlooked is performance.  If the interaction rates and engagement rates don’t increase in online ads, then only the most visible, more premium inventory will be considered valuable.  The long and extra-long tail of inventory will see no value at all.  Regardless of whether they price on performance or not, you can’t squeeze blood from a stone.  If the inventory can’t drive performance with poor creative, then the advertisers will place the blame on the inventory, unfortunately rather than taking the blame for poor creative, and they’ll focus their dollars on only the top notch placements and audience.  It won’t be far, but it will be a fact.

So the fact is not all inventory is created equal, and the immediate future for media buying is going to be changing quickly.  Upfronts may become a necessity.  A futures and secondary spot market may soon become a reality.  The perception that there is a finite supply for premium inventory will become commonplace, and prices may indeed begin to increase.

Do you agree?

Posted on: 05-4-2012
Posted in: treffiletti.com

Things To Think About In Display (Mediapost 4.25.12) 0

There are lots of options facing an online marketer when it comes to display advertising.  Contextual targeting, data targeting, behavioral targeting, re-targeting, dynamic creative – there are so many options, that one can quickly and easily become overwhelmed.  The truth is there are some simple considerations you can use to evaluate, prioritize properly, and engage in a successful display campaign. 

The first consideration is measurement, and finding the right balance between ensuring your ads are viewable, your metrics are clear, and there is an adequate attribution model in place.   You need to enter into a campaign knowing what your key metrics for success are going to be, and you have to establish the infrastructure so your ads will be optimized for success.  That means making sure you get the most bang for your buck.  Your ads should be verified as viewable, and you need to know the right value that should be placed on each successive impression.  I know that attribution is a touchy subject right now, and the industry is not yet standardized in any way, but that doesn’t stop you from testing out a theory you create and sticking to it.  As long as you know there is a value in each impression, you can start down the path of attribution, and that can be valuable.  If you set this measurement infrastructure from the beginning, it will help you to prioritize your options at every stage of the campaign.

Related to the topic of viewable ads is inventory quality.  The quality of the inventory refers to the context and the audience that will be shown the ads.  There are many tools and services you can integrate into your campaign to ensure that your ads will be running on quality inventory, and the right partners you are evaluating will be comfortable with those tools, and they may even offer them for free.  If a publisher or technology is not familiar or comfortable with services like Double Verify or other brand safety companies, then you should de-prioritize them immediately. 

The inevitable element of a discussion around online is data.  Specifically, making sure you are using the right data.  There are lots of ways to access data and integrate it into your campaigns, but you want to partner with the people who have the most data, the most recent data and the right data for your campaign.  Recency and volume are the two biggest criteria when you select a data partner because you want to be able to test out different kinds of data and find the right solution.  I can pretty much guarantee that the first attempt won’t work, so patience is important, as well as time.  You can make it work over a couple of weeks if you have the right partner.

The last thing to keep in mind is that your campaign will be highly dynamic.  What works now, may not work later, and that means you have to have your partnerships open and ready to go.  Be constantly evaluating your campaign and don’t put anything on auto-pilot.  Know that you are going to see fluctuations in your campaign, and that means you need to give it some love. 

What other components do you feel are good advice for those engaging in online display campaigns?  Share with us on the Spin Board!

Posted on: 04-29-2012
Posted in: treffiletti.com

Don’t Suffer From Over Reaction Syndrome (ORS) (Mediapost 4.18.12) 0

Are you an Over Reaction Syndrome sufferer?  Client service can be a difficult business, but it can be even harder if you over react to everything that comes your way, especially when it comes from the clients! 

It’s not something you can find in a book as this is some pretty “new science” we’re talking about here, but it’s real and its prevalent in our industry!  Over Reaction Syndrome, or ORS as I like to call it, stems from the lack of a plan or a roadmap being put in place.  When you don’t have a roadmap for your business, everything that comes your way can seem like a priority.   Some call it a strategy, but I like to cast a wider net and consider it a roadmap.  A roadmap is inclusive of a strategy, but it also includes a series of concepts, priorities and some future vision that can provide a filter for where you want to go with your business.  Its natural that a company will create this for themselves if they want to be successful, but it’s also natural that an agency or any other client service person would, and should, do the same.  Unfortunately there are too many situations where they don’t, and those are the people who suffer from ORS!

