Cadreon sees itself as being in a better position to execute on the concept of audiences instead of inventory, and to drive operational efficiency, marketing effectiveness and business results.
We can also provide an intermediate layer for making better decisions coming out of what the exchanges can offer. Cadreon makes use of the exchange platforms, but there really needs to be that layer of intelligence in the middle to execute smartly on top of what those technologies can provide.
What are your thoughts about the idea of arbitrage and that agencies are getting involved in it?
That's a big one, and it's something that we very much want to take the high road on. It's also another reason why many of the agency platforms have come about: there's quite a bit of margin and arbitrage that occurs in the ad network business today, which means there's inherent waste within the system. Networks have provided a great technology service in being able to aggregate lots of inventory into one place and execute on top of that, but at a 40-45-50% margin, that model can't sustain itself much longer. We see no reason for that middleman to exist if we can do the same thing with our own technology platform, and then reinvest that excess margin back into a campaign.
Cadreon will not pre-buy inventory and allocate it out, nor will we mark up the cost of inventory. There are services we can layer on top of that purchase execution which provide greater value and benefit to the client, such as campaign strategy as it relates to the broader media campaign, optimization strategy, tagging strategy and implementation, the technology offering, the analytics, the back office. There are many pieces from a service standpoint that agencies can provide - and there's money to be made - but it shouldn't be on arbitrage.
Certain agencies will be better at data management and data aggregation, others at analytics, others at the concept of buy execution or buy management workflow. It's about finding platforms that fill the gaps of what a particular group may not be as strong at. From our perspective, there's going to be some build, some bolt and some buy, and we really wanted to create a flexible technology ecosystem that can offer the best of breed solution in each segment of the business, while at the same time providing us the ability to grow and evolve as new technologies become available.
When do you see the buying platform strategy "hitting" for clients? When does this become something clients incorporate as an important part of their marketing strategy?
Today! There is a lot of pent-up demand in the marketplace, and we have been aggressively pushing towards it for a while now. We have some clients that really get it. A large technology client has run over 60 campaigns through our system, in a beta-state for the better part of year and a half, and in a fully live state for the past nine months.
Sophisticated digital marketers will understand the value and benefit sooner - the ones that understand the power of things like tagging and tracking, have very sophisticated websites and website analytics, or use data for targeting and impression valuation - they'll be the ones that will adopt it first. It may take a bit longer for others that may not be as sophisticated with the digital space, but the proposition is absolutely compelling to any marketer.
As these platforms grow beyond display and start incorporating multiple types of inventory - we're working to incorporate mobile, digital out-of-home, digital television right now - as the offerings expand, the client base will widen as well.
Make the case for the brand marketer using agency buying platforms - and I'm talking about the brand awareness marketers.
Right. People inherently look at a platform like this and say "performance marketing" or "direct marketing." While that's very true and Cadreon started in a performance marketing landscape, there are absolutely benefits for marketers who are looking for broad reach and brand awareness. There are certain things you can do from a business intelligence standpoint in trying to decide what creatives and what types of buys are going to respond best. So you can do things like that in a pre-testing environment prior to launching a large campaign and ultimately save money on things like production costs.
For example, you don't have to build out thousands of versions of a display ad if you're doing creative testing or you're turning on dynamic creative, which is harder for today's typical digital teams to do. There are also certain things you can measure within buys, such as embedding in-banner or in-buy surveys to assess brand-lift, which is very easy to do in a dynamic ad serving environment. Then there are the targeting capabilities - when you're making a buy and blasting a message out to a lot of people, there are so many who won't want to see a particular message because it's not relevant to them. When you're doing a home page takeover for example - that is fantastic for reach, but how much of that is ultimately wasted impressions?
We actually did a comparison on one campaign of the inventory that ran through Cadreon versus a sample-set of the inventory that was bought on the broader digital buy, and by our estimates 36% of their buy was "wasted": 11% of the impressions came from outside of the U.S. and 25% of the inventory was off target. A message like that will absolutely resonate with a brand marketer - using a platform like Cadreon can be more efficient for them.
