“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 Chris O’Hara, Chief Revenue Officer at NextMark.
I once heard Terence Kawaja remark that “complexity is the agency’s best friend.” It’s hard to argue with that. Early digital agencies were necessary because tasks like running email campaigns, building websites and buying banner ads were complicated. You needed nerdy guys who knew how to write HTML and understood what Atlas did. Companies like Operative grew admirable services businesses that took advantage of how much trafficking banner ads really sucked and how large publishers couldn’t be bothered to build those capabilities internally. The early days were great times for digital agencies. They were solving real problems.
Fast forward 13 years. Digital agencies are still thriving, mostly by unpacking other types of complexities. “Social media experts” were created to consult marketers on the new social marketing channel; “trading desks” were launched to leverage the explosion of incomprehensible RTB systems; terms like “paid, owned and earned” were coined to complexify digital options. It’s hard being a marketer. It’s so much easier to hand the digital keys over to an agency and have that agency figure it all out.
Some of that complexity is dying, though.
This has created the OpenTable effect. Remember when you had to call eight different restaurants to get a Valentine’s Day reservation? What a pain in the ass. I’d always get to it late and usually would end up spending hours getting rejected before finally landing a table somewhere. Today, I log into OpenTable, type in “11743” and see all the available 8:30 p.m. reservations for two in Huntington, New York. A few clicks and I’m locked in. Would I ever go back to doing it the old way? Sure, why not? Call my beeper if you need me. Please “911” me if it’s important.
With similar sorts of innovation making the complex simple in digital advertising, and all of these platforms democratizing access to advertising inventory, analytics and reporting, why are digital agencies still making a living off of the lowly banner ad? Is there a good business left in planning and buying digital display media?
Programmatic RTB is coming on strong; it’s already how almost a quarter of banner inventory is purchased. That’s a good thing. Platforms like Rubicon Project and AppNexus are making it easy to build great businesses on top of their complicated infrastructure. Marketers can hire an agency to trade for them, or maybe just build their own little team of smart people who can leverage technology. That seems to be happening more and more, making managing RTB either a specialist’s game or a non-option for independent agencies.
Meanwhile, really complicated, multichannel, tent-pole campaigns and sponsorships can never be automated. They represent about 5% of overall display spend, and that’s really where a digital agency’s firepower can be leveraged – at the intersection of creativity and technology. That sector of digital involves a lot of what’s being called “native” today. Working with content owners and marketers to build great, branded experiences across the Web is where the smartest agencies should be right now.
How about the rest of the money spent on digital display – the 70% of money that goes through the transactional RFP space? Many agencies are still making their money buying reserved media, trafficking ad tags and doing the dreaded billing and reconciliation. Marketers who pay on a cost-plus basis are starting to wonder whether paying expensive agency personnel to create and compare spreadsheets all day long is a good use of their budget. Agencies that don’t get paid for such work are seeing their margins shrink considerably as they spend for low-value tasks like ad operations. Clients don’t care how long it took you to get the click tag working on their 728×90. Just sayin’.
This “programmatic direct” future has been coming for a long time, but it is still being met with resistance by agencies, some of whom continue to benefit from complexity – and others who are (rightfully) scared of change and what it means for their business. Looking at legacy workflow systems makes you wonder why anyone would be hesitant to leave them, but the cost of switching to new systems is high, in terms of emotion and workplace disruption, and previous attempts to “simplify” agencies’ lives didn’t really work out that way.
So how can digital agencies embrace the new world of programmatic direct tools, and turn their energy to strategy and client care, rather than remaining an “expert” in processes that will eventually die?
One step is learning to recognize if you have a “wizard” on staff. The Wizard is someone who has truly embraced complexity within the agency. I’m talking about the “systems guy” (or gal) who knows how to pull complicated reports out of legacy workflow platforms. For purposes of this article, I’ll call this person Fred. Fred probably knows how to write the occasional SQL query and knows where all the bodies (spreadsheets) are buried.
Here’s what happens: A salesperson calls to show the CEO or VP of Media what Web-based programmatic direct buying looks like. The demo is a portal to a new world where the formerly complex is suddenly simple. It’s the future of digital-media buying: a directory-driven, centralized, web-based method of planning, buying and serving inventory – just like search! C-level agency executives and media people want it. They want their employees focused on strategy and analytics, not ad trafficking. But first they invariably tell the salesperson to go see the Wizard: “Fred is our ‘systems guy.’ He’ll know whether this can work for us from a technical standpoint.”
That’s when innovation dies. Fred, the Wizard of legacy systems, will likely shut down any innovation that comes his way. Complexity is Fred’s best friend. When you’re the only guy who can pull a SQL query from your data warehouse, or reconcile numbers between SAP and your agency’s order management system, then you’re a god in your agency – and you don’t want a downgrade.
And, after all, complexity isn’t a bad thing: It’s the reason great digital agencies were built and continue to thrive. But tomorrow’s big challenges will come from complexities in cross-channel delivery and attribution – and keeping up with new platforms that deliver amazing native marketing opportunities – not from being the next to reconcile ad-delivery numbers from servers.
So when innovation comes knocking on your door, here’s how to help your agency make the most of it: Don’t let the Wizard answer.