"The initial go-round was that folks like CBS may not be able tell me what is in their inventory because their used to selling age/gender/context and what we really wanted to do was enable another way to find audience in their inventory. The initial go-round on this was to enable retargeting and bring more value to the relationship with the media owner which is respectful of the way that we spend billions of dollars - that seemed to catch fire and we have a lot of premium publishers that work with us today …"
Varick Media's Herman concurred on the importance of user insights and indicated that opportunities such as arbitrage, which may be created by demand-side platform strategies, are appropriate for the agency, "so long as the client knows and it's fully transparent."
Woodman added his thoughts on whether arbitrage is appropriate for agencies, "The advertisers I've spoken to ask me, 'Am I going to be paying more than I'm currently paying. As long as we know that you're doing this and you're not ripping me off, you guys deserve to make some money.'"
Here, Mediabrands' Quentin George drew the line and said that arbitrage was not part of its demand-side platform strategy - services was:
"The number one job is we have to really apply our client's money where it creates the biggest benefit. And in return, you can extract money for services. There is the potential for conflict if you put agency capital at risk to acquire inventory, and then sit on that, and then dish it out over clients over time.
From our standpoint, we think there's a lot of good margin to make on the services side. Certain clients have become a lot more willing to talk about things like licensing fees and data fees. And we would much rather make money on those elements, than pure arbitrage where we put [agency] capital at risk – buying inventory and then selling it off over time."
"You just said it yourself, 'put capital at risk.' If it's not the agency's money, or a separate legal entity's money associated with the agency, whose charter is to put capital at risk in order to do this, then there's a different situation there."
"Sure. But you could potentially lose your objectivity if you, the agency, if your primary role is to generate ROI for the advertiser."
The incentive, though, works two ways: a typical agency model is fee based or hours based, the incentive is to consolidate. The only way the agency makes money is by putting less people against the task at hand. So we are in a situation where the staff is completely over-worked and you cannot do these innovative many things because, in essence, the agency doesn't have the bandwidth to do so.
Razorfish's Matt Greitzer concurred with Woodman and noted the flexibility that arbitrage can provide:
"When you are on a fixed-commission model, which is typically the way the media business works, you're ability to test is totally constrained because there's certain things that might not work initially and you can't run those because they won't perform usually. Whereas with an arbitrage model, the potential benefit is that you can go negative, use zero margin, you can do things that you don't have the flexibility to do with other models."
During the Q&A portion, a question from an audience member who represented a major fashion brand on the web, appeared to put her finger on something that agencies – in their new roles as buying platform or ad network – will need to overcome. She wondered aloud how she can ensure she receives ads appropriate to her site as opposed to the toilet (literally) ads she's received from ad networks in the past.
Havas' Woodman indicated that if the publisher offers transparency on the placement – as in the URL – the publisher will get the advertising they're looking for. Woodman's point being that existing ad network models haven't offered transparency on where campaigns run. And, as liquidity improves through the exchange and buying platform models, transparency will be a key lever to increase pricing especially as brand marketers come online and look to integrate their brands with brands they deem appropriate to their objectives.
Today, it was great to see, once again, the continued momentum of a new, digital era in media optimization. There may be bumps along the way, but technology will only make the media buying and selling process more efficient – creating significantly better yield wherever there is true value.
ContextWeb has the entire video of the event and pictures on their blogincluding Q&As with many of the panelists.