What strategies should agencies be putting into place to stay relevant in the future?
I would say this answer can be applied to both agencies and ad networks, and ultimately it's an expansion and refinement of services offered.
In the agency realm, the model used to be about creating a big media plan - that was prepared over the course of several months - and then let the plan run. Those days are basically over, as sophisticated marketers are asking their agencies to focus on creating smaller base plans, then changing them significantly over time with continuous evolution and optimization.
Our clients are also demanding new models and new services, so we are looking at expanding our offering to include new capabilities for our clients that go well beyond media planning and buying to represent full portfolio management, as well as true marketing and strategic services.
Offering technology-based services similar to those ad networks have today also makes sense. A lot of ad networks were based on technology offerings originally, and as their core focus on inventory shifts or gets reduced, there will be opportunities in the technology and data spaces.
What is Cadreon? Is it being pushed out to all of your partner agencies?
The initial plans is to utilize the two large Mediabrands agencies as pipelines and offer it to the clients of those agencies first. We're working very closely with both UM (Universal McCann) and Initiative - the digital leadership of both agencies were involved in the initial business planning for Cadreon - to speak with their clients about the new offering in a slow, steady approach. We'll look at rolling out beyond those agencies at some point, but that is not our focus right now.
What does Cadreon mean?
There is a Latin or French word "cadre" which means group of people. Since the sell is audiences instead of inventory, it was a natural fit.
How do you differentiate between yourselves and other agency buying platforms?
There are two big differentiators right now: 1) we're not pre-buying inventory and allocating it out. There are some agencies that are approaching that model and buying in aggregate to get really cheap rates, then allocating it out to participants of their platform. 2) we're not operating in arbitrage, either, as some platforms are.
We're also spending a large amount of time tweaking and fixing the algorithm so that the inherent goal is to maximize campaign performance. In a lot of platforms today, the goal is to maximize margin for the publisher set - we're investing that margin back into the campaign, so that campaigns ultimately perform even better. We want our algorithms to be as flexible as possible - offering infinite variability - with unique instances for each client.
Can agencies effectively leverage a client's historical campaign data through buying platforms?
Yes, definitely. There's always going to be value in what's worked and what hasn't - certainly two years ago is going to be less relevant than two weeks ago - but there's a certain training of the algorithm which makes it important to incorporate a client's or campaign's historical data. For example, we like to tag a client's site early - before a campaign even goes "live," so we can get a sense of what types of people are visiting the site and start to understand their behaviors. Over time performance gets better, so why not leverage the inherent learnings from data on what has worked and what hasn't? It's also very important to create segmented silos of data for each client, so that the algorithm can stay pure and a client can be ensured only their data will be used for their benefit.
What's your view on impression-level, real-time bidding? Will this be an opportunity?
Absolutely - we are making decisions on an impression-by-impression basis today. None of the big real-time bidding platforms are 100%, truly real-time today, although they are all going there and we'll be very happy once they do get there, provided we have the right decisioning engine to take real advantage of them. The name of the game will be the ability to evaluate an impression as it's being served and decide what you're willing to pay for it - then do the same with the next impression, and the next, etc. It's the way we all should be looking to go, and I'm personally looking forward to when this type of model gets to inventory sources like TV at scale. We will get there - it's just a matter of time.
Let's seque into attribution - How are you solving cross-platform attribution? Is it solve-able?
Yes, it's solve-able. It's certainly been a big challenge and something we've talked about a lot as an industry, but it doesn't make logical sense for the last click to get credit for everything - you know that people have seen other messages before. It's just a matter of coming up with the right model to share that value out. The Atlas Institute has definitely made a great deal of headway in this space, and this is an industry issue - something that we should all be collectively looking to solve, and as an opportunity to collaborate together. In some way, it's a matter of getting all the right data in one place so that you can even have the ability to make an accurate evaluation from a stream of data such as "they saw this TV ad, then they heard this radio ad, then they saw this banner ad..." while layering in answers to questions as "How long ago did they see it? How far back should we look?" Etc.