If you are a client service person, the very first thing you should do is sit down and establish a basic roadmap for your client.  If you’re on the agency side, it can be about where you want the client to go, where they should spend money, or what kind of innovations you think they should consider.  If you are a publisher it can be as simple as your projected growth for the account and how you expect to get there.  A roadmap allows you to have a place to start.  Its an initial point of reference, and it’s a filter that allows you to evaluate every client service request that comes down your path, and determine how you should react.  Lets face it – this is a reactive business.  However, you can mitigate the over reaction by having some context to determine what your reaction should be.  How far should you go, how deep should you dive.  In 99% of client service situations, you are hired because you are the perceived expert in a specific area, and the clients are paying you as such.  If you are the expert, and you have a roadmap put in place, then you should not be afraid to push back or say “no” to some client requests if you have a rationale and a hypothesis that is based on actual strategic thinking.  Your roadmap can allow you to do that.

When you don’t have a roadmap, you can quickly and easily succumb to ORS.  The symptoms of ORS are easy to spot.  Your day gets longer, and every time the phone rings you experience a sense of dread and fright with the direction that is inevitably awaiting you on the line.  You sleep fewer hours, you get a little bit touchy with people.  You feel out-of-control, and the fact is you are!  ORS is the signal that you are no longer acting in the way that you were perceived.  You are no longer the expert, you’re an order taker!

This doesn’t mean that when the client calls, you can tell them “no” all the time.  This doesn’t mean clients are wrong.  It simply means that you are supposed to be engaging in a relationship with your clients, and unfortunately you’re not!  You’re a servant, or as they will tend to put it – a vendor.  The differences between a partner and a vendor are well documented, but I can tell you that more vendors suffer from ORS than do partners.

The development of your roadmap will help you to avoid ORS.  It can take a day or it can take two weeks, but in any new engagement and in any new role, you should always first sit down and draft a roadmap to work with.  The roadmap will change, it will evolve.  It should be considered a dynamic document, but the point is that its there.  It’s simple.

Have you drafted a roadmap for your current role?  It’s never too late to correct this issue and ORS can be healed.  Give it a shot!!

Posted on: 04-20-2012
Posted in: treffiletti.com

The Bubble Is Back (Or Is It)! (Mediapost 4.11.12) 0

OMGPOP and Instagram have clearly set the stage for the rebirth of the bubble, but what does that mean for the rest of the digital media and Internet industry?  More importantly, what happens if the bubble pops?

The bubble in 2000 was based on inflated valuations from companies that amassed eyeballs and had yet to recognize a viable revenue stream.  Sounds familiar doesn’t it?  Both of these companies have been able to establish a strong base for eyeballs, and have yet to monetize them on a mass level, but the fact is the Internet is now in a much more valuable position than it was in 2000.  The web has been woven into the very fabric of daily life unlike 2000, where it was still an early adopter medium.  Mobile has driven much of that adoption, along with the additional advent of the tablet (led by the iPad).  This bubble may feel bigger, but it’s a stronger bubble and it won’t be nearly as easy to pop.

The other thing is that the sluggish recovery of the economy is being led, in many ways, by technology.  The Internet is driving that bus!  Jobs are being created, and revenue is being discovered by the ecosystem of these companies, mostly driven by advertising. 

That realization leads me to my point.  There’s only so much quality inventory available on the web, and what these platforms are doing is creating premium inventory that needs to be monetized, whether it will be monetized by what we currently know as ads, or not.  The existing model of banners and sponsorships will not be the end game in online advertising, but they will get us over the hump of people thinking this is a bubble.  The fact is that the current model of ads on publishers and websites is viable because they drive engagement.  The recurring theme I‘ve been addressing around viewable ads is rooted in the idea that there is finite premium inventory.  That inventory is what we consider to be the most valuable, and that is what we can charge the most for, regardless of the model.  An opportunity for a marketing message to be delivered to a highly engaged consumer is a valuable one, and both OMGPOP and Instagram have figured out how to create that opportunity.  Whether they have the final solution or not (hint: I don’t think they do yet), they are clearly on the path.  You can argue that the valuation for these companies might have been high, but there is value there and it falls on the acquirer to establish the value in their own terms.  It’s not for the outside world to decide.

