Note: Seth Ulinski is Senior Analyst for Ad Tech at Technology Business Research.

HAMPTON, N.H. – Executives from Kraft Foods, IBM, Razorfish and Facebook joined Advertising Age (Ad Age) staff at the Ad Age Digital Conference to discuss the shift from services to platforms, including opportunities and challenges. As consumers’ focus on and dollars move to digital devices, marketers and agencies follow. In the past marketers and agencies dictated the terms of engagement with consumers through traditional media formats, such as print, TV and radio.

Today’s digital consumer dictates terms of engagement with brands. As a result, marketers and agencies are turning to data-driven marketing technology (martech) and advertising technology (ad tech) platforms to create personalized, engaging user experiences.

TBR believes martech and ad tech, new systems of interaction, are delivering higher levels of media performance, business intelligence and operational efficiencies. However, further value is unlocked for the enterprise when these platforms are integrated with legacy systems of transaction, such as CRM and enterprise software.

The big data and analytics captured in these platforms, particularly in ad tech, represent a double-edged sword for marketers and agencies as they identify high-value engagements as well as wasted media spend. Another factor agencies and marketers must contend with is a fragmented ecosystem, comprised of over 2,500 ad tech and martech vendors.

TBR asked chief marketing officers from Frito-Lay and YP how they identify and evaluate partners in this fragmented landscape.

  • Ram Krishnan, Frito-Lay: Roughly 70% of business runs through proven, trusted partners while 20% of business goes through partners that delivered value during tests, and 10% of the business runs through test-and-learn vendors
  • Allison Checchi, YP: The company maintains a dedicated marketing technology specialist in-house to manage vendors and evaluate new partners.

TBR views complexities presented by fragmented ad tech and martech landscapes as an opportunity for agencies to expand into high-value services areas such as consulting and systems integration (C&SI). Although C&SI work may place agencies head-to-head with IT services firms, synergies and alliances between the two camps are also being created.

For example, Howard Pyle, who leads IBM’s Marketing Innovation Group, showcased a cloud innovation initiative that included subject matter experts from a variety of agencies and holding companies. The cooperative resembled a startup, employing fast-fail and agile methodologies, typically lacking in enterprise-level organizations. Knowledgebase and results drove agencies’ marketing transformation with clients.

Key event themes

Viewability and ad fraud:

Separate industry plagues Ad viewability or just “viewability” refers to whether an ad appears on the screen of a digital device. This has been a major industry issue for several quarters, and the reason is simple: If an ad is paid for but not seen, there is zero ROI to a brand. Depending on the source, 15% to 50% of ads purchased do not appear in-view. According to Ad Age’s membership survey, presented at the conference, roughly 50% of respondents indicated they were “concerned” with viewability, while nearly 40% indicated they were “very concerned.”

TBR notes many vendors focused primarily on desktop viewability measurement solutions, whereas consumers are spending more time on mobile devices. As a result, we see viewability as an ongoing point of contention between advertisers and publishers.

The Ad Age studies segued into interviews with Rob Norman, chief digital officer for GroupM, and Lisa Valentino, senior vice president of digital sales for Condé Nast. Norman opened by stating GroupM only charges clients for ads that are viewed, which means they only pay publishers for viewable ads. Although they did not disclose details, Norman and Valentino mentioned GroupM and Condé Nast have an agreement whereby 100% of inventory purchased is viewable.

Valentino informed the audience that the Interactive Advertising Bureau (IAB) has been working with all industry stakeholders to address the issue and made significant progress in setting general guidelines, such as 50% of an ad must appear on a user’s screen for two seconds or longer to be considered viewable.

TBR believes ongoing collaboration among industry stakeholders and the IAB is encouraging, and aggressive moves from media-buying heavyweights such as GroupM help expedite the process. Norman summed it up best, “Viewability is important because the integrity of the market is at stake.”

Ad fraud, a separate but related topic, was deemed an area of concern by a majority of Ad Age survey respondents, of which 42% are “concerned” and 16% are “extremely concerned.” Fraudsters create phony websites and artificial Web traffic via bots, then sell the ad inventory, bilking marketers out of billions of dollars annually. Norman likened ad fraudsters to cyclists that stay one step ahead of doping committees. He went so far as to say Washington and the FBI are joining the fight, as fraudsters likely fuel other bad businesses (e.g., drugs, terrorism) and ad fraud has become a criminal justice issue.

Ad tech specialists such as DoubleVerify, Moat and WhiteOps fight the battle on both industry plagues, but these startups lack the resources of enterprise IT specialists such as CSC and Symantec. IT outsiders may identify the fraud issue as a sizable business opportunity and be welcomed by the digital community.

