“Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Tim Mayer, chief marketing officer at Trueffect.
Smart enterprises nurture their best assets. Not surprisingly, data has recently taken the coveted second-place position behind companies’ most valuable asset: employees.
Companies have large amounts of data that they want to translate into intelligence, and they’ve begun treating this data differently. For many, this difference means using strong on-staff analysts, known as quants, to mine the data in-house instead of outsourcing it to an agency or partner.
Increasingly, technology-savvy CMOs partner with their CIOs to make decisions on their organization’s marketing technology. These partnerships lead to new requirements and perspectives on how these technologies should interact, with areas such as data security being pushed to the forefront in this evaluation process.
At this year’s AdExchanger Programmatic IO conference, Joanna O’Connell, research director at AdExchanger, discussed three ways to take programmatic media in-house: agency-led, agency-involved and in-house. The first option, agency-led, is the default approach for most companies. The agency-involved route, which is rapidly gaining popularity, allows enterprises evaluate technologies directly and own the relationships with advertising technology vendors. The third option, in-house, is still very rare.
Consolidation in the industry has significantly reduced the complexity and number of vendor relationships that need to be managed. Previously, an enterprise might have a relationship with a data-management platform (DMP), one or more demand-side platforms (DSP), an ad server and an attribution vendor. With the consolidation that has taken place, many vendors offer a good portion of the required functionality to clients.
As enterprises continue to take control of technology relationships, CMOs and CIOs will also begin challenging existing pricing models. Currently, there is significant waste in the system, with more than half the media costs consumed by middleman-type vendors who sit between advertisers and publishers. Some enterprise procurement teams will try to push down the cost of each component, such as the DMP or DSP. Other, more forward-thinking enterprises will generate larger disruptions in the industry price structure, compensating both their technology vendors and agencies based on performance. Enterprises will also look at their spending more holistically across multiple channels while viewing performance through a business lens. Some companies, such as Allant and Experian, already help their clients do this. The use of performance evaluation will force an evolution in pricing models, and many of the current inefficiencies in the advertising system will quickly be wrung out.
The Need For Human Capital
Another major reason for this transformation is that while both enterprises and agencies are evolving, the talent and abilities of the human capital remain static. Many people in both agencies and enterprises are not equipped for today’s more analytical, tech- and data-driven advertising world. Companies are adapting at a faster clip, with many already employing in-house search team members who have quant backgrounds and know how to work with tech platforms. The agencies, on the other hand, will try to rapidly grasp the key success factors in recruiting, screening and hiring candidates with these highly desired skill sets.
So what is next for agencies, and what position should they play? Enterprises clearly want intelligence and will continue to seek it, along with strategic insights, using either their in-house resources or agencies. Will the agencies become the implementers of this intelligence, focused on operations and production? They have, after all, started hiring chief data officers, which seems to suggest that agencies are trying to step into that role. A new set of jobs and activities for the agencies will emerge with this new split. Some agencies will adapt quickly, while others will be left behind.
The subtler shift is that evaluation of performance will align with where the intelligence resides. So instead of agencies defining performance via clicks and impressions, we will see enterprises define success based on their own business metrics, which they will dictate.
Big data means big insights. Both make the enterprise smarter. This should be great news for smart agencies, too.