John Mellor is VP of strategy and business development for Adobe's Digital Marketing Business. He discussed yesterday's acquisition of media buying services and platform company Efficient Frontier by Adobe (read the release) and its implications.
AdExchanger.com: What would you say Adobe was looking for? And then we can get into why the Efficient Frontier offers...
JM: Sure. It's probably a very similar storyline to what you and I talked about with the Demdex acquisition (Q&A here). Eventually our customers are looking at all the information that they're able to measure their site, their mobile app - all of their digital properties where they're investing money. They want to understand, “How do I now activate that data to make a decision in my media buying program since there is so much money being spent on digital media?” -we've all seen the line "up and to the right" in digital ad spend.
We are answering the call of customers to give them more capability in how they spend those dollars, how they understand performance, and how that understanding loops back into how they can spend more.
Your acquisition intentions were well‑known on the buying platform side. For Adobe, how was it that Efficient Frontier was differentiating itself? And then, why buy them?
If you look at digital media spend, 50 percent of it is paid search. That's just the reality. Paid search will continue to be a key pillar in any digital media strategy for our customers. We know that we need very strong leadership there and continue to push our capabilities to meet what our customers and our partners, including the agencies, are looking for. That's around – “How do we continue to develop algorithms? How do we continue to develop more of a closed loop system with paid search?”
As we talked to Efficient Frontier, it was clear that their thought process around paid search was very similar to ours. They had a very strong portfolio of optimization technology, particularly portfolio optimization technologies.
Getting to the rationale of why Efficient Frontier (EF) was particularly interesting, was that they shared this view with us that the biddable market segment of search engine marketing is a key part of how other digital media is going to be bought and sold in the future. And, EF had extended their algorithms and technologies to include other media types like display advertising which is becoming more and more biddable, meaning, I have to make a decision in real time about a given impression: 1) Do I want that impression?; 2) How much is that impression worth to me?; and 3) What creative should I best serve into this impression?
That's the action process that's beginning to happen.
The next area where EF pushed was in social. They made an acquisition within the last year of Context Optional, a provider of social campaign management. They're doing great things on Facebook and on Google+ and are a preferred developer of both programs. As we looked at who could advance our agenda best in terms of optimizing and allocating ad spend, and understanding how that ad spend performs, Efficient Frontier popped up because they had focused so much on paid search, display, and social.
What's the key takeaway for each of these with the acquisition: the marketer, the publisher and the agency?
The key takeaway, in general, is that this creates the leading digital ad buying and optimization platform. And that is our agenda. That is what we need to be today for our customers. By no means are we done. I'm not going to sit here and tell you we've checked all the boxes. There is a lot more functionality that we are looking to add to this platform.
For advertisers, we want to help them technologically paint a richer picture of where they can spend their ad dollars and how those ad dollars are performing. Since this is all on one platform, that can create a positive feedback loop – “I can understand that my display works best if I'm also doing search. - It will work even better if I do some social. - Help me understand how will things collectively attribute?” and so on. Search grew up in a silo. Display grew up in a silo. It just doesn't work anymore to approach these things as siloed pieces of ad spend. They are interconnected and found inside of the data for measuring performance. That's where Adobe's real secret sauce is.
To agencies, the message is that this is a platform we are very interested in agencies using it for their advertising customers. We have no interest in displacing agencies. We are 100 percent focused on helping agencies do what they do great, which is campaign strategy, and digital strategy and executions. We want to be the platform that frees their creativity.
And for the publisher, in particular?
Our goal is to help advertisers more efficiently spend money, so they can spend more money in aggregate. Once an advertiser finds a publishing outlet that works, they can spend as much money as the data says they can spend and as the optimization platform can help extract value from. Our goal is that we raise both the advertising side and the publisher side here, because we have significant publisher customers. At the end of the day, we want those publishers to be able to charge a maximum price. And we want advertisers to be able to pay that, because they can extract the right ROI.
In a way, we want to bring some chaos to this view of the world of digital media.
What do you think is still missing in the platform that you're building?
That list is long, fortunately. I do mean fortunately! Fragmentation, from a business standpoint, is our friend. A couple of years ago we were thinking about how we do a deal with Facebook. Or, how do we effectively extract value from our Facebook presence? Now, it's Google+. There's no question that Google is going to invest in order to be a player in social media. That gives us more fragmentation, more challenges for digital advertisers, and more of a rationale for an independent company like Adobe to be best friends.
Maybe a publisher ad server would be something you're interested in?
Well, just in the last 12 months we've bought Dendex and Auditude (Q&A here), which is a video monetization platform. Adobe bought Day Software, which is the content management layer for not just websites, but any digital presence - if you're pushing content out to a smartphone, to a tablet, to a desktop computer.
One of the most exciting things for me personally is how much this underscores Adobe's commitment to digital marketing. More significant acquisitions in the last 12 months warms my heart.
Does Adobe buy into the idea of a “marketing stack” solution? What do you think about that concept?
When you say "marketing stack," I think of an end‑to‑end solution where you can plan your media spend, organize that spend around campaigns, and push it to multiple digital channels, and then have execution of that happen with optimization built-in.... Meaning I can make decisions in real-time about what to show John versus Eric based on what I know about them, and then "wash, rinse, repeat." We're a ways from that, but that is absolutely where we are going. I view the marketing stack as something that is long overdue. There were entire industries built around the CFO or the CIO. And that has yet to happen for the CMO. And that's Adobe's opportunity.
Let's talk about Efficient Frontier’s team and the company. What are plans for integrating the team?
Dave Karnstedt is the CEO at Efficient Frontier. And Dave will report to Brad Rencher. Brad is the senior vice‑president for the digital marketing business unit. That's as far as we've been able to get. These acquisitions, you announce them and the government goes through their customary review process, and then you hopefully close in Q1 of next year. And then we'll be able to do the integration. But David will be a direct report to Brad.
What do you see as the competitive set right now for Adobe Systems?
In terms of who is approaching it the way we are, I really don't see anybody. Adobe has a heritage from marketers on the authoring and creative side. I don't think you could look at a piece of content online that has not passed through some Adobe workflow in its creation and delivery. With that heritage, we are very unique. But, I don't think there's any question that Google is trying to build a similar stack. That's fine. We believe we're unique. We believe we offer a very independent optimization platform for both advertisers and publishers that gives them transparency and control. And that's the agenda today.
By John Ebbert