“Data Driven Thinking” is a column written by members of the media community and containing fresh ideas on the digital revolution in media.
Today’s column is written by Brad Terrell is VP and General Manager of Digital Media at Netezza, a data warehouse and analytic appliances company.
Agency holding firms face significant strategic and operational challenges in adapting to the digital transformation of the advertising industry. Data-driven competitors are shaking up the market and threatening to disrupt their current positions of power.
So what? This is not exactly news. The WPP Group’s Sir Martin Sorrell made the threat clear years ago when he dubbed Google a “frenemy.” Agencies and technology firms are increasingly encroaching on one another’s turf, making it critically important that every firm identify and leverage their sources of differentiation for competitive advantage.
Unique resources are the building blocks of a firm’s competitive advantage. Creative talent is arguably one of the most prized resources within an agency. Significant client relationships are also difficult for competitors to reproduce. Most importantly, the agency holding firm model that emerged in the 1980’s in response to media consolidation and globalization made scale an important resource. Scale gives agencies the global reach required to serve worldwide clients and the buying power required to negotiate the best possible advertising rates.
Technology has historically played a relatively weak role in the strategy, culture and operations of agencies. Hiring the right kind of engineering talent and investing in the right kind of data infrastructure are expensive decisions that aren’t well-aligned with the mainline operations of most agencies. Contrast that to firms like MediaMath, a company whose brand name makes their strategic focus on leveraging “math” to create competitive advantage clear, and the differences are unequivocal (full disclosure: MediaMath is a Netezza customer). MediaMath even issues press releases announcing significant engineering hires to further emphasize the technology-driven nature of their business. In today’s environment, agency releases touting engineering hires are few are far between and the cultures that prevent it from becoming more commonplace also make it difficult for agencies to adopt data-centric strategies.
The good news for the agencies is that it’s not too late to establish meaningful data strategies. Fortunately, global scale gives agencies the market power to make this happen quickly. The multichannel campaigns that agencies run every day already utilize the digital channels that generate massive volumes of data on who sees ads, how people respond to ads and how to more efficiently reach target audiences.
Valuable data is generated at every stage in the digital campaign execution value chain – from campaign strategy/planning, to audience targeting, optimal creative, ad delivery, website analysis, and attribution analysis. However, this data is typically analyzed in independent silos, and this limits its value significantly. There’s a huge opportunity for agencies to unlock the value of this data by constructing centralized data platforms that unify all of the data captured on every campaign. This will enable deeper analysis to generate better insights and deliver more value for clients.
The insights that data can deliver are critical to an agency’s mission to maintain “trusted advisor” status with clients, and the uniqueness of those insights are what differentiates agencies from one another. Importantly, the trick to generating unique insights from data is to leverage unique technology capabilities to analyze more data more quickly. Therefore, agencies must take control of their data. And by opening up interfaces to their data platforms so that complementary technology providers benefit from integrating with them, they will enable network effects that increase the economic value created for all of the players in the ecosystem, with a disproportionate share of that value accruing to the agencies that control the data. Data platforms further benefit agencies by unlinking growth from headcount, creating barriers to entry that reduce competition, and establishing switching barriers that increase client retention.
Many agencies––such as Publicis’ VivaKi, Havas’ Artemis and IPG’s Cadreon––are taking steps in the right direction. WPP’s approach appears particularly sound: beyond the recent elevation of digital chief Rob Norman, which will likely drive the right cultural alignment internally, WPP acquired strong engineering talent with 24/7 Real Media that enabled them to accelerate their data strategy. Its subsequent spin-off of the Media Innovation Group as an independent profit-center with an explicit technology-driven mission seems to have been pulled directly from Christensen’s book on how to overcome the Innovator’s Dilemma (full disclosure: the Media Innovation Group is a Netezza customer). WPP’s updated online ad buying contracts clarify ownership of campaign data and make it clear that it understands the value of creating a data platform. Its partnership with complementary technology provider Omniture also has the potential to create the network effects referenced above. While only time will tell if these steps will be enough, it’s clear that at least one of the agency holding firms has recognized that it will take more than creative talent, relationship assets and scale to compete in our increasingly digital world.
Brad Terrell is VP and general manager of digital media at Netezza (NYSE: NZ), a data warehouse and analytic appliances company.
Follow Brad Terrell (@bradterrell), Netezza (@Netezza) and AdExchanger.com (@adexchanger) on Twitter.