Zynga’s acquisition of OMGPOP feels like one of a team and the ability to solve problems.  They figured out to make a competitive game more of a partnership, and that drives higher engagement.  Facebook’s acquisition of Instagram makes slightly less sense to me because these were users that, for the most part, Facebook already had.  If anything, they just wanted to own the service as another entry point into the Facebook landscape for the average consumer.  The less you have to let them leave your service, the better it is for you.

In both situations, the acquirer now has the opportunity to “own” the experience of the consumer, meaning they have them from beginning to end.  The Draw Something game is a self-contained environment and photo-sharing alongside the social platform is a self-contained environment, as well.  If you own the entire experience, you can own the session and you can effectively surround the user with a more immersive marketing experience too.  The NY Times pioneered this model many yeas ago and others have extended it.  Even basic retargeting with banners speaks to that effect.

This surround model, and the ability to own the experience online for a consumer, is where I see the future of online marketing and advertising.  That is why, in my opinion, there may be a bubble at play, but it’s a tough bubble.  This is Hubba Bubba, this ain’t no wimpy Big League Chew being used to blow it up.  This is true growth in an environment where it is needed, so let the funding flow into these companies and let’s continue trying to push the envelope with them, and see where it leads!

Posted on: 04-15-2012
Posted in: treffiletti.com

Viewable Ads Part 2: The Need For A Price Correction (Mediapost 4.4.12) 0

Last week I really got some people riled up regarding viewable ads.  Thankfully that was my intent!  The fact is this is an opportunity.  It’s an opportunity for a discussion regarding how to make online advertising more effective and more efficient, which will pave the way for the next 10-15 years of growth!

Lets recap, shall we?  Apparently, according to Comscore, 31% of all ads viewed online are considered un-viewable, for various reasons.  I made a statement that below-the-fold ads should be considered less-premium, and priced accordingly.  I stand by that.  The remainder of the viewable ads issue does relate to fraud, as well as to unloaded ads, etc.  My contention is a simple one; that if an ad is not viewable then it has no value.  That leads us to the issue of a price correction based on opportunity to see, or view, a relevant ad.

This area of pricing is where I think we should be focusing our attention.  One of the key drivers for the growth of online advertising has been supply.  Supply of online inventory far outpaces the eventual demand, however the availability of premium inventory has been finite, and prices tend to reflect that.  The integration of data, targeting and other creative applications of technology have done a good job at increasing the value of what was previously considered to simply be “remnant” inventory, and that application of technology should be recognized and rewarded, but there needs to be a perceived end to supply if we can realistically foresee an increase in the overall value of online ads.  To expect that we can increase prices against an almost limitless supply of inventory is false, and the viewable ads issue presents an opportunity for us to re-set the stage properly.

Whether or not you agree with my initial hypothesis of the proposed breakdown of viewable vs. non-viewable ads, you must agree there needs to be a way to increase the demand for online ads.   By placing a “premium” tag against standard ad placements and guaranteeing they are viewable, whether through third party verification or some other means, you can maintain a premium price.  The same goes for applying a brand-safe tag to that inventory.  If you can guarantee the safety of the message and that it was guaranteed to be viewed by the right person, then you have something to hold up against an increased price, and premium advertisers will value that, especially if those guarantees translate to increased performance for their messaging.  The performance is based on engagement, not click-through.

The same can be applied for long-tail inventory that is willing to undergo the same strict set of quality reviews, all of which are currently available to advertisers, though not established as standard must-have’s.  It is possible that if the industry can make a push towards these elements becoming a standard piece of the puzzle for online media buying, then the perceived value of the inventory will increase in the eyes of the audience.  If this happens, then we could also see the emergence of a true online upfront for advertisers, whereby advertisers look to lock in inventory early in the year because the laws of supply and demand will dictate that pricing could increase later on a spot or scatter basis.  In my humble opinion, all of these self-installed regulations would result in increased pricing for our inventory, and the increased value of the industry as a whole. 

