Demystifying Agency Trading Desks: Power's In Analytics & Integration, Not Pork Bellies
Last week at the 4A’s “Transformation LA 2012” conference, I moderated a panel on “Agency Trading Desks and Demand-Side Platforms.” To me, the online ad trading desk world is a confusing, algorithm-chocked sector where math geeks buy and sell digital display ads in computer-automated virtual “trading pits” not unlike the trading of pork bellies -- so I was a bit apprehensive going into the session. I didn’t come out of Wall Street, and never really worked around automated ad trading systems much.
The panel was a who’s who of the space, with the four largest holding companies each well represented -- by Quentin George, the Chief Digital Officer of Mediabrands; Josh Jacobs, president of Accuen; Brian Lesser, the CEO of Xaxis; and Kurt Unkel, EVP/GM-Audience On Demand, VivaKi Nerve Center. The sell-side ad network world was represented by Joe Apprendi, CEO of Collective, while JT Batson, president of Mediaocean, represented stewardship and billing systems. Once I started talking to the panelists to prepare for the session, I realized that many of my assumptions about agency trading desks were wrong. Here were my four big takeaways:
Analytics is the key value driver today. The trading desks owe their creation to the media world’s recognition that audience and audience data will become bigger and bigger drivers of media value going forward, so you need new platforms to evaluate and activate that value. Historically, media trading systems were built primarily around content and context. The trading desks are already having a very significant impact within their companies, helping to realign systems -- and underlying strategies -- to plan, buy and measure all media in the future in audience-centric ways, not just by content or context.
Wall Street is the wrong metaphor, for now. To a person, the panel agreed that the Wall Street trading metaphor confuses more than it clarifies, and probably sets the wrong expectations. The platforms are still in the creation phase and are much more about actionable analytics than liquidity. We are a very long way away from a time when automated trading desks will drive significant amounts of media trades, and where financial market notions like arbitrage, futures markets and taking principal positions can be done on any kind of massive scale. While these ideas are a compelling part of the long-term vision -- particularly as media agencies seek areas for future profitability -- they can distract folks from the analytic value being created today.
Systems integration is the future. The panelists also agreed trading desks today are becoming learning centers and areas of expertise within their agencies -- not just for data and insights, but in learning how to leverage them within business processes at both agencies and their clients. Several of the panelists envisioned a future in which they become marketing and media data systems integrators for their clients, extending their expertise well beyond the online ad marketplace of today and into all commercial communication channels over time.
We’re still in the learning phase. Agency trading desks are still very new. Most of the efforts are less than two years old. Lots of folks in the industry have lots of opinions about what the trading desks can, should or should not do -- not without some controversies -- but it’s clear that it’s way too early to know all of the places where these platforms will create value for their companies and clients, and it’s quite likely that much value will be in areas well beyond the original visions of their creators.
What do you think?