In Optimization, Service Is King

adamheimlichNEW0613“Data 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 Adam Heimlich, a digital consultant currently under contract with Accordant Media.

If you own an ad-tech company, you probably envision the service layer of your offering as a very light, efficient consulting operation. The last thing you want to do is start an agency.

This line of thinking, shared by many the industry, looks forward to the day when advertisers have their house in order with regard to data and strategy. At that point, the thinking goes, there will be no need for the tool provider to do much that can’t be automated. It’s necessary to provide human service now, in the interim, to teach advertisers how to market as efficiently as new technology makes possible. The goal is to show advertisers how to use the platform to the full extent of its capabilities, and then move on.

For an ad-tech company aiming to be acquired by a software giant, there isn’t really a viable alternative to this perspective. Silicon Valley is open about its deep bias against service, which, to the extent it’s required, exerts a drag effect on growth and profitability. After all, humans are costly. And engineers’ distaste for the irrational side of business also helps drive this vision of keeping the consulting side light on the way to a bright, algo-powered future.

But this vision, which is supported by billions of dollars in capital and is shaping the service wing of the industry today, obviously and utterly conflicts with reality. Only a stranger to optimization could take this prevailing view as gospel. And the gap between the concept and the likely reality is likely to have big consequences for those who work in digital-ad service, for whom business transformation — dependent on business communications advancing as much as technology has already made possible — is their job.

Optimization In Real Life

Our best hint about what data-driven marketing will look like in the near future can be gathered from what it looks like today. The optimization-services sector of the industry is more than 10 years old, and although tools have reduced the grunt work, they have not disrupted the pattern of more data driving a need for more human decisions.

Data tends to clarify connections, which in turn drives a need for closer collaboration among functional experts. An illustrative example is paid search marketing, where tools are mature and many advertisers are deeply familiar, yet demand for full-time-search talent is only increasing.

More specifically, digital agencies with interlocking technology relationships, such as 360i and IgnitionOne, are thriving. Equivalent technologies with lousy service, exemplified by holding company trading desks, are not. They’ve succeeded just enough to stunt the growth of a competing service model, which might have otherwise blossomed given DSPs’ reticence to build agency capabilities. And perhaps that was the point.

Engineers’ bias against service benefits antiquated agencies as long as they can maintain status-quo service on new tech. But status-quo service is like junk food for our young industry.

For a parable about the fate of ad tech with and without great optimization service, consider the history of the Atlas ad server, which went from pioneer status with service by Avenue A to quasi-independent standard under the hot property Aquantive, followed by stagnation under acquirer Microsoft and now an uncertain future in Facebook’s hands. A relatively short road to riches for the original owners left its customers on a long, winding path in the shadow of Google’s dominance. While agencies feed on the crumbs of anti-agency bias, the rest of us should worry about One Platform to Rule Them All.

Leaving Dollars On The Table

The VC narrative has service dwindling as in-house capabilities improve, but media buying enabled by functional knowledge of technology and an integrated marketing organization is not going to spontaneously self-generate where it never existed. It’s too different. Even companies that aim for real-time excellence are held back by legacy structures, rigid planning processes, inexperience with technology, a shallow talent pool, and not-unreasonable caution in the face of radical change. So who’s going to help them?

A good start to answering that question is “someone they trust,” which rules out the ninja consulting operation of a venture-backed ad-tech provider. With no disruptive force in the market for media services, even DSPs and independent trading desks with direct-service capabilities are mostly cut off from progress toward the assumed future state.

And I would argue that what passes for “full service” nowadays falls short of what’s needed, especially for large advertisers. The work is anything but “light.” Simply to sustain high-ROI results, a provider must engage in three levels of engagement: tech consulting to manage tagging, data, rich creative, and landing page testing; management consulting to help marketing and tech functions work together (which naturally expands into strategy consulting when things go well); and operational support to work through inevitable changes in markets, tools, campaigns, and the media landscape.

Who’s best-equipped to do this? Not traditional agencies and established internal teams, which are too invested in the low-tech, siloed way of doing things. While operational support is a version of media buying, the strategic imperatives of real-time decision making render it ineffective — over the long term — without tech and management consulting. That makes great digital work beyond the capability of most traditional agencies.

Management consulting firms, which lack experience executing digital comms, also aren’t the answer. Those firms, though, which have helped craft many companies’ strategies and structures, do have a role to play toward adaption. Publishers aren’t right for this, either. Even though big publishers, especially Google, might be expected to help with emergent strategy, they instead train their sales teams to deliver within a consultant’s rigid framework. This strategy may help close deals, but it strikes sour notes when buying more Google inventory — for example — isn’t really the best answer for clients, and is useless for tech support beyond the one product suite.

Meanwhile, software providers — which might seem ideal because they have consulting teams, don’t sell inventory, and understand execution — prefer to let agencies pitch and win contracts to provide service for their products.

All this is why, in my view, the service gap will prevent ad tech from fulfilling its potential, and bad service providers will benefit. Much as Web-development agencies provide service on IBM platforms, while IBM — despite its service offering — is happy to just take the licensing fees, agencies with strong traditional media-buying relationships will successfully exploit the service opportunity that ad tech is leaving on the table. They will collect another decade’s worth of commissions for running digital out of the basements of shops built for traditional media.

It’s unfortunate — but perhaps unavoidable, given the collision of technology and communications — that balance will be slow in coming. Ours is not the first industry to be shaped, in part, by common misapprehensions in the finance community.

Then again, where there’s a disconnect, there’s opportunity. I can think of one other reason, besides a burning desire to see progress, to execute digital communications to the full extent technology makes possible: The companies that do it first will beat their competitors and make money. It won’t be software-license money, sure, but marketers aren’t supposed to be making that anyway.

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1 Comment

  1. Thanks Adam. This is the best article I’ve read in a while. Funnily enough, I just commented on a similar article on ExchangeWire: “Without Service…”. This thinking is obviously gaining momentum.

    It’s a really exciting time to build a new agency to join up products and services across a range of disciplines from consulting stage through to execution. It’s less about media-buying power these days than it used to be. Digital is a great leveller. It now seems more about gathering together high calibre talent and great technologies across silos like media /PR/CRM/creative/social/advertising/data/analytics for a powerful, operations room marketing approach for advertisers.

    To build this agency of the future we need new charging structures and we need clients who are willing to try a different way of procuring services and technologies. This may make small to mid-size ‘new’ companies the perfect fit for this new agency until it is able to scale to take on global clients.