Where is the advertising industry with addressable media in digital today?
We are doing it today with display, and to a certain extent with online video, mobile and digital out of home, too. I think that's where it ends when you're talking about scalable platforms, but we'll get there with things like digital radio and TV. It's just a matter of the infrastructure being in place to be able to deliver truly addressable media at scale.
If you were a publisher today, what sort of strategies would you be putting in place to make sure you?re successful and profitable down the road?
Better information around who my audiences are - who the people are that are visiting my site. It's a great thing when you have real, rich information around your user base - that will be of value to advertisers and agencies, and should help provide a better experience for visitors.
I also don't believe that CPMs will inherently "fall" as a result of this type of change in direction. There may be a bit of a net loss at the beginning as these agency platforms are sorting themselves out. But, over time you're going to see one brand that will be willing to pay significantly more for a particular audience or impression than another, and everyone will end up gaining from that model. I think the industry as a whole should eventually see a net gain, we are just in a bit of a pricing dip right now as publishers are certainly feeling the effects of ever-increasing fragmentation.
What is going to happen to the creative agency? What can digital media do for the creative side that they're not doing today?
There are untapped resources in the creative space today, and they are our publishers and media vendors. They have incredible creative ideas, great access to resources, top-notch producers and fantastic content. If you can bring in those partners early in the process and give them a sense of what your goals are, they can come back with really great ideas in the creative space, and those types of activities can typically be thrown on top of a media plan.
Dynamic creative is also something that is becoming more and more interesting to clients and agencies, particularly as the demand to execute on the depth and breadth of creative duties increases. We are working closely with our creative partners to showcase the capabilities and deliver on the true benefits and promise of dynamic creative.
There are new buying platforms popping up everyday such as MediaMath, Turn and Invite Media. Are you using these types of platforms? How do you evaluate them?
Yes, we are using those types of platforms today. We made a decision to centralize our offering around a handful of core providers, and we continue to test and evaluate several others - particularly in other media types such as mobile, digital out-of-home, video networks, etc. We as a company want to be in a constant state of evolution and growth, trying out new things so that we can determine the best new capabilities to integrate into our core platforms. We have a belief in maintaining that flexibility, while focusing on generating predictability in results and outperformance for our clients.
Can you identify certain data points that use for evaluating buying platforms? Is it the ROI, service??
For us, it's about how does the campaign perform - which speaks to three things. One is the decisioning engine itself and the ability to make the valuation of the impression and decision on the ad call - again, at scale. The second is the use of data in ultimately making that decision. Finally, the quality of the algorithm and the inherent focus of that algorithm on campaign performance.
What sort of changes do you expect to see in digital in the next 12 months?
If I were to speculate, I would say we will continue to be a large shift of ad dollars to the digital space, but the actual value of that shift will depend greatly on what you consider to be "digital." Once TV becomes a real, scalable player in digital media, that will be a true game-changer.
We also see consolidation continuing in the ad network ecosystem. As the agency holding companies venture farther into that space, they will be managing the demand for those services to a certain extent - and if we are able to provide a more robust offering at an inherently better value, our clients are going to feel more comfortable working with us as partners. Clients will also be more at ease providing us with sensitive data that can enable better targeting and optimization decisions, provided we are taking all the necessary measures to ensure that each client's data stays private, separate and secure, which we will continue to work very hard on doing.
In regards to the big, broad reach ad networks, I think their business model will evolve further, and the truly good ones will grow and adapt their businesses into new spaces. The networks we like to work with will provide us with digital acquisition of inventory in an elegant way - with greater control over that inventory; access to the audiences we want; and work with us as collaborative partners to help drive results. The vertical ad networks will also remain - providing deep niche audiences - and ad networks of all sizes will continue to provide a great service and offering for middle and smaller advertisers.
It's certainly an interesting time to be a part of, and we are excited to be at the forefront of helping solve some of these challenges for our clients, and for the industry.