But Solving the Right Problems are the Key to the Future
I once heard Terence Kawaja remark that “complexity is the agency’s best friend.” It’s hard to argue with that. Early digital agencies were necessary because doing things like running e-mail campaigns, building websites, and buying banner ads were really complicated. You needed nerdy guys who knew how to write HTML and understood what “Atlas” did. Companies like Operative grew admirable services businesses that took advantage of the fact that trafficking banner ads really sucked, and large publishers couldn’t be bothered to build those capabilities internally. The early days were great times for digital agencies. They were solving real problems.
Fast forward 13 years. Digital agencies are still thriving, mostly by unpacking other types of complexity. “Social media experts” were created to consult marketers on the new social marketing channel, “trading desks” launched to leverage the explosion of incomprehensible RTB systems, and terms like “paid, owned, and earned” were coined to complexify digital options. It’s hard being a marketer. So much easier to hand the digital keys over to an agency, and have them figure it all out.
Some of that complexity is dying, though.
Have you ever done any advertising on Google? It’s not that hard. You can get pretty good at search engine marketing quickly, and it doesn’t take anything more than common sense, an internet connection, and a credit card to start. Facebook advertising? Also dead easy. Facebook’s self-service platform is so intuitive that even the most hopeless Luddite can target to levels of granularity so minute that you can use it to reach a single individual. Today’s platforms leverage data and offer great user interfaces and user experience mechanisms to make the complex simple.
This has created the OpenTable effect. Remember when you had to call 8 different restaurants to get a Valentine’s Day reservation? What a pain in the ass. I used to always get to it late, and usually spend a few hours getting rejected before finding a table somewhere. Today, I log into OpenTable, type in “11743” and see all the available 8:30 reservations for two in Huntington. A few clicks, and I am locked in. Would I ever go back to doing it the old way? Sure, why not? Call my beeper if you need me. Please “911” me if it’s important.
So, with all of this innovation making the complex simple, and all of these platforms democratizing access to advertising inventory, analytics, and reporting, why are digital agencies still making a living off of the lowly banner ad? Is there a good business left in planning and buying digital display media?
Programmatic RTB is coming on strong, now representing the way almost a quarter of banner inventory is purchased. That’s a good thing. Platforms like Rubicon Project and Appnexus are making it easy to build great businesses on top of their complicated infrastructure. Marketers can hire an agency to trade for them, or maybe just build their own little team of smart people who can leverage technology. That seems to be happening more and more, making managing RTB either a specialist’s game, or not an option for the independent agency.
Really complicated, multi-channel, tentpole campaigns and sponsorships can never be automated. They represent about 5% of overall display spend, and that’s really where a digital agency’s firepower can be leveraged: the intersection of creativity and technology. That sector of digital involves a lot of what’s being called “native” today. Working with content owners and marketers to build great, branded experiences across the Web is where the smartest agencies should be right now.
How about the rest of the money spend on digital display—the 70% of money that goes through the transactional RFP space? A lot of agencies are still making their money buying reserved media, trafficking ad tags, and doing the dreaded billing and reconciliation. Marketers who pay on a cost-plus basis are starting to wonder whether spending money to have expensive agency personnel create and compare spreadsheets all day long is a good use of their money. Agencies that do not get paid for such work are seeing their margins shrink considerably, as they grind away money paying for low value tasks like ad operations. Clients don’t care how long it took you to get the click tag working on their 728×90. Just saying.
This future (“programmatic direct”) has been coming for a long time, but it is still met with resistance by agencies, some of whom are continue to benefit from complexity—and others who are (rightfully) scared of change and what it means for their business. Looking at legacy workflow systems, you wonder why they are so hesitant to leave them, but the cost of switching to new systems is high in terms of emotion and workplace disruption—and previous attempts to “simplify” agencies’ lives didn’t really work out that way.
So, how can digital agencies start to change, and embrace the new world of programmatic direct tools, so they can turn their energy to strategy and client care, rather than be an “expert” in processes that will eventually die?
Part of that is learning to recognize if you have a “wizard” on staff. The Wizard is the guy that has truly embraced complexity within the agency. He is the “systems guy” who knows how to pull complicated reports out of legacy workflow platforms. He probably knows who to write the occasional SQL query, and he knows where all the bodies (spreadsheets) are buried. When a web-based technology salesperson comes calling on the agency, and shows the CEO or VP of Media what web-based programmatic direct buying looks like, they are showing an agency a world where a lot of complexity is suddenly made simple. That demo shows the future of digital media buying: a directory-driven, centralized, web-based method of planning, buying, and serving inventory. Just like search! C-level agency executives and media people want it. They want their employees focused on strategy and analytics…not ad trafficking. But to get it, they invariably tell you to go see the Wizard. “Fred is our ‘systems guy.’ He’ll know whether this can work for us from a technical standpoint.”
That’s when innovation dies. Fred, the Wizard of the legacy systems, will shut down any innovation that comes his way. Complexity is Fred’s best friend. When you are the only guy that can pull a SQL query from your data warehouse, or reconcile numbers between SAP and your agency’s order management system, then you are a God. Fred is God…and he doesn’t want a downgrade. Complexity is the reason great digital agencies were built, and continue to thrive. Tomorrow’s big challenges are going to come from complexities in cross-channel delivery and attribution, and keeping up with new platforms that are delivering amazing native marketing opportunities, not being the next at reconciling ad delivery numbers from servers.
When innovation comes knocking on your door, don’t let Fred answer it.
[This post was originally published in AdExchanger on 6.3.13]