Founding Partner Isaacs Discusses Essence And Digital Agency Trends

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essenceMatt Isaacs is founding partner of Essence, an independent, global digital agency based in the United Kingdom.

AdExchanger.com: Please share a brief background on your agency.

MI:  We're six years old and have served many of the leading Internet companies, originally, on a UK basis, and then on a pan‑European basis, and now for some of them, in the United States. We work with Google across EMEA and in North America, and we do all of Expedia and eBay's work on a pan‑European basis, as well as Betfair globally.

At the moment, our business in North America is very nascent. But in Europe, we're one of the largest independent digital agencies that has a focus on media. Having said that, we do lots of other stuff. We design and build websites, and we do digital advertising and social media. But media is definitely very much our core.

How do you overcome the challenge within your own digitally-focused agency to maintain a unified message across all channels including traditional ones?

I think that's one of the main concerns of clients in terms of working with any specialist, and I think there's a few responses to that.

Certainly, in the mindset of clients, they see this as a creative challenge.  And our experience is that clients are still looking to their [traditional] advertising agencies to set the tone. The role of a digital specialist in that environment is very often an interpretation of that core messaging strategy into how it should work in the digital arena. And I think that's often entirely appropriate.

Obviously, from an agency perspective, that does mean collaboration is absolutely key. You can't survive in an agency world if you don't collaborate with other agencies. The idea that everyone should be competing with each other within the client context, kind of winning business off each other, it's nonsense in my opinion. In fact, we find very few issues in terms of working alongside other agencies.

I think there is an interesting question for some advertisers starting play out which is, "If social media is so core, then should we actually be almost using social as the arena in which figure out how we communicate with our consumers?" almost flipping [traditional strategy] on its head and using that as a lead to think about their broader communication strategy. It's very early days in that arena, and there are examples of people getting it horribly wrong. But I do think there's something interesting in that as a concept, as to how advertising may evolve over time.

But, is there something there regarding the need to have a media strategy more holistically consider the cross‑channel implications of any buy?

Yes, this is what we're certainly finding. Coming from a digital perspective, we try to be very, very careful to always be as objective as possible. Obviously, we're not yet in a world where you can track absolutely everything. So you have to be realistic about what you can untangle. There is already a huge amount of data available in terms of trying to understand channel interaction.

Sometimes that's using brand‑metric research, as opposed to necessarily traditional, direct sales measurement techniques. So you can use it for both brands, actually, as well as direct. There is clearly no preference and there are still a lot of big holes.

One of the things I have started to hear a lot certainly here in Europe is skepticism actually about the core metrics. People are trying to build solid econometrics using more traditional techniques to predict future performance. But, they're finding them really inaccurate.

One of the reasons is because the market has now become so dynamic. My belief is that in econometrics you have to take the longer term trends, which are very often over years, to try and un‑bias effects like seasonality and everything else. In fact, the market is moving so much faster than that.

Data from two years ago probably is a very poor predictor of what is happening in the world today. So, this is a massive challenge for client‑side marketers.

We do quite a lot of cross‑channel analysis and attribution work using the stuff that is trackable online to try and understand, for example, the interaction between display and typed‑in search, or social activity and search.

But we would only look at interactions with traditional offline channels in conjunction with the client and with the other agencies. Otherwise, it's almost impossible if you don't have a level of context around what actually is being done.

What do you think about the marketer mindset right now? Do you see a cultural shift at all on the marketer's side?

It is a really interesting thing. I'm sure you're aware of this, but the market in Europe is quite different to the US, particularly in digital. In the US, there's a tendency to do a lot more things in-house so it has not been unusual for advertisers to build their internal, specialist, online marketing teams. That's much more unusual in Europe though it’s starting to change.

And the reason for this difference is simple - the European market is just more fragmented, because of the nature of different countries and languages and everything else.

Also, in Europe, there is a mass skills shortage in digital and that has been a real problem for the client‑side marketers in particular, who historically slightly undervalue traditional skill sets. They weren't prepared to pay for [digital marketers]. I think they've now woken up to it. In fact, client‑side digital specialists are paid better than in the agency arena.

But the expectations that are made on these people… even in very large organizations where they may only have one person who really is focused on online and are expected to understand everything, from mobile to video, to all forms of display, to data‑driven strategies.  That is an extraordinary challenge for anyone, right?

Having said that, with some of our clients, you see incredibly savvy, senior clients in some organizations. Unsurprisingly, people like eBay, Expedia, Google and some of the other Internet companies do have very bright people. But my observation would be that a lot of those best people don't come from traditional marketing backgrounds. They've done a variety of different marketing roles in their career, but at some point they come from somewhere very different.