Of course, this does mean that less valuable inventory on small to medium sized sites with no desire to take part in these regulations will end up with purely performance based inventory, but that’s ok!  There is nothing wrong with performance based pricing.  Google has proven that, and affiliate networks exist because they work!

Viewable ads is an issue that we can address and quickly, and if we tackle it properly it could be a boon for the entire industry.  I don’t know about you, but I was raised that a challenge represents an opportunity, and opportunity is a very, very good thing.  Don’t you agree?

Posted on: 04-6-2012
Posted in: treffiletti.com

How To Solve The Viewable Ads Debacle (Mediapost 3.28.12) 0

If an ad shows up on a web page, and it’s below the fold where no one can see it, did it make an impression?

The buzz of this month is viewable ads, and the issue of whether or not your ads are being seen on the web.  It’s a big issue because, as we all know, click through is a horrid metric and actual click through rates are abysmal to say the least.  The only metrics that we’ve had left to champion have been exposure and engagement, and you can’t engage with something you never actually see.

The Comscore findings that 31% of all online ads are never seen are alarming, but also somewhat comforting.  If click through, engagement and interaction rates are so low, then at least we can discount those poor metrics by 31% and assume that if 100% of the ads were seen, then maybe the numbers would at least be a little bit better!  Really though, the fact that this high a percentage of ads are wasted is an issue because one of the strongest elements of online advertising has been the opportunity to reduce waste.  Online provides targeting, which means you can expose your message to only the most prime audience members, but now we find that a third of those prime audience members are not seeing the ads.  That is wasted value.

Back in the old days there was the concept of OTS, or opportunity to see. This concept was applied to the counting of online ad impressions, and was used by the ad-servers to come to a standard definition for an impression.  That definition is in place, and has been in place for years, however it’s clear the spirit of that definition has not been enforced by the long tail or the short tail of media.  Comscore also surfaced that the issue of viewable ads doesn’t get fixed by paying a higher CPM.  It’s an issue across the web.

What does this mean for the industry?

Well, one possible fix might mean that you tier the pricing for ads.  My suggestion would be that only ads above the fold are able to be priced on a CPM basis, and any ads below the fold of a standard website should be priced on a CPC or CPE (cost per engagement) basis.  Additionally, I would recommend that ads on mobile browsers be sniffed and priced in a similar fashion, realizing that the fold is much higher.  In the case of mobile, only ads at the top of the page would be CPM based and the rest would be performance priced or some other model. 

This is not a difficult issue to fix, in theory, but in practice it’s a doozy.  The bad news is the vast majority of “impressions” on the web are going to become devalued rather quickly and the overall opportunity for revenue from the long tail of websites is going to drop dramatically.  The good news is that the best inventory, the truly premium above-the-fold, quality inventory, is going to be priced higher.  It’s a simple supply and demand discussion.  There is more supply of below-the-fold, lower quality inventory and a finite supply of premium placements.  Think of it as a market correction for the ad industry.  These kinds of corrections are good in a maturing industry, and necessary if we are to take our rightful place as the number one advertising and marketing medium in the eyes of big brands.

Of course, we could just piddle around on this issue for a couple of years, and have “committees” and “initiatives” put in place to deal with it.  That would be helpful and productive (not so much).

How do you want to see this issues addressed?

Posted on: 04-1-2012
Posted in: treffiletti.com

Secrets Of A Digital Evangelist (Mediapost 3.21.12) 0

The role of the digital evangelist inside a large brand can be a difficult one.  The road is marred with people who’ve taken on that responsibility before, and in many cases they’ve left feeling unfulfilled at best, or battered, bruised and beaten at worst.  It can be a thankless job as you spend every waking hour developing innovative strategies, evaluating an endless stream of intelligent, venture-backed companies and holding one-on-one meetings to educate and expand the horizons of your colleagues.  But don’t lose hope!  The day of reckoning is upon us (or at least its very, very close).

