MediaMath has become the first demand side platform to spin off an agency from its core software business. With the creation of Kepler Group, the marketplace gets a new services provider for programmatic media buying – one that will work directly with high-touch brands. The new firm launches in the U.S. with nine clients, including Kayak, as reported by AdAge today.
None of those clients are agencies. MediaMath CEO Joe Zawadzki is emphatic that that the move enables his company to focus more completely on core agency customers – including providing a services layer to them – by offloading direct client work that he says creates conflicts anyway.
But the arrangement does beg questions about potential coziness between MediaMath and Kepler. Kepler’s six founding employees will have a majority stake in the firm, while MediaMath retains a minority position. How might that impact decisions the agency makes on behalf of clients, both in the short and long term? In the interview below, Zawadzki and Greenberg respond to that and other issues raised by Kepler’s launch.
Zawadzki kicked off the discussion, saying of the spin-off, “I'm not sure the Twitterverse is viewing it in the same light we are.”
AdExchanger: What’s Twitter saying?
JZ: This was a very clarifying strategy for MediaMath, to say we have 200-plus agencies that are super happy clients. And we have nine brands that were asking for agency-like services. We are so committed to our agency clients that we said we don’t want to have this business line in the office anymore. It should be this wonderfully reaffirming “we love our agency partners” [gesture], and some of them have taken to, “Boy, MediaMath has launched an agency.”
How long did you see this coming, and was it inevitable that you would launch an agency unit?
We license the platform to agencies and brands. Sometimes those brands, similar to how they license an ad server, they’ll think, “I’m going to do this in-house.” A small number of clients said, “We want more services on top of what you are doing.” Those higher-touch advertisers said we need more than MediaMath, an enterprise software DSP, was willing to provide.
Rick specifically said, we shouldn’t be doing this. It creates channel conflicts with some of our agency partners. It raises questions about the long-term direction to the extent that direct advertisers are being serviced in a high-touch way. Let’s move this business out.
That was the genesis of this. We see Kepler being one of our 200 great agency partners. It happens to be one that we know pretty well, but they - like Hill Holiday, like Merkle - are power users of the platform. They use it through and through. They know the system extremely well, as opposed to it being one of the ways they manage a line item on the plan.
But we want to have 20 of them. We want them in holding companies, we want them independent agencies. The sense that people got from this was this is our one bet in the agency-powered-by-T1 world – whereas it was actually a clarifying way to ensure that we had lots of people that we wanted to look like that.
And you’ll still maintain a significant service layer in-house, owing to all those agency relationships?
Exactly right. It’s about training our 200+ agency clients on how to use the system, how to use it better, how to customize it for their needs, how to maximize it for their customer segments. We’ve got training programs rolled out about making people really successful using T1.
Not to be defensive about it, but I’ve already gotten three or four emails from agencies saying, “WTF.” We’ve got legions more agency partners than direct brands. Just think about the sheer numbers. The Kepler crew is six folks at launch. The notion is not that they’re going to be out there competing with folks at Digitas, Razorfish, and Mediacom, and trading desks.
I’d like to talk about those six people for a minute. You told AdAge that the employees own the majority of the new agency. Can you talk about they're incentives versus, let's say, a traditional agency? What's in it for agency members of Kepler that isn't for other agencies?
RG: I don’t think the incentives are drastically different than they would be for any person that has a financial stake in an agency. Our teams and incentives are to deliver breakthrough client impact, which accrues to more clients and more success for our clients. That benefits everybody.
Do existing owners of Kepler have a stake - whether stock or options - in MediaMath? As an agent of the client, how do you manage church-and-state if the Kepler’s employees own MediaMath too?
When someone works with Razorfish or Avenue A, they’re preferred ad server is Atlas. If you work with Havas, you know they’re preferred bid management tool is Marin or Kenshoo.
It’s the same thing. If a client were to come in and say, we demand that you use this ad server and this DSP, Kepler can certain support it. But we think there’s a really good enterprise class demand side platform out there, and this is the one by default we should use.
All of ad tech has the same thing. People generally speaking get comfortable with the platform. They evaluate, every year or two, which is currently best-in-class and then go with it. We don’t think “We work with 19 platforms” is the answer.
So just to clarify, can Kepler Group use other DSPs?
RG: We can support and use other DSPs, but there is no plan in place. The team is expert at using T1 to its fullest capacity, and we think it’s in our clients' best interest to use the one we know how to use best.
JZ: To be super clear, this is not exclusive. MediaMath wants to work with lots of agencies like this. In fact my next order of business is to buy IPG, Publicis, and Omnicom stock to insure we are shareholders in those as well.
Is that so?
Seriously, I’m actually doing that today.
How does your strategy play out in other countries, particularly Europe?
RG: We have no plans to enter Europe. It’s a U.S. agency.
Are the dynamics different here that make it a better opportunity?
It’s home turf and where our clients and network are based.
How does this improve the lives of the brand clients that are working with Kepler?
It allows any organization that is a pure play [to] focus on developing and expanding its capabilities in this area of specialization. The way this is going to change the experience for our brand clients is that they will continue to see the level of service and expertise they have come to expect, and we’ll see that the capabilities will deepen fairly quickly as we’re able to lean forward and invest in strengthening the bench.
What might that bench look like in a year?
I can’t tell you exact bodies, but the key characteristics you’re going to find is that because it’s an agency built in a technology driven way from the ground up, we don’t have to invest in lots of resources to manage outdated media planning processes.
We can invest in more senior, more seasoned marketing oriented folks that spend their days focused on client impact. You’ll see a deeper bench of analysts, strategists, program innovators.
Are there remaining brand clients at MediaMath? Or are they all porting over?
JZ: We have to make the distinction between brands that license the platform and those that ask us to operate on their behalf with an expanded scope of service.
The first thing, that’s business as usual. We see brands licensing platforms. That is the wave of the future in the same way that once search and ad serving got to be mature markets, brands often held that license themselves.
We don’t want to be in the business of an expanded scope of service, providing more strategy work, what have you. That’s not core to the business of an enterprise software company. MediaMath is really focused on enterprise software.
These nine clients are all of the brand clients that are asking for the full service high-touch solution.
My last question is about your competitive set. There are lots of ways the service element in programmatic media buying is playing out. There’s stuff happening at the holding company desks, at the operating agencies, at the independent trading desks like Accordant. Who are you most competitive with?
RG: I think Accordant is probably the closest.
JZ: Oh, I’m an investor in Accordant as well.