Some of them are very technology-focused. Some of them are very data and analytically focused. But they're certainly not the traditional work your way up the market in communications groups.

I do think that is a big challenge for more traditional marketing directors, whose experience maybe has been more with TV and with traditional channels, where the analytical rigor has not actually been as central.

Let’s look at what's hot and maybe what's not from your viewpoint. What are you seeing trend‑wise within your agency?

I would say definitely social [is hot].. We acquired a UK‑based social media agency about a month or so ago annd it was probably the first significant acquisition in that space in the UK by anyone. Our rationale for doing it was in reaction to client demand and we felt that we were missing some of the capability and skill set.

It's very hard to have a conversation with anyone now in the UK and Europe without ending up having a conversation about social in some guise. That definitely is, I would say, the number one hot ticket at the moment. I think it will also be, this year, a big year in terms of mobile, just because of the penetration of smartphones now.

It will be very interesting to see how the competing mobile ad platforms play out, iAds versus AdMob. Is there a role there for specialists, mobile ad networks? Or actually, is it going to move to a small number of big platforms very rapidly? -which in some respects would be preferable.

I think video is a bit of a fight right now.  We'd love for it to happen faster, but it feels like it's a bit further out.  Historically, it's been incredibly expensive. I mean, some of the prices for pre‑rolls, etc. have just been completely nuts in the UK and Europe. I suspect to some extent that may have been the case in the US as well.   And there is a need to innovate in terms of ad formats in order to make video a more compelling format both for consumers and for advertisers.

Also, for a long time, video media in the UK was a premium buy. You had to make a commitment for a certain amount at a crazy rate. And you had no idea how it was going to perform - I mean absolutely no idea. So obviously, moving toward more auction‑based models is all good.

But there are even practical constraints like production. Clients who aren't used to spending huge amounts of money on a TV ad are not going to do that for an online, video‑format‑only pre‑roll that is going to get a much smaller number of views.

So what do they do? Are they repurposing TV ads? -and does that work? Or are they creating something that's specifically for online? I don't think anyone's even vaguely gotten under the skin of that one. Video is the elephant in the room that no one's really talked about yet. That means obviously lots of opportunity for someone.

So are your clients asking about buying through demand-side platforms, ad exchanges and that sort of audience buying opportunity for their plans? What do you see right now?

Slightly. It varies a lot by clients.  You've got people like eBay, who have been investing in their own proprietary platform. Of course, one of the challenges of building stuff is sometimes you build it and then you realize that it wasn't quite what you needed in the end after all.

But, we have other clients who are actually not going to build their own stuff, like eHarmony and Ancestry.com.  They're certainly interested - and had their appetite whetted by media frenzy.

What we're certainly finding is that a lot of the market is retargeting. A lot of that is actually being kind of gobbled up by specialist players like Criteo.

In some respects, they're doing a great job at opening up the opportunity, in other respects, obviously they're an arbitrage bubble, and in a way it feels it shouldn't work like that.

I think all advertisers recognize that as well. It's like if I had the data and I could bid myself for the impression for that user, why on Earth would I get Criteo to do it for me?

But advertisers are lacking the sophistication necessary to be able to do that, and I think that that is where agencies have a role to play, an important role, in trying to get clients and advertisers to the point where they start to really understand what it's going to take.

I mean... even basic things like getting clients to tag up their sites in an intelligent way can be challenging.

The evolution of the DSPs and the exchanges is fantastic. But, for a lot of our clients, a lot of the value is in understanding their own client base at a much deeper level which is, is obviously our heritage, and it's something we're very focused on.

We think there's almost this hole at the moment where there needs to be more investment in data management platforms to build up that side of the data universe.

Final question, what's the biggest challenge ahead for you and your agency?

The biggest challenge is going to be around technology funds.  We as an agency have always had a principle, which is we're not a software development shop, but if there's an arena where we see that our clients need something and we can't see anything on the market that adequately fulfills it, we'll go and build it. So we've built quite a variety of systems. At the same time we work with third‑party platforms such as Kenshoo and Efficient Frontier for paid search.

We definitely see holes in the market and in our opinion, platforms at the moment are not advertiser‑centric enough. So the biggest challenge is what expense you invest in that arena versus waiting.

I think making that decision is the hardest challenge because the technology is becoming so important.

Follow Matt Isaacs (@MattIsaacs), Essence (@essencedigital) and AdExchanger.com (@adexchanger) on Twitter.

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