When David Williams bought Merkle in 1988, the first online display banner was still a few years away. But that doesn’t mean marketing tech wasn’t a part of his CRM agency from the get-go as Merkle ‘grew up’ building platforms for direct mail, and then the phone, and then email as the Internet made its appearance.
According to Williams, who is the company’s CEO today, his next bet is that cross-channel addressability – across social, mobile, search and display - is approaching and everything will be more measureable over time. He believes that just 12 months from now, we'll see "a meaningful difference" from what we're seeing today across digital.
AdExchanger spoke to Williams recently about his company, industry trends and what that “meaningful difference” is.
AdExchanger: Given the transformation with Merkle, how do you see your competitive set today?
DAVID WILLIAMS: Our competitive set is clearly fragmenting. Five or 10 years ago, our competitive set was the classic marketing service provider. An Axciom, an Epsilon, an Experian - people like that. We still compete in that segment primarily in marketing technology, data warehouse development.
But from there, our competition becomes highly fragmented. In some cases, it's digital agencies. In other cases, its digital point solution providers. In other cases, it's more of the CRM agencies like Wunderman or an Ogilvy. In other cases, it's more of a system integration offshore company like Accenture. My guess is that our competitive landscape will continue to fragment here over the next few years and ultimately my bet is it consolidates. But for now, we’re in that fragmentation phase.
What are you seeing on the staffing and recruitment side right now?
So, we're 1,700 people now. Ninety percent of those are onshore here [in the U.S.]. We have almost 200 people in Shanghai now.
Years ago our staffing challenge was technologists, then it was analytics people and to some degree now it's the intersection of analytic technologists with a digital background.
Staffing continues to be challenging like any fast growing company. In other ways, we've been very pleasantly surprised. If you really look at why we've come into this [digital] space as aggressively as we have, it’s ultimately because the big Fortune 500 companies - a Dell, a Direct TV, a Geico, whomever - all have these marketing technologies infrastructures and we host 150 of those for the Fortune 1000. We use that customer intelligence to better inform media and channel decisions for media channel experiences, if you will.
With the digitization of mediums and channels, those connections are just becoming more and more possible every day.
People are excited to join a company like Merkle because we can facilitate those connections. There's a little bit of flight to digital, in our case anyway, because people are excited about having that completely integrated tool set.
Is the CMO your target market today? If not, who?
It's clearly the marketing organization, so in most cases it is the CMO. In some cases, it's ahead of loyalty. In other cases, it's ahead of strategy so it depends on the industry. We're organized across industries so what the healthcare market's doing today is significantly different than CPG and so on.
One thing that is changing is IT. The enterprise IT organization is playing a bigger role with a company like Merkle, primarily because the assets we're building are becoming enterprise level assets and global assets. The marketing department used to go be able to outsource those on their own but today, that's just not the case. So, we're seeing more IT involvement but clearly the marketing organization is our target.
How do you think things will shake out with regards to online behavioral advertising and privacy?
To be blunt, I don't know exactly how it's going to shake out. I mean, we've been around this problem all the way back to fair credit reporting in the 80s.
The fundamental issue is that the public has trouble understanding the value exchange of somebody sharing information until somebody can do better marketing. In the connected world that we live in today, I don't think the credit bureaus could get built today under the environment that they quietly were built in the 70s and 80s because the scrutiny would be unbelievable. The idea that my bank and all my credit card companies are going to send information that I can't control to some third party so it can increase the ability of America to function in a debt world to affect my credit, my interest rates? No way.
My view is that that’s the constant struggle. With the brands we work with, these brands are incredibly sensitive to the respect and trust of their consumers. The big brands are always trying to do the right things because they care about the customer experience - and customers vote with their wallets.
Certainly, there are bad actors out there. My bet is there'll be regulatory issues here and there, but I think the industry over time tends to adapt to those things and it's hard to stop the flow of information.
Former Right Media exec Megan Pagliuca helps spearhead your programmatic display ad strategy. Why is display uniquely important at Merkle?
The uniqueness of display at Merkle is taking these 150 marketing databases - where every day we're predicting the households that we want to communicate with -- and make the linkage of that marketing database to that display ad purchase. We don't want to deal in unidentified audiences. We don't want to deal in profile.
In other words, we don't want to dumb the targeting down to like it was 20 years ago in the offline world, where you go back to direct marketing and say “Give me everybody 45 to 50.” We want: “My predictive analytics say go to this household and I almost don't care about characteristics of that household.” In many ways, the display world is operating in an incredibly unsophisticated targeting capability. We want to make those direct linkages to the databases because that's where the opportunity is and that's what our customers are demanding.
Can you give me any sense of scale of the display business or the digitally addressable business at Merkle?
It's a growing piece of our business but in reality, it's a relatively small team here at Merkle. I think we've become the de facto largest independent guy out there right now in terms of what we're buying. We're one of Google's fastest growing customers in the last 12 months - according to Google, anyway.
We're only looking for the performance media type buys associated with this [strategy], so we're not going out and saying, “Hey, let us do all of your buying.” We're only interested in the buying that links directly to the database. And part of the way we would measure our success is what percentage of the total media is bought at the household level. I can tell you that that percentage has increased over 100% in the last 12 months.
Are the mobile or video channels of interest to your company?
We tend to use the word “mobile” as a slightly more descriptive term. Mobile and search is huge, so we're going very hard there. With video, we see it from a display perspective. We don't have a definitive video business. We have a mobile business, but it's more about actions and experiences. We serve “device neutral” and obviously that's the momentum.
What are some milestones that you'd like to hit in the future?
Data technology and analytics are enabling more intelligent targeting from a media and channel perspective. A lot of the challenge that we’re facing today is helping organizations with the internal and organizational transformation, so we've been aggressively building out a consulting organization here at Merkle.
I was with a president of a Fortune 20 insurance company recently and we were talking about this transformation from product-centric to customer-centric. The first question I get asked is “How are my compensation systems going to have to change,” because that is a much different world than “How do I do good targeting in display?”
We're very focused on building those transformation skills to help our customers with these journeys.
What do you think marketing will be like 10 or 20 years from now?
My view is that the world will rationalize itself into two major camps: a brand camp and a customer camp. Everything we're talking about is customer marketing. People talk about the funnel inverting in the future, but what most marketers are good at today is, “I have a product or value proposition. I have a bunch of media choices to offer that product or value proposition - which I can then optimize.” The challenge is that the analytic skills and the targeting performance gets better down the road, and you get into this downward cycle...which is the idea that I just keep narrowing my audience.
Where marketers will get to is identifying a group of people that would be highly attracted to my brand. “How do I create experiences and value propositions that will attract those people to my platform or my brand?” And then, “How do I speak to those people in the most relevant form?” There is optimizing profit; the other end is optimizing growth. The organization that figures out both of those things will create meaningful competitive advantage.