Commentary
My Q&As On Evolving Advertising Landscape
- by Dave Morgan , Featured Contributor, December 10, 2015
On Monday, I was part of a panel on the “Evolving Advertising Landscape” with UBS' Eric Sheridan, one of the top analysts in the ad and media world.
He sent us some questions in advance of the session to prep. I thought that sharing some of those questions -- and my answers -- would be a great way to give you a sense of the issues we talked about. Here they are:
Eric Sheridan:Attitudes Towards Automation (Advertisers) – How do advertisers view the pros and cons of automation? Have there been any notable changes in this view over the past 12 months? How do you think this will change over the upcoming year?
Dave Morgan: I think that advertisers have been chasing automation for not all of the right reasons. They are trying to use it to drive costs down — and they are also doing it because their agencies are pushing them into programmatic, many times because the agency has intermingled its economics with the economics of the programmatic vendors.
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Advertisers should look to automation as a way to shift their focus from just buying media outputs to buying business outcomes. It is a path toward making media just a component of revenue management and ROI.
ES:Attitudes Towards Automation (Media Owners) How do media owners view the pros and cons of automation? Have there been any notable changes in this view over the past 12 months? How do you think this will change over the upcoming year?
DM: Their motivations in looking to automation parallel advertisers' motivations. Media owners are now starting to move on automation -- but many face an “innovators dilemma,” in that if they embrace and promote audience and automated ads too quickly, they might accelerate a shift from content-based TV ad buying, the bread and butter of their ad business today.
ES: Adoption Hurdles – For the industry, broadly, what are the big hurdles to seeing increased adoption of automated solutions? On which side (i.e., advertisers vs. media owners) does greater friction reside?
DM: The biggest hurdle to adoption of new technologies in TV is the protection of legacy business, margins and relationships. [It's hard,] moving from a cost-center-managed world to one where buyers and sellers transact on outcomes, and ROI is counter to those born into a world of where “efficiency” rules. Many lack skills to transact and succeed in that work. Most lack experience operating in worlds where you place total trust in data, science and software. Navigating that shift is hard.
ES:TV to Digital Shift – As consumers spend more time on digital media and less time watching TV, are you seeing advertisers modify their approach towards video advertising across those channels?
DM: Yes, advertisers are modifying their approach towards video, though I believe that many have over-shifted into digital video, spending on it well before there was appropriate inventory and ROI.
ES:Programmatic TV – How would you assess the state of programmatic TV? As you consider the end-to-end process of buying & selling TV ads programmatically, where is there room for the most improvement? How does this compare to digital display?
DM: Programmatic TV is a press release that is 98% hot air. TV ads are not going to be bought and sold like display ad inventory anytime soon, if ever. Yes, the industry will automate and will certainly become audience-based and algorithmic, but not like what many of the press releases I read say.
ES:Opportunities & Challenges – As you look ahead over the next 12-24 months, what are the biggest opportunities? What are the biggest challenges?
DM: I believe that the themes in 2016 and 2017 will be big shifts to buying TV media on guaranteed ROI, and marketers taking direct control of much of the process. We will start seeing TV insights, planning and outcomes becoming part of marketers’ enterprise data systems. It won’t happen overnight, but it will begin to happen over the next two years.
So (readers), what do you think?
Hi Dave,
This is an excellent Q&A and hits several important points. I agree with you--from what I've been hearing from people I'm speaking with for RTBlog, programmatic guaranteed will be a big deal in 2016. Thanks for your insights.
The logical and expected outcome of inventory management, real time measures, programatic buying, and various algorthms will be the migration to a "perishable inventory" and last minute bidding marketplace. Certainly some may try to maintain an upfront advance purchase economic, but these will be few from advertisers, but might be huge from agencies.
Larry, you're right on target. Once the market gets comfortable with buying predictive outcomes, we'll see significant movements to making buying decisions much closer to real-time. It will take a while and it's a big opportunity for agencies if they become expert in it.
Dave,
Nice Q&A. Automation has to be about more than media automation (programatic). The real leaders are automating their end to end customer interactions. You can no longer just target offers better but have to deliver the promise end to end. You must apply context to all communications across all channels. This is hard but the new normal. The customer data set has to be integrated and actionable in real-time to be really effective and an asset to CMO's.
Some very good points, Dave, especially about "programmatic" TV buying.
I have a little problem with the idea that the sellers---say broadcast TV networks or cable channels---will eventually guarantee advertisers results on a ROI basis. This places the sellers in a position where, aside from supplying audiences---targeted or otherwise---they also guarantee results---presumably sales or image-related plusses for the advertiser. How does that work if the seller has no control over the advertiser's product quality, pricing or distribution, to say nothing of the relevancy or motivating power of the ads? How does the media time seller avoid bad ROI results caused by a poorly conceived ad campaign or a product that doesn't do what it claims to do?
Absolutely agree with Ed. And I'll add that for such a system to work, a small subset of impact will be the only possible measurements that could be called "ROI". And that is a horrible error. We see it everywhere - that when a specific measure is used "because it CAN be measured" and called ROI, it damages the entire business.
I say this as a guy with lots of DRTV experience - and I've spent 20 years fighting against the idea that phone sales accurately measure the value of a campaign.
Media cannot every successfully be held accountable for ROI. There are far too many issues outside the control of media.
Doug, Ed, now that we have massive single source panels (millions of us househilolds) and proven experimental design models, I disagree that we can't know ROI in really robust ways and identify all significant contributors.
Robert, great points. When it comes to automation, way too many people are focusing on automating the media process and are missing that it should really about automating the marketing function; that media is just a means - and only one of them - in the creation of customers.
Dave, what Doug and I are questionning is not whether you can track sales and, perhaps, other ROI-related metrics, but whether it's the responsibility of media sellers to guarantee ROI for advertisers, without being able to control the quality of the product or the way it is promoted.
Thanks Ed. I think that the point you two raise is critical to the future of media. When buyers were buying specific branded content, the sale was not very commoditized. However, in an outcome-based world, I think that media sellers will have to provide certain outcome guarantees, in spite of their lack of control ovre the product and the creative because they will be in competitive marketers where others will make that guarantee. Google has built an extraordinary business model doing just that with search. Sellers will have to find ways to replicate those kinds of models in media like. It won't be easy and it won't be without risk.