Agencies And Marketing Clouds Are On A Collision Course

toddvanfleetData-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 Todd Van Fleet, managing partner at Van Fleet Capital Strategies.

The recent news that Adobe is acquiring video demand-side platform (DSP) TubeMogul may accelerate industry speculation that other marketing cloud vendors could soon pursue activation platforms.

While the Adobe/TubeMogul marriage is somewhat unique due to each organization’s specific focus on video-based technologies, a broader and more important implication is what the deal potentially says about the evolution of customer acquisition as a business process in the age of the connected consumer.

With commerce, media and entertainment increasingly available at our fingertips, paid media activation may be a natural extension of marketing cloud platform capabilities, putting them in more direct competition with agencies.

Sharing A Common Business Challenge

The lifeblood of any business is customer acquisition. Keeping the incremental cost of acquiring the next customer sustainably less than the customer’s lifetime value is critical to long-term business success. At a high level, both marketing technology companies and agencies are tasked with helping brands address this challenge.

Historically speaking, agencies drove top-of-funnel activity by designing, planning and executing branding campaigns across nonaddressable paid media channels. Marketing technology companies focused on bottom- and mid-funnel activities and aggregating relevant first- and third-party data assets to help internal sales and marketing teams increase conversion rates and reduce sales cycles. Their role in media activation was typically limited to direct marketing campaigns using search and email channels via self-serve software.

More simply, agencies sought to improve customer acquisition by optimizing resources external to the brand while marketing technologists focused on better use of internal resources. The connected consumer is forcing these traditional roles to merge.

Technology Enhances Accountability

The impact of the connected consumer was felt first by small and mid-size business (SMB) owners who lack the internal resources to undertake sophisticated digital marketing campaigns. Marketing dollars are precious in the SMB world, and a partner isn’t worth using if it isn’t measurably driving customer acquisition. Hard metrics, such as phone calls, appointments, bookings and purchases, dictate SMB marketing decisions. Yelp, Angie’s List, OpenTable and other platforms are flourishing as a result.

The connected consumer is similarly impacting the world of enterprise (brand) advertising. As consumers spend more time with digital devices, media channels become more addressable and digital commerce gains steam, there seems little need to distinguish between upper- and lower-funnel activities or brand and direct-response campaigns. The trend is toward an environment where any media format can be served to any screen, to audiences big and small, at any time.

A new era of accountability is coming to brand marketing now that the technology infrastructure is largely in place to enable targeted and automated advertising at scale. Heightened levels of scrutiny of the customer acquisition process require both agencies and marketing clouds to re-evaluate their existing value propositions.

Agencies are likely to see more pay-for-performance agreements similar to the one recently struck between McDonald’s and Omnicom, where the objective is making large pools of media dollars perform better. We should also expect to see agencies acquire more technology assets for several reasons. First, the process for purchasing paid media of all types will be increasingly automated. Second, data and its correct application are key determinants of ad campaign success. And third, agencies endeavor to make client relationships stickier, and the best way to achieve that is through proprietary technology.

Marketing clouds are already expanding the scope of their offerings by increasing investments in people-based marketing approaches using persistent IDs and the like. For this to be effective, it requires a view of consumer behavior well beyond a brand’s CRM file and owned media properties and into paid media environments. The industry has already seen the strategy to marry owned and paid digital media data sets play out with DSPs, such as MediaMath and Rocket Fuel, developing or acquiring data management platform capability. Marketing clouds push this further by including nondigital data sets as well.

It’s quite possible most marketing clouds may choose to shy away from engaging directly in media activation given the revenue models typically accompanying activation platforms – it’s a percentage of media instead of an SaaS fee – but this may not be practical. The best audience targeting effort can be undermined by subpar activation, including inadequate inventory access, poor bidding strategy or a suboptimal channel mix.

It may make more sense to own the entire customer acquisition process than make brands guess whether it’s the targeting methods or the activation effort causing success or failure. The complex mar tech landscape is begging for simplification. Brands may well prefer one throat to choke, so to speak, for their customer acquisition needs.

An Ongoing Threat Of Disintermediation

The connected consumer now has greater direct access to brands than at any time in the history of commerce. This is a trend that will likely continue.

Generally speaking, the natural evolution of markets is to support fewer intermediaries when transactions between buyers and sellers become more frictionless through technology disruption. The bottom line: Expect brand dollars to shift to vendors best able to direct consumers to their digital and physical doors.

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1 Comment

  1. Steven Hess

    The cloud is an abstract idea, it contains services like information processing, storage and distribution. An agency is a (somewhat) less abstract idea built around the processing of information, storage and delivery (production and media) to brands and audiences. There is nothing to say that agencies won’t follow the smart money and evolve into a networked, on demand proposition. As you say markets are a great leveller.