I know many people who’ve played that role in brands, and I’ve played that role in agencies that wanted to drag their brands kicking and screaming into the digital age.  It can be considered a pretty sexy job, to be positioned as the expert in a trailblazing category of media.  It can also drive you crazy, because more often than not you’ll get buy-in from people in face to face meetings, but when push comes to shove and the dollars are being allocated, you may not see your conversations come to a satisfying fruition.  To be successful in that role, wherever you may be, I do have some advice…

1. Start At The Top

When you first take on that role, even in the interview process, you want to go as high as you possibly can in the organization to get buy-in on innovation.  Speak to the CMO, but also speak to the CEO and the CFO if you can, because most of the time the budget allocations for marketing include all three, not just the CMO.  You want general buy-in from all the involved parties that innovation is looked on favorably in the organization, and that your ideas will be supported and the first place to cut the budget won’t be in the innovative marketing bucket.

2. Focus On Key Colleagues

This is a political decision, but it is an important one.  You need to focus your efforts on no more than three people in the organization at the brand manager level, or possibly the director level, who are interested in being, and want to be viewed as, innovative.  These are going to become your best friends in the organization.  They will control specific budgets, they’re going to want to advance in their careers, and they’re going to be interested in digital.  You invite them to meetings, you engage them in healthy discussion, and bring them to dinners, parties and events.  I know it sounds a tad bit cheesy, but these are the people you want tied to your hip.  You want them to go to bat for the ideas you develop together (yes – together).  The rest of the people should be involved, but you will know quickly who your lowest-hanging fruit allies will be and the rest may end up playing second fiddle.

3. Don’t Take Center Stage All The Time

This one is not so easy.  You need to make sure that the ideas you created, or were involved in, are seen as coming from other places in the organization.  You are to be the “man behind the man” or the “woman behind the woman”.  It’s your job to make sure everyone else sees the benefit of the digital platform, and that they’re perceived of as innovative.  You don’t need the attention because everyone will know you were involved, and that is good enough.  It’s your job to evangelize the platform, not take all the credit.  That may mean you miss out on the internal award at the marketing conference, but that’s ok.  You can’t take an award to the bank and cash it in – you get compensated on other metrics and those are what you should be focused on.  If your partners win, you win.

Of course, patience is also a must in this role, because at least half of your ideas will never see the light of day.  That doesn’t mean you shouldn’t work on them.  Think of it as practice.  You need to put in the time, and sharpen the pencil that is your brain, in order to come up with the best ideas.  The best ideas are the ones that will succeed and you will be viewed as a success as a result!

Posted on: 03-23-2012
Posted in: treffiletti.com

Relevance + Recency + Frequency = Resonance (Mediapost 3.14.12) 0

Marketing is all about psychology.  It’s about culture.  It’s about audience.  These are simple facts, but the other fact is that technology is substantially changing the psychology and culture of the audience.

The fact is the Internet has had an enormous impact on the audience we speak to as marketers, and as a result its made them more difficult to affect, yet when you affect them its easier to see the results and affect their behavior.  That has resulted in a culture with a higher barrier of entry, but once you get over the barrier they’re more malleable than ever.

My hypothesis is based on the fact that the pathways for consumer, and overall human, education have changed.  If you go back 20 years, and you ask someone a question they either know the answer or they don’t.  If they know it, it’s because they read it or learned about the topic previously.  If they don’t know the answer, they make a decision to go learn about it or to have someone teach them about it.    Fast forward to today… if you ask someone a question and they don’t already know the answer, then they whip out their phone and Google a response in 60 seconds or less.  The path to drive learning is shorter, and it requires less anticipatory knowledge about a topic when the human understands that every answer is less than 3 clicks, or 60 seconds, away. 

