• by Brian Wieser , January 23, 2015

Software vendors will often focus on selling a suite of products to their customers for reasons which should benefit everyone involved. A customer will want a collection of related technologies to work well together, and there should be a higher chance that this will happen when they come from one place. Further, customers want to reduce the number of vendors they work with wherever possible, as training, servicing, and an exchange of information about customer needs with a sales executive can absorb significant volumes of scarce time. Meanwhile, vendors want to generate incremental revenues from products which provide some value to their customers but which might not have been bought on a stand-alone basis. They want to amortize their marketing costs across a broader revenue stream. They also want to reduce customer churn, which should be facilitated so long as a suite includes at least one must-have product, if not several. In short, there is a clear argument that everyone involved should want a suite rather than a point solution.

In the advertising and marketing worlds, these mutual interests should be just as clear. Today, there is a fluid and rapidly evolving continuum between technologies which help marketers communicate with the consumers who use their products, and there is a significant interest in making them all work together. From sales records to site analytics, audience segmentation, media trading and campaign management (among many other technologies) we think most marketers fundamentally believe that integrated suites are more desirable than a collection of best-in-class point solutions.

However, we can also find evidence to contradict this view. For example, a survey released this week from consulting firm the Winterberry Group (in partnership with internet advertising trade group the IAB) focused on data technology customers found that only 6.1% of enterprise marketer respondents use between one and four distinct toolsets in support of “data-driven marketing or advertising”. 51.5% of these respondents say they use 5-10 solutions, and a remarkable 9.1% use 31 or more (the average number of solutions used among respondents was 12). Perhaps these large numbers aren’t surprising considering that respondents typically conveyed no preference for “integrated” or “independent” solutions. A large number of technology providers will operate with agency holding companies, too, even when there are formally designated preferred solutions for different technologies.

Part of the problem is that specific constituents – such as the front-line users inside a marketing or agency organization – will be the ones to express the strongest preference for a specific product, which may often be a point solution. As expert knowledge becomes more widely disseminated and as differences in features narrow, preferences around suites will probably prevail (Winterberry’s survey also conveys this view). To the extent this occurs, what will those suites look like? Should lead generation management, email marketing and digital display buying exist in one suite? Or does email marketing and lead generation belong with sales management? Or both? Or neither? Or something else? Specific combinations will probably take many different forms.

Among those combinations, we think that the most successful suites will center around consumer data and / or consumer segment data, built upon DMPs, or data management platforms. As marketers place a disproportionate degree of their strategic focus on better understanding the consumers of their products, technologies which best help marketers to do this should also receive a disproportionate degree of focus in terms of their scarce time and money. Because of that, DMPs are well positioned to be the “stickiest” of the point solutions among today’s modern marketing tech and ad tech stacks. Given the strategic importance of data management, it is unsurprising that marketers and agency holding companies have sometimes gone to pains to develop their own DMP solutions. For example, last year WPP’s programmatic platform Xaxis announced a new DMP called “Turbine” (which was the beneficiary of $25mm in investment – a significant capital investment for a division of an agency holding company).

The definition of what we mean by a DMP in this context can be broad. We can see how a B2B marketer or one who sells directly to an end-consumer will want to make use of data about exactly who buys what products and, by inference, who does not. This can make a CRM system or an email platform (a common database of consumer records for many marketers) such as one operated by Oracle or Salesforce.com an important building block when tools are used to organize and segment consumers efficiently. We can also see how a manufacturer with a massive audience but only indirect transactional data from retailers might organize decisions around consumer segments to drive more subjective goals. Data related to insights on site visitors (something that Adobe or IBM will be able to help with given the businesses they acquired via Omniture and CoreMetrics, respectively) or connections between consumer buying actions and media activity (Oracle again, via its pending Datalogix or completed BlueKai acquisitions, or Nielsen, among others) can serve this purpose, too. Media owners can satisfy these interests to some degree by applying insights from attribution businesses they own (such as AOL’s Convertro or Google’s Adometry) so long as the advertiser trusts that the media owner will assess competing owners objectively. Media owners can also provide similar – and highly tangible – capabilities so long as the marketer is fine with only optimizing campaign spending within a single media owner’s inventory. Certainly Facebook’s Custom Audiences product has fared well by helping marketers connect their customer data with Facebook audience profiles to drive more efficient media buying.

We should note that our observation around DMPs need not apply to digital media only, although it will be the medium where the dominant share of media buying will be driven by a focus on consumers and audiences rather than adjacencies of commercial messages to media properties. For example, in television buying, we would argue that a primary reason why Rentrak has gained so much traction with large media agencies is not because any agency is considering using Rentrak for conventional audience measurement. It is because there is a genuine interest among practitioners within those agencies (and many of their clients) to plan and buy a sub-set of their TV campaigns by appending data to those plans and buys which relate more specifically to a marketer’s business goals than age-gender demographic breaks. Rentrak is essentially powering agencies’ DMPs for TV in large part because they have placed a significant focus on powering buys of TV inventory in this manner. Nielsen maintains significant potential to do the same given that they have set-top data of their own as well as retail purchase and consumer data, although we think that their approach to commercialization via NCS has not been as attached to media buying tools as Rentrak has. Meanwhile, on the sell-side of TV, applying more data to the process of identifying which ad units should go to which advertisers – which is at the heart of last week’s announcement from Comcast’s NBC Universal regarding its Audience Targeting Platform – highlights that over time, perhaps tools that digital media owners develop will also come to be used by the owners of TV properties too. However, we also note that the market for this approach to TV trading remains very small in dollar terms and will probably remain small so long as the content adjacency model continues to dominate the medium.

We are not suggesting that ad tech or marketing tech solutions or media owners which lack a dedicated DMP will not be successful. For example, today’s DSPs – particularly those focused on making marketplaces, with DSPs, exchanges and SSP offerings under one roof – will have a unique view on sources of demand and supply and could very well concurrently drive media prices down and supplier yields up at the same time. This produces significant value to buyers and sellers alike and provides for the foundation of what can be a very good business. Similarly, stand-alone SSPs or supply-side focused ad tech companies will add a lot of value to their media owner partners, too. In television, we expect that the content adjacency model will continue to drive the vast majority of the industry’s spending for many years to come. Further, we also note that large media owners such as Google might impose rules to restrict the use of marketers’ preferred DMPs (the company recently established rules that would effectively prohibit the use of DMPs which operate independently of DSPs on Google’s dominant display network. According to Digiday, implementation of those rules has now reportedly been extended until next month rather than this month as originally proposed and the implications of such restrictions remain to be seen).

Still, when we think about how companies participating in this sector who do not own their own media properties will add the necessary scale to recover technology investments, it will be important to have a reason why a marketer or their agency must buy multiple products. If a DMP will prove to be the single stickiest point solution, then a powerful DMP may go a long way towards causing advertisers to buy a suite from a given technology vendor. To the extent this is true in ad tech and marketing tech, then believers in the potential of the suite will need to pay particular attention to the degree to which a DMP has traction in the marketplace. After all, the DMP is ultimately the proxy for what is probably the most important component of the marketing tech and ad tech stacks: the consumer.