Will The Merger Of DDS And MediaBank Into Mediaocean Benefit Media Buying?

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reactionThe recent merger of Donovan Data Systems and MediaBank into Mediaocean promises to usher in a long-awaited era of simplified, seamless workflow processes into media buying methods that have remained pretty much the same for decades.

The deal, estimated at $1.5 billion, was struck last fall but took about six months for a regulatory review by the U.S. Department of Justice. The primary focus of the DOJ's inquiry was on pricing and whether the business of managing data for media buys would remain competitive. MediaBank, the relative upstart at five-years-old and Donovan Data Systems, which was born in 1967, represent a long term effort to create a singular platform that would eliminate the discrepancies that come with manual orders for media buys. It sounds simple, but if it was, the industry would have solved that problem -- one that wastes tens of thousands of dollars (at a minimum) every year.

Now that the dust has started to settle on the deal we asked a number of industry observers to weigh in on the deal. A number of ad agency executives declined to speak on the record, either because they have existing deals with Donovan and expressed an existing bias, or because they've already made their bets with Mediaocean's rivals, Harris Corp. and Strata. Given that the ink is barely dry on the merger, it's impossible to offer a long range forecast on what it will ultimately mean. But we can at least offer a quick view on how it appears as it begins its course.

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Michael Kassan, Chairman and CEO, MediaLink LLC
At one point in time, when I was still running Western and then Initiative Media, we were Donovan’s largest single client. So I have a history here. I think Michael Donovan built an extraordinary company and one that served the industry very, very well for many years and continues to.

I think MediaBank were the challengers, and as such, had to be more innovative in terms of the product offerings and pricing. Donovan effectively had a monopoly that was challenged a few times over the years, but MediaBank was the strongest one to come along as a llegitimate competitor.

Why did it take so long to find that strong competitor?

The industry tried back when the holding companies formed Mediaport. This was a venture run by Mike Lotito and funded by WPP, IPG and Omnicom. That was as close as the industry got.

Then, a few years ago, MediaBank, to its credit, launched with the focus of offering an alternative and Starcom was the first domino to fall and signed on with them, prompting a lawsuit. It was a point in time when you needed another player to join, and the next one was IPG.

The complacency in the industry and unwillingness to change finally caught up with the desire on the part of agencies to seriously address the problem of managing the inefficiency of media buying.

Do I think this merger is good for the industry? Yes. It will drive change in how the industry addresses the process of media buying. And it can best do that by supporting one bigger player as opposed to two. The industry realized you don’t need five players in this game. You really need one good system.

The agencies and sellers are very comfortable with the idea of an industry standard -- as long as they are not gouged on pricing. I don’t know what sort of commitments were made to the Justice Department around pricing, but I guarantee you, those issues were raised. And I’m certain that the DOJ will do its part to ensure there is a fair, competitive landscape. And I don’t mean competition in terms of “systems” -- the DOJ doesn’t have the expertise to know how to do that. Rather, they should ensure that there is competition in terms of pricing. At least that’s my hope.

As long as there’s transparency on Mediaocean’s pricing, I think this new entity will serve the industry’s needs very well.

Nick Troiano, president, Black Arrow
I think Mediaocean will make it easier to complete media buys with much less friction. And it will solve a lot of the inefficiencies associated with buying TV. And one of the great things about buying TV is that it is easy to buy. People talk about it as the most efficient way to buy advertising and reach audiences at scale. Historically, Donovan has been at the center of that universe. They simplified one of the most complex workflows to make that process easier to manage.

Mediaocean incorporates that infrastructure and augments it with digital workflows. That will further standardize the process of moving dollars to new platforms, especially in the area of digital and TV.

Ultimately, this was necessary for the industry. As audiences become more fragmented, if there were not a more simplified way of reaching consumers, you would never see scale. The Mediaocean integration of Donovan and MediaBank represents an opportunity for advanced TV platforms to achieve the kind of scale that both sides of the advertising equation have wanted to see for some time. It won’t happen immediately, but as Black Arrow aims to bring TV to the internet -- as opposed to bringing the internet to the TV -- this is one important thing that will help clear that path.

Seth Haberman, CEO Visible World
You’ve had a lot of competition in this space for a number of years and I actually think a lot of people might bemoan that fact. Even though the merger reduces the competition, I think it’s going to be much more positive than people believe. The new efficiency and functionality will be overwhelmingly more valuable than the cost of the reduction of competition. Visible World is an indirect participant to the buying process, so we’re unaffected. But we’re not disinterested and since there’s so much pressure on these guys to improve the system, I wouldn’t worry that there’s going to be an adverse effect on pricing or the level of innovation that comes out of Mediaocean.
 
It’s like the unification of the New York subway system, a big project that eventually allowed the entire city to grow at a phenomenal pace. Because of the demand to provide greater efficiencies, if you create a better system—one that’s faster, smarter and can be done with less friction and more automation, even if it’s more expensive—the benefits will outweigh the negatives. In the end, what’s going to be remembered is the greater reach and connectivity that this transaction is going to allow.

By David Kaplan

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