This immediate gratification for knowledge is coupled with the fact that a consumer is deluged daily.  The average consumer spends approximately 12 hours per day consuming information, which consists of more than 100,000 words and 34 GB of data (according Time Magazine).   There are around 3,000 marketing messages thrown at a consumer every day.  The level of clutter is high, and this is coupled with the self-selecting data that a consumer is searching for throughout the course of an average day.  That means for a marketing message to resonate with the consumer, it has to score high on the relevance and immediacy quotient in order for them to take action.   It also has to be frequent, which brings us back to the age-old model of reach and frequency.  It’s simple mathematics that relevance + recency + frequency = resonance for a marketing message.

Of course, the culture has changed because if you achieve that formula with the audience (relevance + recency + frequency = resonance), then things can take off.  We’ve created a culture of virality, wherein a message that is resonant can be shared among consumer-to-consumer groups.  This virality drives additional reach and resonance because it feeds the other elements of frequency and recency.  That creates a circular situation, driving interest and consumer engagement.  The psychology of the audience is such that if you can get over the barrier of entry and gain access to the mind of the mob, then the mob takes over and shares the message quickly. 

What this means is that marketers should be spending their time strategizing about how to achieve relevance through creative and recency and frequency through media.  The purpose of that forethought is to make the best use of the eyeballs for the audience when you have them, and increase the likelihood of their engagement.  If you don’t think of these elements in combination, and if you don’t enable the sharing of the message for the supposed eventual activation of audience, then you aren’t setting yourself up for success.

Are you using that formula for success?  Let us know on the Spin Board!

Posted on: 03-18-2012
Posted in: treffiletti.com

Where Is Sisyphus Today? He Works At An Agency. (Mediapost 3.7.12) 0

I say this with love, but if the Greek King Sisyphus were “alive” today, his punishment would be to work at an agency.

Sisyphus was punished for the crime of trickery against the gods by being damned to hell and forced to push an immense boulder up a hill, only to watch it roll back down the hill, and this was to go on for eternity.  It’s a common analogy brought up in today’s ad agency world because most agency executives feel that working with clients and delivering success is Sisyphean in nature.  They rarely get recognized, they almost never get kudos, and for their efforts they typically get procurement pushing on their fees, and clients threatening a review.  It’s painful, it’s debilitating and it’s just a bummer.  That being said, maybe there is indeed light at the end of the tunnel!

On Monday of this week, Matt Straz wrote that agencies are starting to think like tech start-ups by investing in technology and hiring smart people.  Last week I wrote about the possibility of ad futures models for agencies as a new revenue stream.  I’m not sure I agree 100% with Matt’s opinion that the “agencies are back” but I do see them having an opportunity and if they’re smart, nimble and fearless they could reinvent themselves into a model for success!

Mad Men returns this month, but the world of the agency could not be further from that world if it tried.  The world of the agency is going to become more like the world of finance, banking and analytics than the creatively-driven, ego-centric world of Don Draper.  It may very well be the age of math men rather than mad men, but regardless there’s definitely a future, and that could not be said just 5 years ago.  Maybe that future is more “Boiler Room” than Mad Men?

I built the first stage of my career on agencies and I will never forget it.  It’s an intoxicating business (in many cases, literally).  You have real authority in the industry.  You are (if you’re good) looked upon as experts, and the largest brands in the world look to you for advice.  There are perks unimaginable to many, and unattainable to most.  When you’re on the outside looking in, it’s an amazingly attractive business.  However, when you enter into it, you see some of the cold underbelly of the business.  There are too many late nights, and they happen eight days a week.  There’s travel with schedules always in adjustment until the last minute.  You’re at the whim of your clients, and the effort you put in is almost always thankless, knowing that your hours of overworked exhaustion made someone else on the client side look good, but they may never utter your name in recognition.  The worst part is that when you do a great job, the halo effect of that work lasts only until the next time you’re in the room and you’re being re-evaluated based on what you did last, not what you did before.  The bank account never seems to be overly positive, but is most certainly rather neutral, if not in the red. 

