Digital Marketing Consolidation Is Not Inevitable

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martinkihnData-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 Martin Kihn, research director at Gartner.

You can't swing a cat video in the marketing and ad tech space these days without hitting someone who says they have a hub, cloud or suite. A litter of credible upstarts are clawing onto the pile started by IBM, Adobe, Salesforce.com and Google, ranging from data providers (Acxiom, Neustar), analytics powerhouses (HP Autonomy), service providers (IgnitionOne, Digilant) and a few veteran tomcats (Oracle).

And we've all seen the logo farms and transit maps that show herds of providers just yearning to become the pick of the litter. Common sense says a frenzy of acquisition in 2014-15 should lead to a more domestic setup where a few megahubs divide most of the market, from CRM to advertising and analytics. We’ve already seen convincing shakeouts in categories such as ad servers, website analytics, marketing automation and, most recently, data-management platforms.

Is rollup inevitable? After the catfights subside, will we peer over a postapocalyptic landscape that looks something like telecoms or airlines, with four to five big bananas monitored by the government?

I doubt it. Just look at the logos themselves: They keep spawning not only providers but also categories that didn't exist five minutes ago (geolocation analytics, anyone?).

To borrow a line from 4 Non Blondes: “What’s going on?”

To the hubsters, I offer three cautionary meows:

1. Change Isn’t Changing

The speed of change in digital marketing alters math. It is not a stable system, and it has seemingly unlimited access to capital. The end state is nowhere in view. Products shadow the rate of change of underlying components, such as processing and connectivity, which improve at a rate that is not linear. This is a market that literally moves at the speed of light; an industry may never have changed so much, so fast.

An Xbox One has as much computing power as the entire Department of Defense had when Justin Bieber was 5 years old. Bieber, now 20, is still a young guy. No sooner does a single digital marketing fiefdom get rational – say, desktop search engine optimization – then something moves the boundaries, such as when people buy smartphones and start searching on Twitter.

Take my area: website analytics. An embarrassment of options in the late 1990s has settled into a handful in 2014, including Adobe, Google and IBM. But lately I’ve researched app and mobile website analytics platforms, and trust me, it's chaos. Meanwhile, the hubs scramble to upgrade or acquire this critical thing that came out of nowhere. Trouble is, these "critical things" keep appearing. I have bad news for the hubsters: It’s never going to stop.

In fact, by Moore's Law, it's only going to get worse. Once a hub has conquered app analytics, marketers will be all over wearable beacons, AI decision support and talking cars. It’s what keeps analysts and consultants off the streets.

2. Big Companies Can’t Innovate (Enough)

There, I said it. As marketers' and advertisers' requirements expand, they can only be met with innovation. There is less wiggle room each year, as spending – whether on campaigns or less structured efforts like social and content marketing – gets easier to link to business goals. Blame the attribution analytics industry. No matter how useful a marketer’s hub, or how familiar, if it's missing some competitive advantage or some breakthrough technology, marketers will simply find something else in the cloud. They have to. They have benchmarks now.

Big companies have little incentive to invest in speculation. No leader in one digital era has gone on to lead in the next, as Bill Gates points out. "Success is a lousy teacher,” he says.

So big boys can be late to innovate and shift the risk of new ideas onto the startup ecosystem and VC complex. Startups are de facto R&D labs for the major players. Unless capital dries up – and there's no reason to think that it will – expect new arrivals to keep leaping onto the pile, offering more options to marketers outside the hubs.

3. Lock-In Only Benefits The Warden

Everyone enjoys the rule of law. Programmatic display wouldn't make up half of the impression volume today if it weren't for IAB standards and XML. However, within common guardrails, marketers have a lot to gain from open connectivity, data portability and flexible tools. Switching costs can still be high, but they are declining as platforms migrate to the cloud.

Simultaneously, solutions are emerging to ensure marketers' sway over their data. The popularity of tag-management systems, such as Tealium, data-connectivity platforms, like segment.io, and onboarding tools, such as LiveRamp, point to a healthy demand for control.

Meanwhile, even traditional "skills lock-in" is on the wane. Think of Oracle or Microsoft DBA certification programs, and you get the idea. Tools themselves in the digital marketing sphere are becoming simultaneously more alike and easier to use. Experts morph from solution-specific, say, Omniture ninja, to domain-specific, such as predictive modeler in R. It doesn’t take a data science degree to grok Google Analytics – and that’s a good thing. The marketing quants are less reliant on brand loyalty to build a career.

Now, before we lose track of the plot, let me be clear that digital marketing hubs exist, will continue to exist, and are often doing great work. Seamless collaboration and workflow, common data models across platforms, single sign-on and a unique customer data record – fantastic goals, every one. But I think we should wonder whether a marketers' most important decision right now should be which of the three or four digital hub mega-vendors to bet on for the long haul. That smells like mainframe spirit.

Maybe a better option is to pick a set of solutions that are best in show, and insist on controlling your data. It's likely that some lynx none of us have ever heard of will become the real cat’s pajamas.

Follow Martin Kihn (@martykihn), Gartner (@Gartner_inc) and AdExchanger (@adexchanger) on Twitter.

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2 Responses to “Digital Marketing Consolidation Is Not Inevitable”


  1. Blair Reeves says:

    Interesting post, Martin... but I disagree. (Disclaimer, though - I work for one of those marketing hubs!)

    You must segment this market into SMB versus enterprise clients, because the needs for each determine (perhaps drive) the consolidation we're seeing. Enterprise-class marketing management needs not only powerful marketing capabilities (digital analytics, attribution capabilities, personalization and segmenting features, testing, campaign management, social analytics, mobile messaging and ESPs, etc etc etc), but they need to syndicate data across ALL of those tools in real time, and pretty much seamlessly.

    The smaller point solutions can often do one or two of those things very, very well - but not more. It's increasingly infeasible (not to mention unprofitable) to try to build wide-ranging marketing platforms from scratch, which is what has driven M&A activity. So if you're a really, really excellent TMS or attribution provider, that's great - but large enterprises need those solutions offered as a service within a larger solutions environment that uses common formats, standards and architecture. Add to that the advantages of fewer vendors and integrations to deal with, and you see the value prop.

    For the SMB market, I think you're probably right on the money. If you actually don't NEED that many marketing solutions, then it probably makes sense to be a "cafeteria marketer" (picking and choosing here and there). But that does not scale well, either from a technical perspective nor a financial one.

    The "lock-in" I see is more a function of solution familiarity, not actual data lock-in. Moreover, I think you're wrong about the level of innovation happening in the large platform vendors. At least on our side, there's a ton of it happening. Obviously there are differences in what solution areas we focus on vs. the startups, but that's to be expected.

  2. Jay Calavas says:

    Brilliant article Martin, we are seeing this across the board. The fatigue associated with a single vendor source for many solutions has changed the market forever. Choice has inspired a new generation of digital marketer. Clouds will always dominate in their respective core competencies (Analytics, Email, CRM, etc.) but the days of land and expand are numbered. Customers both big and small demand their freedom back. Best of breed is the war cry of today's digital marketer!

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