Rob Norman, GroupM’s global chief digital officer, foresees a future without fragmentation.
He also expects more walled gardens, although “walled” won’t necessarily mean “closed.”
Speaking on Thursday at DMEXCO in Germany, Norman outlined how agencies and advertisers will adapt to the rise of a handful of major consumer platforms and applications.
“When you think about the app ecosystem and usage of the top 10 apps, by extension, you see the consolidation of ownership of those apps vs. all other apps,” Norman told AdExchanger in an interview. “You’re going to start to see a world where the interface between people/screen and people, content, services, entertainment and communications are dominated by a relatively small handful of businesses.”
He elaborated about the impact on the ad business.
AdExchanger: You have a theory about the evolution of the app ecosystem.
ROB NORMAN: DMEXCO is a great opportunity to have a conversation people aren’t having quite as much as they should, and really it’s a challenge to things you hear over and over again in our business. People say that fragmentation is relentless and who knows where it will go. The second thing you hear is the world has gone from broadcast to desktop to mobile. I’m of the view that it’s actually better described as going from channels to sites to apps, which is a subtly different narrative. I say that because apps are more than a mobile issue. Yes, of course people use apps on phones and tablets, but they use them on smart TVs, cars and wrist watches.
Tim Cook said the future of TV is apps.
It’s good that we think alike. It’s the closest that I’ll ever get to Tim Cook.
So you’re predicting more consolidation in the app ecosystem?
Characteristically, anything that is dominated by a relatively small handful of businesses cannot be described as something that’s fragmented. As a consequence of that narrative, we will see a return to scale and an end to fragmentation.
What does this mean for the advertiser?
From an advertiser perspective, and from only an advertiser’s perspective during the [heyday], at least, I think back to commercial television [and] the magazine industry. What we observed then was that a bunch of companies, whether they were in the packaged goods business [or] the automotive business, lean very hard into that media, whether it was spot TV or the back covers of magazines. As a result, they secured franchise positions because once they had them, they were relatively difficult to get them out if you were a competitor and also, they created competitive advantage. They also created competitive advantage by paying less than inflationary rate increases year after year.
Even if inflation is 5% and you pay 4% more, when you extrapolate that over 20 or 30 years, the delta between the value you’re receiving and the value your competitors or new market entrant is receiving gets to be enormous. What happened in the digital world was that no such advantage accrued to those people because of fragmentation [from] hundreds of thousands of channels and millions of sites.
Are you referring to programmatic?
The rise of the algorithm leveled the content playing field, and so people who created what we like to call premium content were put in the same bucket as other people who created any content. And the auction leveled the trading playing field because the person around the corner who knitted their own socks could buy media at the same price as the world’s largest packaged-good companies.
My sense is this defragmentation or consolidation of the world is an opportunity for major advertisers to think again about long-term competitive advantage and how they integrate content, advertising and services with the major players in the app ecosystem. It doesn’t necessarily stop and start with media as we know it, but it was a competitive advantage for McDonald’s to be integrated into the Uber app while Burger King was not.
Let’s shift gears a little bit. Can you talk about the BuzzFeed data partnership and how that came about?
There are many reasons – experimentation, being where the consumer is going. The BuzzFeed deal was unique because BuzzFeed itself is both a creator and distributor. It not only creates for itself, it creates for brands and on multiple platforms. At the center of it, the Pound analytics system allows you to look at the flow of audiences cross-platform and across content types, and also informs the content itself because its shows you [that] something that works really well on Snapchat might not work as well on Twitter and Facebook. We believe the BuzzFeed deal will help our advertisers and WPP agencies, who were very much involved in this like GroupM. It will help us create more socially relevant assets for social platforms.
Ad blocking’s becoming a challenge for TV companies, not just digital publishers. Is this why we see so many new ad-free, paid video subscriptions?
Ad blocking wasn’t the reason we saw HBO, Showtime, Netflix or Amazon Instant Video. Television and cable have had hybrid pricing models for some time now and only the most elite content creators with the hardest access and exclusively available content will be able to maintain a paywall around their properties. All of them in the end I think prefer to be paid directly for their content and receive a dividend on that content through advertising.
On the other hand, I think there is a real need for publishers to create more attractive formats and experiences for the delivery of content that accommodates advertising in a relevant and compelling way.
Example?
I’m intrigued that when we began our viewability discussions a while ago, we began with Condé Nast and one of the key outcomes was a significant redesign of their digital properties. They’re not only more engaging for the consumer, they’re more relevant for the advertiser. I think a combination of targeting and also a new creative zeitgeist that adds value to the user experience will reduce the volume of blocking in the market. There’s no doubt it’s a concern. There has to be a place for advertising as a funding mechanism for content. It’s simply not sustainable for someone to have a subscription to everything.
What do you think about walled gardens?
It’s almost like broadcast television 25 years ago. Today we have Google, Facebook, Amazon. Then we had CBS, NBC, ABC. While there were ratings for measurement, they kept a lot of data to themselves and had walled gardens around their data too. What the agency and client businesses did was build models where we took empirical evidence, used the evidence, deconstructed the evidence and affected different media types and different media owners within that media type and built models to do that.
Of course, life would be easier if data was perfectly democratized and available, and I sort of buy the data leakage argument, but I think that can be handled contractually. What will happen is the agency business will focus an awful lot of its attention on cross-platform, cross-vendor attribution and build models to do that, and be, as we always were, approximately right almost all the time.
