Death Of The Impression/Rise Of The Data Economy
Recently there has been buzz around the rise of advertising exchanges, which bring media inventory into a liquid, dynamic environment driven by automation and technology. The exchanges come in many flavors, but they all move in the direction of allowing wide swaths of media impressions to be bought in a computerized manner. Google, Microsoft, and Yahoo are all in the game, with ever-increasing amounts of inventory becoming available in this environment.
In one sense this movement is a natural extension of the race to build the bigger and better network that can offer the one-stop shop to agencies and clients. Aggregate enough impressions, guarantee reach, sprinkle in some targeting solutions and you have a winner that can appeal to a wide range of clients. It is a simple enough model and an easy extension of the traditional media buy. But beneath the surface of this move is a far greater shift that will shake up and unsettle marketing as we know it.
It is about data -- data in ways we have never before fathomed. The future of advertising is not about social, not about viral videos, not about mobile, not about any new medium or any new ad unit -- but about data. Those who know what to do with this will be the new kingmakers, the new rulers of Madison Avenue -- or the creators of a new Avenue of media.
Why is this so? Because the impression by itself is becoming worthless.
In the past media was a relatively constrained commodity with a finite amount of time or attention that could be rented. There were only so many publications, so many channels, so many avenues to reach the audience you coveted.
This is no longer true. We have reached terminal velocity, the exponential, the moment when it is clear that the number of media vehicles and opportunities has far exceeded the ability for any marketer to manage without the use of technology. Welcome to the beginning of a seemingly infinite media world.
Some perspective: there are now over a trillion known Web pages, more than 500,000 Facebook apps, 140,000 iPhone apps, billions of videos on Youtube -- and more have been created since you started to read this sentence. The depth and breadth of content is mind-boggling, and we have only just begun. All trends point to an accelerated world of content, as ever-larger percentages of the global population come online armed with easy and powerful tools for capturing, creating, spreading, and consuming digital assets.
The standard way to deal with this phenomenon has been to work with networks that can aggregate this inventory into manageable bundles. However, this has its disadvantages. The fundamental problem is outsourcing the core understanding of what works for the business. The strategies, audience data, and all of the other factors that make a media buy successful are hidden to the marketer. Want to buy on a new network? It's time to start over again.
This is not the only problem. Buying from multiple networks? Chances are you are bidding against yourself because many of the networks are vying for the same inventory sources behind the scenes. Looking to find your customers via remarketing? Add yet another tag to the site and give another vendor your valuable customer data.
It gets worse. Most of the standard methodologies for buying an audience do not translate to this new world. When there were only a few channels it was pretty easy to get a good sense of the media with which a certain demographic resonated. When there are infinite channels, this approach doesn't scale. The person in the cube next to you might be an exact match on every normal demographic point and yet have a radically different media consumption pattern.
In this new world, the successful brands will be the ones that speak directly to you. These brands will be able to identify not that you are a likely traveler -- but that you are traveling to Atlanta next week. They will be able to tell not that you are likely to play games, but that you are a hardcore street fighter player with your own custom joystick. The brands that get you are the ones you will reward with your time, your attention, and your wallet.
The critical component that makes this new world work is data -- not simply general research data, but data about you. This goes far beyond just behavioral targeting, to your preferences, your interests, your actions -- all of the signals you send as you move through the grand stage of life. The revelation is that this new world is no longer the far-off land on the horizon -- we've hit the beach.
Right now the new world looks something like this: a global Wall Street of ads in which media trading firms will bid for your attention at every part of your life -- when you are at a computer, using your portable device, in front of a digital billboard, listening to your personal radio station, chatting with your social network, flying for business, playing your favorite game, and numerous other modes of interaction we could only dream before. A world where we can connect to the Net whenever, wherever, and however we want is a world that presents an infinite variety of means for an advertiser to engage and interact with us.
The first preview of how this looks can be found in Google. For not being a fan of advertising, Google has certainly done a good job at it. What makes Google different is that the ads are content themselves. The better targeted the ad is to the user's interest, the more often the user will click -- and the more money Google will make. Its entire ad system is built to encourage advertisers to tailor their offer as specifically as possible to what users are searching for. It may not be a perfect system, but it works.
Google also hints at what the future of publishing might look like. While Google is a search engine, it is also a publisher: one whose content is search engine results. In that sense, Google might be the most highly monetized publisher on the planet.
The lesson for publishers is that the more you know about your users, the better the experience you can provide for them -- both in content and ads. Already moves are being made in this direction from companies that aim to open up premium inventory on the exchanges with a range of targeting options and controls.
An open marketplace based on data will reward the best publishers for the attention and trust they have gained from quality users and enable advertisers to quickly and fairly price this attention -- and customize ads to fit. Publishers that wall themselves off will eventually find themselves irrelevant, as marketers buy their audience without them.
When we turn to the current aggregators of publishers -- the networks -- it is clear that disruption lies ahead. In one sense networks have been the first to use the impression and data exchanges to extend their reach and targeting capabilities. Many agencies and advertisers have been playing in this new economy without realizing what was happening in the background to make their media buy successful. Increasingly, however, marketers will access this inventory and data directly and cut out the high margins that the networks have enjoyed.
This shift will splinter the network world into a few different factions. Some networks will become more like agencies and partners for brands and use their optimization and campaign skills to grow a client's business. Vertical and specialist networks that are site-specific will still exist, along with networks for emerging media that has not yet been commoditized by the exchanges.
The losers in this new economy are the networks that have only existed for reach without a high degree of additional value and insight. When marketers seek ever-higher returns for their dollars, it will be difficult to justify the extensive arbitrage that has played out in the first version of the ad economy.
Just as networks will have to look more like agencies to survive, agencies will increasingly have to look more like networks through the use of custom technology, proprietary trading strategies, and a deeper understanding of how to leverage vast pools of liquid inventory against massive data sets. Instead of media buyers, there will be media traders whose jobs look something like a blend between a Wall Street number jockey and an Army field general. Premium negotiated placements and custom deals will always be part of a large media buy -- but the days in which most deals are done over drinks and a handshake will look like the Wall Street paper-slip days of yore.
There is the question of creative and the role of the message. Core brand positioning has an intrinsic value, but sophisticated marketers are already learning that it is not about one message, but the right message at the right time to the right person. The more data and insight marketers can understand, the greater the ability to customize the ad for that user at that moment -- yielding engaging experiences and high ROI.
This trend can already be seen in the e-commerce space, with giants like Amazon that have pioneered smart recommendation technology and ads that are targeted to your preferences and choices. As this technology filters down, ads will grow increasingly intelligent and persuasive.
Finally, there is the data itself. Direct marketers have known the value of a good list for years, but this is an entirely new playing field. Data will come in all shapes and sizes: from your standard demographic breaks to infinite categories of interests, activities, thoughts, locations, relationships, purchases, and any and all properties that can be abstracted into a database table. Data is the oil that fuels every part of this new ecosystem and the real challenge for the marketers of the future/now is how to understand, price, and act against it. Google, Amazon and the like have understood this for many years and are using their information hegemony to dominate existing markets and terrify new ones.
Numerous issues and practical realities remain to be solved, from ensuring adequate privacy controls to brand protection safeguards, but there can be no doubt that the shift has already begun. The only question is how you will adapt to survive and thrive in this new media economy before the gravel road becomes a quantum highway.