Can you share the progress being made with the integration into Dentsu? Any unforeseen synergies being unlocked at this early stage?
We are in the early stages of our deal so many of the opportunities are just unfolding. Both Dentsu and Innovation Interactive’s core business philosophies are very similar in that we put the client at the center and develop services and solutions around their needs. So some of the immediate opportunities we see involve offering expanded services to Dentsu’s customers across the digital spectrum ranging from search/display management and attribution technology, audience network offerings and agency solutions such as paid search management and social media strategy.
Please discuss Innovation Interactive’s DSP strategy.
First, we don’t believe that DSPs will save the world. DSPs will definitively give agencies better control, transparency and data collection capabilities where they didn’t have it before. But they will not replace 100% of display inventory. There will always be room for network buys with differentiated offerings whether that is unique data used for targeting, vertical players or added capabilities such as advanced analytics as an offering on top of a media buy.
We’ve been running a DSP in effect for several years at Innovation Interactive. We have all of the components — from a search optimization and attribution technology (DSSP-Demand Side Search Platform), to the necessary hooks into the exchanges and direct inventory sources, to the data warehousing and application of that data to optimize media spend and performance. With millions of clicks from $550 million in annual spend, $8 billion in transactions and on-site behavioral information on millions of users (used only with permission from our clients), our data is farther down the funnel and richer than most companies in the space. We also have a sizable in-house media buying team that’s spent years buying on the exchanges and on an auction model. We’re far along in our efforts in this area, which we began years ago because we saw efficient auction-based media capabilities as a core and increasingly more important benefit to our clients. (use of the data is only done with permission from our clients)
It is definitely a U.S based phenomenon right now. We have offices in Japan (#2 market), UK (the #3 market) and Brussels (Headquarters for our European operations). We don’t see exchanges flourishing the way they are in the U.S yet. We believe they will soon, so it’s critical that agencies build their DSP offerings in a flexible way for international capabilities.
Do you see pricing models changing? Will cost per engagement become a standard?
On the performance display side, you’re going to continue to see CPM and CPA/rev share pricing. Just about everyone agrees that CPC pricing is the wrong model for graphical ad units for branding. For video and rich media advertising, you’ll see a combination of CPM and CPE. While CPE is appealing because you are paying for performance, the effective CPMs can often be higher than marketers can bear. In those cases, they’d prefer to pay on a CPM and optimize on a CPE.
In general, how do you see the media agency model evolving over the next 2-3 years?
Depends on the client objective. For brand work, I see a movement towards a fixed fee model based on a scope of work, although commission based models will still be prevalent. For direct response objectives, we see a lot of momentum towards pure or hybrid based agency compensation models where a material portion of the agency’s compensation is based on exceeding definable ROI objectives. This model has both more risk and more reward for the agency as the floor compensation is much lower but the agency is able to participate in upside value they produce. Value based compensation aligns compensation between agencies, publishers and marketers.
Do you have a data strategy for Innovation Interactive? If so, can you share the broad strokes of it?
We have a rich set of proprietary data which we are warehousing and applying to the optimization of media. Our search marketing optimization and media attribution technology SearchIgnite measures both PPC and SEO click and conversion data, while our audience targeting platform Netmining gathers a wide variety of site analytics and display click stream and conversion data. We also gather a variety of social and earned media data for clients utilizing our digital and social planning capabilities. With all of this data, we’re focused on helping our clients optimize and properly attribute performance to better understand how various media channels are working together.
So we are better positioned than most companies due to the fact that our data is farther down the funnel and thus more relevant and we own the proprietary technology that gathers it. We believe that leads to better transparency and results for our clients. (use of the data is only done with permission from our clients)
Should agencies build and/or buy technology? Or should they just “rent”? What’s Innovation Interactive’s view?
This is simple. It depends on their capabilities first and then their use and acceptance of technology. We believe it is important to own the technology but that plays well with our client’s needs. There are other companies that focus on other elements of a client’s needs and just don’t need to own the technology to be successful. An example of this is an agency that does mainly creative with limited full-service clients. For a company like this, it might be better for their business model and their clients to rent rather than own technology. It really is a DNA thing.