The agency world can get past the Sisyphean feel if it can reinvent itself in terms of technology and strategy and expertise, and get away from execution and tactics.  Everyone knows this, but no-one is sure how to get there.  The performance pricing that many agencies are testing is one way to get there.  Only charging for the higher end of the work is another, potentially giving away the execution.  Creating new revenue streams for technology consulting, integration and education (or strategy) is even better.  The holding companies are full of smart people who need to be deployed in the right manner.  The typical deployment of talent in agencies is to put your best people against your most pressing challenges in the hopes they can fix them, but that is the absolute wrong way to do it.  You should take your best talent and deploy it against the strongest opportunity for growth.  Put them against these areas of higher margin, higher priced solutions and have them sell these through to your customers.  Invent new revenues that you know will eventually supersede and replace the outdated, commoditized ones.  Then, and only then will the boulder get to the top of the hill and stay there.

Of course, pushing a boulder up a hill is a great workout.  Maybe they just like it?

Posted on: 03-9-2012
Posted in: treffiletti.com

The “Futures” Of Ad Exchanges? (Mediapost 2.29.12) 0

What’s the future of the ad exchange model?  It’s clear that ad exchanges and DMP’s are the future of the media business as media has become more and more of a commodity and data has become a requirement to add value, but where are things headed?

Many people refer to the commodities exchanges as the future of the ad exchange model, but to do so requires there be a marketplace for the buy and hold of media assets.  At first I was skeptical of that version of the future because there are not too many media buying shops willing to take the liability of those media assets on their books, but then I realized that market already exists and thrives and its called the Upfront.  In the television Upfronts, marketers and agencies buy and hold the media until a later time of the year, in some cases they put them all to use and in some cases they put them back into the market as scatter, taking the financial hit in the form of a cancellation clause.  If marketers had the chance to buy, hold and resell that media at either a profit or at least a break-even, wouldn’t they consider that?

The “futures” market is a tenuous one, especially in a volatile stock market and one where economic indicators are so across the board chaotic, but the advertising marketplace continues to grow.  More money is flowing into TV advertising every year, and the Internet continues to expand regardless of the almost infinite supply of impressions.  OOH and print may not be growing, but they are still finite assets that retain value, and marketers still want to take advantage of them.  A futures marketplace could indeed be valuable if the marketers and agencies were set up to take advantage of it.

The agency category is the one I find the most interesting here, because it’s the model that has been most in flux over the last 10 years.  The Internet and digital, more than anything, pushed margin’s down on agency commissions and as a result the agencies have been innovating to find new revenue streams.  Creative continues to be uncommoditizable, and strategy continues to be only semi-monetizable, so the agencies have focused on media buying – specifically by creating trading desks and analytics groups.  The agencies are focusing on the data and they are driving the media landscape into a commodities market.  If you agree this is the case, then it makes sense that the agency category may shift to a buy and hold strategy for media.  Some agencies do it already and have done it for years by entering into upfront agreements with the portals and larger publishers.  If you have money in the bank, and you know you’re going to be buying media for your clients, why not try to buy it at the low and sell it at a profit, which is still probably a discount to your clients?

Of course there’s the argument that the large marketers and public companies might be the ones to take advantage of this model because ultimately they are the ones who buy the media, and are ultimately responsible for its use.  I can foresee a model where the marketers buy the media on the market, hold and pay their agencies to put it to good use, rather than paying them a commission for it.  There could even become a secondary market for marketers who want to trade and barter media for their benefit.  The opportunity is endless if you commit to the idea that media can be bought, held and sold on a futures platform rather than the way most agencies buy now, which is last minute and through manual insertion orders.

For this model to truly succeed, the media buying agencies need to mature.  Currently they are full of young, undeveloped, and in too many cases poorly trained, buyers.  These new buyers would be analysts and traders.  They would be evaluating trends and matching those market trends against the needs of the clients.  I don’t see these buyers being compensated to the same scale as Wall Street bankers, but I see them commanding stronger salaries than the current media buyers.  It’s a skill and one that could not be easily replaced by some smart person off the street.

What do you think?  Can a future’s model succeed in this business?  Would it have to be cross-platform, encompassing online and offline, or could a stand-alone online marketplace exist and survive?  Let me know what you think by posting a comment on the Spin Board!

Posted on: 03-4-2012
Posted in: treffiletti.com
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