On yesterday’s Omnicom Q3 earnings call with CEO John Wren and CFO Randall J. Weisenburger, the ad agency's digital media and analytics efforts through Annalect were highlighted.... -and that's news in itself as trading desk-related business has rarely, if ever, made an appearance on a holding company earnings call. A trend to watch for the future.
"While each of our agencies is developing digital and analytical skill sets, we are also increasingly leveraging our investment in Annalect. Annalect, which includes our search business, resolution media, our mobile and display businesses, now has over 600 employees servicing clients in more than 30 markets around the world."
The subject of agency trading desks and Omnicom's Accuen, in particular, bubbled up at the very end of the call as BMO Capital Markets analyst Dan Salmon asked bluntly about the future. A few key takeaways from Omicom’s execs...
- CEO Wren sees a future where nearly all media channels are bought and sold with algos.
- Privacy challenges persist –and it could be inferred that it inhibits growth of the trading desk model.
- Also, CFO Weisenberger says the trading desk model at the agency is still a work-in-progress and only a couple of years old.
- Weisenberger also notes the critical need for people who get the insights from the data as the dearth of talent in data-driven digital and programmatic buying is a challenge for the agency let alone the rest of the ecosystem.
Here's the transcript of the trading desk conversation:
BMO ANALYST DANIEL SALMON:
“I just want to go back to your discussion around analytics and Annalect, in particular, Accuen The Trading Desk. And some market participants have claimed maybe that The Trading Desk has become an unfortunate sort of layer in the media buying processes, programmatic becomes a small but growing part of the mix of media buying. Do you agree with that assessment? And whether or not you do, how do you see those analytics and particularly trading desk functions evolving over time? Is it to be a sort of specialized group, a SWAT team, so to speak, within OMD and PHD or is it more and more being aligned with some of your client teams directly?”
CEO JOHN WREN:
“Well, it's clearly being aligned for the benefit of our client teams as a utility, in effect, for both our media-buying activities as well as some our other activities and campaigns. The pace at which the digital marketplace occurs and then the manner in which it's done instead of using physical bodies, but almost through algorithms where in nanoseconds things are purchased, and then if not producing the kind of ROI, resold off back into the market, I think looking way into the future, that kind of option will occur for almost all media. But just for those the technology existed though, it doesn't mean that it will happen overnight. It's slow. TV is still going to get started in the same similar fashion throughout. It was once done as is outdoor, as is other major components, which are key part of the mix. So it's a process of evolution. I think at the core of it is going to be and the determinant to where these analytics go is going to be what privacy laws have become and whether you wind up with public information, which you can access to target or do you have to build your own ability to measure consumers than to target consumers. And the question hasn't been resolved yet. And I think it's going to take quite a while before some of these privacy issues do get resolved and I think that will dictate a good deal of the future. The problem isn't lack of data. There's always been too much data. The problem is how do you make the data you have actionable and useful and where you can analyze it in a fashion that you can get insights and then act upon them in an appropriate amount of time.”
CFO RANDALL WEISENBURGER:
“Yes, I think a couple of things to add. One is to keep in mind that these trading platforms have only been around for a couple of years at this point. So the development of them and how they're going to work out, we have to realize that they're only a couple of years old. Frankly, being involved in them with a -- there's a huge value in learning how they can work, et cetera. On a long-term basis, it's not really about the technology. It's about the insights in utilizing the technology or as John points out, there's a lot of data, but there's limited number of people that have the ability to get real insight out of that data. That's what our ultimate business is. Now in the early stages, we have to be somewhat the technology player, the data player because those things are all new. But on a long-term basis, it's going to be that insight that we can bring to our clients that it's going to make the difference.”
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