Commentary
Agencies As DMPs
- by Jason Heller , June 28, 2011
Winds of change are blowing down the halls of major media agencies. The race to develop data management and audience buying platforms is on. Does this surprise anyone? I hope not. It's a logical evolution and has been underway for a few years now.
The recent announcement of WPP's Xaxis is just the first in what we should expect to be similar announcements from all of the holding companies. Surely Publicis will be next.
On the one hand, this is just another re-org of agency assets around a new subdiscipline -- an evolution of the trading desk to a more full-service solution. On the other hand, it reminds us that "agencies as end-to-end audience buying firms" is a trend with far-reaching ramifications for reshaping the media-buying world. Operational scale, coupled with centralized systematic processes and analytics services, present a number of benefits for both agencies and their portfolios of clients.
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Is this the Media Agency Structure of the Future?
Of course developing the capabilities of a next-generation, audience-buying agency is not an overnight endeavor. A true end-to-end solution requires first-party data management, third-party data access, real-time bidding, ad serving, analytics, dynamic creative, and I would argue that attribution reporting and modeling would be required to round it out. Developing systems that manage, bid, analyze and optimize terabytes of data in real time is no small task. Expect agencies to be the newest suitors of some of the ad tech firms that are leading the charge in their respective specialties.
The holding companies have been under scrutiny lately regarding the ways in which their trading desk units have fit into a client's bigger picture. They have been accused of mandating spending, double dipping on fees, and a lack of transparency and conflicts of interest in upfront media commitments. While I don't have the space to go into this issue here, I don't believe the intentions are to deceive or gouge. After all, we are still in a transitional period -- from the way it was, to the way it will be.
Is Proprietary Better?
While "proprietary" is at face value a competitive positioning for an agency, it is not always the best solution, as technology requires a significant ongoing investment in staying relevant and ahead of the curve. Investing in upgrading older technology may not always be a company imperative, and clients will never be aware of this shift in priorities. That said, agencies have every motivation to build and buy technology that helps to serve the best interests of their clients.
Generally, clients should perform a better due diligence when their agencies claim to have proprietary technology and tools. Often what is claimed as proprietary is simply a white-labeled version of existing third-party technology. I wish agencies were more transparent about this; there's no shame in choosing the flexibility to work with the best third-party technology in market at a particular time.
Privacy Gatekeepers?
The privacy debates rage on. As agencies' assume a data management platform role on behalf of marketers, privacy compliance must become more of a priority. But who will oversee the agencies? Doesn't third-party objectivity and enforcement make sense? We may see the rise of PCPs: privacy compliance platforms (yes I just made that up, but it seems logical). As an industry, we must ensure that personally identifiable information, or ties back to it, are scrubbed and never accessible for inappropriate means. We really all need to take this issue more seriously.
Data and Branding - Finally in the Same Sentence
The growth of audience buying, ad exchanges, DMPs, DSPs and trading desks have predominantly been focused towards direct marketing, removing context and environment from the equation. However, brand marketers and their agencies will not argue the value of media environment. Private exchanges have emerged to balance the best of both worlds -- environment and audience. In theory and promise, the next iteration of agency audience buying and data management platforms will incorporate premium inventory and bridge this gap in new ways.
The ramifications for brand marketers are substantial. Applications of targeting data are now beginning to transcend beyond online and mobile channels and into TV. It's only a matter of time before the improved targeting and predictive modeling enables cross-channel insights and improved media mix modeling.
I'm eager to hear what you think. Is this trend agency hype or a major evolutionary shift? Privacy concerns? A new platform for branding in addition to DR? Chime in on the comments or hit me on Twitter @jasonheller.
Good article Jason - and although you're just touching on a lot of different issues, I'm glad you touched on the proprietary portion right away. For whatever reason, the perception has been if you're not proprietary, then you're behind the curve. Media Two actually built one of the first ad servers back in the mid-90's (actually - a contractor did), and what we learned from that experience was that one-size doesn't fit all, and what we thought was great at the time was quickly out-dated. So my advise to agencies is to shop around and find the best solution for each of your clients, and if you can't find it, then consider building it. But once you build it - don't force it on all of your clients like it's the magic pill that fixes everything. You need to be aware of all of the solutions and stay nimble.
Nice article on the future of media structure. Seems that most of the holding companies are leading the way, but there is a significantly large number of agencies that haven't even started this transition. Some (which claim to be leading digital agencies) that you would be suprised by. Proprietary systems, in many cases, are just as you describe: Obsolete before there time, or more smoke and mirrors than a true buying tool.
Although I do think that DMP technology will be and is valuable, in and of itself it is evolutionary not revolutionary.
@Michael - "if you can't find it, then consider building it" great advice.
@Clyde - exactly. definitely is not revolutionary, but the phase I efforts were a little disjointed. phase 2 is the end-to-end approach, and applications beyond DR is where I think we are going to see the big shifts over the next 12-18 months. in many ways this does give the big agencies additional competitive advantages. but at the same time, there will always be DSP's and DMP's for the rest of the industry, which in aggregate presents similar scale to any one holding company's media agency. the key is that this market needs to not get too fragmented to lose scale
Great article Jason. I think your point about proprietary or best-of-breed technology is spot-on. The magic is not in the technology, it is in the skills and ingenuity of the people using the technology for improved marketing executions. Data combination, analysis, segmentation and modelling are the skill sets that will distinguish one agency from another, not the DMP that they have licensed or built.
One point you don't address is how this trend of agency_as_data_management_platform will impact the relationship between agencies and their clients. If I were a client-side marketer I would feel distinctly uncomfortable about this development, and, while I can see the potential benefit to my marketing effectiveness, I would be very worried about the shift in the power balance now that my agency knows more about my customers than I do.
How do your clients at AGILITI feel about it? Am I the only one who is paranoid, or do they also see it?
I can't imagine another way for agencies to maintain their centrality than to manage audience platforms for clients. To me this is a strategic function with major tech/data inputs and systems. Agencies should invest in the strategic leadership AND in world class partnering capabilities to ensure state of the art tech and data is delivered by the best specialists.
@Peter - that line sums it up "Agencies should invest in the strategic leadership AND in world class partnering capabilities to ensure state of the art tech and data is delivered by the best specialists"
@Stephan - actually i think it brings it one step closer to the marketer. currently it's happening with a combination of third parties. it's fragmented and data is everywhere and harder to enforce usage limitations. marketers will need to build in contractual clauses providing ownership of their data and restrict usage beyond certain purposes, including the abandonment or transfer of data assets when relationships cease. this is a brave new frontier and all of these details will need to be addressed. great point!