While ad pricing and models vary, TBR believes even the lower-end estimate for nonviewable ads (15%) can easily equate to tens of billions in paid media that is never seen by consumers. Meanwhile, TBR estimates that fraudulent activity will siphon an additional 5% of ad spend from marketers.

‘Good’ data is the only competitive advantage for marketers Consumer engagement data is a critical asset for marketers; however, it is only valuable if it can be leveraged cross-platform, avoiding silos and feeding into CRM.

A quote from Julie Fleischer, senior director of Data, Media and Content at Kraft Foods, stating “90% of data is crap” blanketed screens at the event. While the message provided some laughs, the underlying message was sound: If the data marketers read is inaccurate or invalid, then it is worthless.

TBR believes inaccurate data could even lead to bad decision making (worse than zero value). Fleischer also discussed automated buying and selling of digital advertising, saying it is a great tool, but addressability is critical. In the past, Kraft Foods simply learned how to drive consumers to its site, but messaged them all the same: “At end of the day the content has to be put in context, powered by the data layer,” Fleischer stated.

Fleischer talked about improving data sets through cross-device mapping, which is needed to better understand who is receiving messages and where they are located. She believes traditional advertising productivity is falling off a cliff as consumer purchasing behaviors shift to online sales and consumers pay less attention to advertising. In short, she views today as an inflection point for the ad industry, and successful companies will embrace infrastructure and platforms. Kraft Foods leverages platforms to drive messaging, but tomorrow platforms will become commoditized. First-party data is how and where marketers should focus. Fleischer stated consumers provide companies “a proprietary lens of our products, to enrich, scale and diversify.”

TBR agrees first-party data is a strategic lever for marketers and the enterprise. During Fleischer’s presentation, she appeared to have a love-hate relationship with ad tech vendors in the demand-side platform (DSP) and data management platform (DMP) segments. We can only speculate this is due to a mix of experiences, but one thing is for certain: DSPs and DMPs represent two key platforms marketers are using to drive relevant consumer engagements. TBR estimates growth of more than 30% across both segments in 2015.

Platforms:

The new retainer for digital agencies TBR tracks vendor evolution in the shift from services to platforms. On the second day of the event, Ad Age Lead Agency Reporter Alexandra Bruell interviewed Razorfish CEO Tom Adamski on how this shift impacted digital agency business. Adamski said, “Technology is the new retainer,” for agencies and the technology platforms of today that span content management, asset management, data management, and test and target solutions.

Interestingly, Adamski left out programmatic media-buying technologies such as DSPs when citing examples. A highly polarizing subject, DSPs disrupted the legacy media-buying business model, a key service line for agencies. TBR believes agency holding companies such as Publicis (which owns Razorfish) are still developing long-term business strategies in today’s programmatic landscape. In April Publicis dissolved its 400-person programmatic business unit, VivaKi, which largely utilized third-party platforms. However, TBR anticipates Publicis will relaunch a programmatic unit and perhaps operate as a vendor, leveraging a DSP (i.e., RUN) it acquired prior to shuttering VivaKi. Going to market with proprietary IP as a vendor, not an agency service later, would mirror the strategy of WPP’s Xaxis.

Bruell asked Adamski where client spend on platforms is occurring, and he sees it moving from customer acquisition initiatives to conversion retention. This is a result of the interaction data today’s platforms can glean, learning more from clients than ever before. The information can be applied to create smarter acquisition campaigns, or as Adamski put it, “Figure out how to get the next customer.”

Bruell also asked Adamski whether today’s CRM needs to be revamped. Adamski believes this is the case, and as a result we are seeing the rise of investment in ad tech and martech platforms as well as retention and conversion metrics.
Adamski said, “A couple years ago it was all about churning and getting more clients, not really understanding how to keep them.” He believes that now, the smartest clients understand that their most valuable asset is the client base. TBR believes systems integration between ad tech, martech and CRM platforms is a key value add for clients and a significant revenue opportunity for Razorfish.

Regarding business climate, Bruell asked what the biggest challenges are for digital agencies such as Razorfish. Adamski discussed the maturity curve of agency business growing from boutiques to global businesses, such as Razorfish, with 40 global locations.

“We have to grow up. We have to be great businesses. We can’t just be out on the fringe,” Bruell said. “We are critical-mass businesses, and clients want to see that we are efficient, drive operational efficiencies and best-run businesses.”

TBR views strong lines of communication and a global delivery model as integral to agencies’ success as they compete with IT services firms such as IBM Interactive, Accenture and Deloitte Digital. Regarding human resources, Bruell asked if HR and talent were a challenge. Adamski responded that talent is a big hurdle breaking down the agency business model to “idea, execution and distribution.” The distribution or platform specialists are becoming a key area of focus, and people do not “shape shift, these people aren’t growing on trees,” Adamski said. Razorfish has historically manufactured talent by working with educators and schools, as a “farm system.”

(C) TBR