Commentary

The New SaaS: Software-as-a-Strategy

On Sept. 25, 1995, New York Stock Exchange member Michael Einersen traded 1,000 shares of IBM through a handheld computer, signaling the end of an era: a 203-year legacy of trading stock via paper transactions. It was hailed as the digitization of Wall Street, the revolution that forever transformed global finance.

There was only one problem: Wall Street’s technological revolution had actually happened two decades earlier.

On Feb. 8, 1971, 45 years ago this week, the National Association of Securities Dealers (NASD) introduced a technology that automatically sent quotes -- a stock’s latest trading price -- to newspapers. Prior to 1971, quotes were delivered by hand from the NASD to the press, appearing in print in the following morning’s edition.

Although brokers still executed stock trades by hand, they could inform those trades based on information from a feedback loop that had been sped up by orders of magnitude. The brokers immediately recognized the significance and it became standard operating procedure nearly overnight.

But no one remembers that now. Today, when people talk about how technology transformed Wall Street, they think of Einersen’s handheld computerized trade. They think of giant flashing billboards and complex rules that govern millions of trades transacted in a matter of milliseconds -- as they should. They don’t remember that original innovation because it’s been improved upon so significantly that it’s meaningless to everyone except historians.

This phenomenon is not unique to finance. Introducing technology to any industry makes companies smarter, saves time and money and creates opportunities for immediate lessons. Look at how easily we consume our favorite movies and TV shows, do our banking and hail cabs -- and how drastically different it is now than it was only five years ago.

Businesses and consumers alike recognize -- and embrace -- revolution almost instantly, because it drives better results. It saves money. It makes life easier.  But given how quickly people and entire industries forget the way things used to be, one wonders why, in advertising, we remain transfixed on the past.

Five years ago, programmatic advertising was a single line item on media plans -- a cost-efficient way to access remnant inventory, improve reach and achieve strong performance. It was a percentage of the overall budget dedicated to ultimately improving margins. It was tactical, and in that context, it worked pretty well.  

In the time since, technology has developed enough that programmatic is no longer just a line item. Ads bought through software are expected to exceed $21 billion this year -- over 10% of the total U.S. ad market.  Automation has penetrated the $70 billion TV market, which still operates largely the same way it did half a century ago. It’s even allowed marketers to take a page directly out of Econ 101 and buy futures!

Fortunately, technology has solved the challenge of how brands can reach people. Unfortunately, brands' unwillingness to see automation as more than just a way to cut costs prevents them from doing so. Despite the writing on the wall, technology is still labeled “a tool, not a strategy” by some, “the enemy of the status quo”  by others -- and my personal favorite: “The worst thing that ever happened to advertising.”

It took over 20 years for Wall Street to evolve from automated reporting to the real-time decisioning that governs today’s trades -- but once it happened, the financial industry recognized it, embraced it, and never looked back.

People, of course, move much faster than industries. We started watching the news on iPads, transferring money through our phones and sending text messages with our watches as soon as we could -- because it’s better that way.

Marketers don’t have the luxury of waiting for perception to catch up to reality. The irony is that, as soon as they accept the fact that software has become the process -- not just a piece of the pie -- they stand to benefit more in the next few years than they did in the last 20 combined.

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